Credit policy likely to ease in Q4
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China Daily, November 3, 2011
The new yuan lending of Chinese commercial banks will total nearly 7.5 trillion yuan ($1.17 trillion) in 2011, and the credit policy in the fourth quarter will be relatively loose, analysts said.
"As white-hot inflation is tamed, there will undoubtedly be some loosening of policies and increase of new loans in the last two months of 2011," said Ding Zhijie, dean of the School of Banking and Finance under the University of International Business and Economics in Beijing.
As of Oct 27, the Big Four lenders - Industrial & Commercial Bank of China Ltd, China Construction Bank Co, Agricultural Bank of China Ltd, and Bank of China Ltd - have made new yuan loans valued at more than 140 billion yuan last month, China Securities Journal cited an anonymous banking industry source as saying on Wednesday.
And during the five working days from Oct 21 to 27, new yuan lending surged more than 60 billion yuan, signaling an accelerated outflow of new loans from major Chinese lenders, it said.
"In the fourth quarter, the total credit will remain comparatively loose. Especially in last two months, the new yuan lending each month will be somewhere above 650 billion," the source said, adding that total lending this year will probably stand at 7.5 trillion yuan.
In the first nine months this year, commercial banks in China lent out 5.69 trillion yuan. In the third quarter, new loans at banks each month stood at about 500 billion yuan.
But Li Wei, economist at Standard Chartered Bank (China) Ltd, said even if the government encourages banks to lend in the last two months this year, new lending for the whole year will not be more than 7.3 trillion yuan.
"Demand for loans usually declines at the year's end, and regulators often impose more requirements on banks then," said Li, adding that the numbers of ongoing projects could not support excessive lending.
Chinese banks will probably provide new loans between 7 trillion yuan and 7.5 trillion yuan through the whole year, Bank of Communications said earlier in a report. Last year, new yuan lending totaled 7.95 trillion yuan, exceeding the government's target ceiling of 7.5 trillion.
Dong Xian'an, chief economist at the Peking First Advisory, said the old practice of regulating new yuan lending cannot meet the new requirements because economic entities tend to raise funds directly and banks try to steer clear of credit control by developing off-balance-sheet intermediary business.
The central bank didn't announce a quantitative target in 2011 for credit control. A source told China Daily previously that the overall credit target was probably set at 7.5 trillion yuan, but unlike in previous years, the target includes lending outside the balance sheet of banks.
Analysts said falling inflation and signs of a possible economic slowdown in China have opened more room for government officials to loosen their monetary stance and credit control, especially to small and medium-sized enterprises, projects under construction and affordable-housing projects.
The consumer price index, a main gauge of inflation, eased slightly to 6.1 percent year-on-year in September from 6.2 percent in August.
The official Purchasing Managers' Index, a key gauge of manufacturing activity, performed weaker than expected in October, falling to 50.4 from 51.2 in September.
"The government is likely to take more action if the economy (including the housing market) deteriorates sharply. But we think it would feel more comfortable supporting growth only if the CPI was below 5 percent," said Chang Jian, a China economist with Barclays Bank PLC.
