Tue, Apr 28, 2009 - Page 11 News List

New loans in China expected to surge by more than 57%

AFP , BEIJING

New loans in China are expected to rise by more than 57 percent this year, state media said yesterday, as banks heed government calls for more credit to boost growth.

Chinese banks are forecast to extend at least 8 trillion yuan (US$1.2 trillion) in new loans this year, said Cai Esheng (蔡鶚生), vice chairman of the China Banking Regulatory Commission, according to the China Securities Journal.

That will represent a rise of 57.2 percent from the 5.09 trillion yuan in loans given out last year, according to official figures.

Chinese banks already lent 4.58 trillion yuan in the first quarter of this year to match government efforts to lift growth by priming the economic pump.

Cai said that there were “uncertainties” regarding the banks’ ability to fend off risk as they were now lending more aggressively than before, the report said.

The data so far gave little reason for alarm. The nonperforming loan ratio at commercial banks stood at 2.04 percent at the end of last month, down from 2.4 percent at the beginning of the year, official statistics showed.

However, analysts said the negative effects of the current lending spree would surface only after one or two years.

The bad loan figure would likely remain low in the first half of this year because it reflects older loans, they said.

Bad loans have been one of the main stumbling blocks for the government’s efforts to create a globally competitive banking sector.

The authorities were forced earlier this decade to inject huge sums of money into the top lenders to allow them to write off bad loans and get in shape for overseas listings.

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