Mainland sees surprise US$1.01 billion lending rise by international banks

The mainland saw a surprise US$1.01 billion lending rise by international banks in last year's fourth quarter, proving wrong analysts who predicted a credit slowdown following the collapse of Guangdong International Trust and Investment Corp.

The Bank for International Settlements (BIS) said this stems from a book-keeping exercise by 'one major Chinese bank and its foreign affiliate affecting both sides of its balance sheet'.

Lending to the mainland jumped to $82.7 billion, reversing a $6.28 billion third-quarter contraction, according to the BIS report.

'Surprisingly, the default by the Guangdong International Trust and Investment Corporation in October does not seem to have been associated with a withdrawal of banking funds from mainland China in the fourth quarter,' the BIS said.

The bank said, however, that if the book-keeping element was stripped out, lending to the mainland may actually be down by more than $3 billion.

It is understood that the Bank of China is behind this 'accounting trick', which involved the transfer of funds to its Japan-based affiliate as well as the movement of funds in the opposite direction.