Chinese banks lend record amounts as government seeks to stop economic slowdown

Banks extended US$2.4bn in credit last year as policymakers aimed to boost loans to private sector

People’s Bank insists it will not ‘flood’ the banking system with cash to stimulate the economy

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The central bank has said it will maintain a “prudent” monetary policy. Photo: AP

Published: 9:30pm, 15 Jan 2019Updated: 2:17pm, 16 Jan 2019

China’s banks extended a record 16.17 trillion yuan (US$2.4 trillion) in net new loans last year the People’s Bank of China said on Tuesday, as policymakers pushed lenders to fund cash-strapped firms to prop up the slowing economy.

The new figure, well above the previous record of 13.53 trillion yuan in 2017, is an indication that the bank has been moderately aggressive in using monetary policy to stimulate the economy, which slowed sharply as a result of the trade war with the US.

Outstanding yuan loans were up 13.5 per cent at the end of 2018 from a year earlier, according to the central bank data.

In addition, debt issued by private enterprises increased by 70 per cent year-on-year from November to December last year, indicating that the central bank’s efforts to support the private sector are working.

The central bank cut reserve ratio requirements four times last year. Photo: Simon Song

The People’s Bank cut the amount of cash that banks have to hold in reserve four times last year and again this month. The latest reduction in the reserve requirement ratio will pump 1.5 trillion yuan of additional liquidity into the banking system to spur more lending.

Chinese Premier Li Keqiang instructed the central bank to make cuts of the reserve ratio a central part of Beijing’s efforts to bolster economic growth.