Hong Kong Monetary Authority

Loans by Hong Kong banks to mainland firms drop sharply

Relatively weak economy leads to growth in borrowings dropping sharply in first 9 months

PUBLISHED : Thursday, 07 February, 2013, 12:00am
UPDATED : Thursday, 07 February, 2013, 5:16am

Growth in loans made by Hong Kong banks to mainland companies slowed substantially last year as a result of the relatively weak economy on the mainland.

Total lending to non-bank mainland companies rose 13 per cent in the first nine months of last year over the same period in 2011, less than a third of the 42.9 per cent growth rate seen in 2011, the Hong Kong Monetary Authority said.

Total annual loan growth slowed to 9.6 per cent last year, from 20.2 per cent in 2011.

However, Arthur Yuen Kwok-hang, a deputy chief executive of the HKMA, which regulates banks in the city, said the slower growth was a healthy sign.

"The loan growth to the mainland companies has been too high during 2010 and 2011," Yuen said, and it was good to see loan growth figures "go down to a more healthy level".

Analyst believe the slowdown reflects the economic situation on the mainland. Louis Tse Ming-kwong, a director of VC Brokerage, said: "It is natural that companies cut down their bank borrowing last year."

The mainland reported economic growth of 7.8 per cent, down from 9.3 per cent growth in 2011.

Tse said the outlook this year remained uncertain. "The companies relying on exporting would not be willing to borrow as the US and European markets remain uncertain. However, since China has announced it would focus on boosting domestic consumption, companies involved in infrastructure, real estate, retail and consumer products would have opportunities to expand and they are the ones which would borrow from banks in Hong Kong."

Yuen said the HKMA would continue to monitor credit risks, including those related to the red-hot property market.

He said the authority would tighten mortgage policies further when needed.

The HKMA has introduced five rounds of mortgage tightening measures for buyers of luxury properties or second properties since 2009.

This year, Yuen said, the HKMA would continue to check on banks preparing for the new international banking requirement under Basel III stress tests.

It is also introducing new security measures from next month to protect Hong Kong customers who conduct transactions through ATMs when they travel overseas. After February 28, Hong Kong customers will need to activate their ATM cards before they can use them overseas to withdraw money. Customers will also need to set the period of time they will be using the card overseas.