Chinese banks extended a record 1.62 trillion yuan (US$237 billion) in loans last month, more than double the year before, as lenders heeded government calls to loosen credit controls to help revive the economy.
Total bank loans rose by 814.1 billion yuan, nearly 104 percent over lending in the same month last year, when the government was still imposing stringent curbs on credit as it battled inflation, the People’s Bank of China reported yesterday.
Banks made 771.8 billion yuan in new loans in December, figures show, up nearly 15-fold over the same month a year before, when credit was at a virtual standstill amid credit controls.
China’s banks are in relatively good shape, with less exposure than most of their global rivals to the toxic mortgage-related securities that have wrought havoc in the global financial system.
The government has ordered them to make credit available to help battle the downturn which hit last fall. But with many industries facing overcapacity and demand slowing for many products, analyst warn the state-owned banks risk letting policy, rather than profitability, guide their lending decisions.
Analysts said the structure of lending last month, with short-term financing accounting for two-thirds of the total, did not bode well for a sustained expansion.
The trend suggests that demand for “attractive project finance is still insufficient to absorb excess bank liquidity, leaving banks to still pursue low risk, low return businesses in large scale,” Citigroup Global Markets economist Ken Peng (彭墾) said in a report issued yesterday.