Chinese banks extended a record 12.56 trillion yuan (US$1.82 trillion) of loans last year, as the government encouraged more credit-fueled stimulus to meet its economic growth target, despite worries about the risks of an explosive jump in debt.
Last month alone, Chinese banks extended 1.04 trillion yuan in net new yuan loans, far more than economists had expected, data from the People’s Bank of China showed yesterday.
New bank loans last year surpassed the levels of China’s massive credit-led stimulus during the global financial crisis in 2009, according to Reuters calculations based on central bank data.
Last year’s total was about 8 percent above the previous all-time high of 11.72 trillion yuan set just the year before.
Despite China’s ever-more frantic pace of credit creation, some analysts say Beijing is getting less and less bang for its buck, with every yuan of stimulus proving less efficient in generating the same amount of economic growth, while adding to the risk of rising defaults and non-performing loans.
“Let’s say credit growth in China right now is about 13 percent, but GDP growth is around 6.7 to 7 percent,” Commerzbank AG senior emerging market economist Zhou Hao (周浩) said in Singapore.
“From a longer term perspective, you’re using the same level of credit growth, but you have lower real economic growth, so the credit is becoming less productive and less efficient,” Zhou said.
Lending continued to be driven heavily by robust mortgage growth, despite a slew of measures rolled out by local governments late last year to cool sizzling housing prices and avert property bubbles.
Household loans accounted for 50 percent of total new yuan loans last year, while corporate loans accounted for 48 percent.
Other money supply data yesterday confirmed China continued to keep the financial system flush with cash, with broad M2 money supply growing 11.3 percent last month from a year earlier, while outstanding yuan loans rose 13.5 percent by the end of last month.
China’s total social financing (TSF), a broad measures of credit and liquidity of the economy, hit a record of 17.8 trillion yuan last year, despite Beijing’s efforts to contain risks and crack down on the shadow banking sector.
TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales.
China’s overall debt has jumped to more than 250 percent of GDP from 150 percent at the end of 2006, while corporate debt has soared to 169 percent of GDP.
Polytronics Technology Corp (聚鼎科技) yesterday announced that it is buying Henkel AG’s thermal clad dielectric material (TCLAD) business division for US$26 million as the Taiwanese firm aims to improve its technology, product portfolio and revenue performance. Polytronics, headquartered in the Hsinchu Science Park (新竹科學園區), is a supplier of protection components and heat dissipation materials. The firm entered the metallic heat-dissipation substrate market in 2007 and developed a unique solventless production process. Its board of directors approved signing an agreement with Henkel to acquire the German chemical firm’s TCLAD division in the US. The purchase includes all assets and business interests, including equipment,
SIZE MATTERS: Medium-sized hotels that do not have the support of parent groups are more vulnerable and are forced to take action, a REPro Knight Frank researcher said About 50 hotels across Taiwan are seeking to exit the market as they succumb to the bleak business outlook amid international travel restrictions imposed to combat the COVID-19 pandemic. Yomi Hotel (優美飯店) on Minsheng E Road, Sec 1, in Taipei is seeking to transfer ownership with an asking price of NT$950 million (US$32.15 million) and a pledge for a lease contract that guarantees a 3 percent return. The budget hotel, with room rates that start from NT$1,400 per night, maintains normal operations, but has been struggling since March, when the government placed restrictions on inbound and outbound travel. Occupancy rates for hotels in
With the US dollar expected to weaken in the next 12 months due to near-zero interest rates, investors should consider purchasing US corporate bonds, Standard Chartered Bank Taiwan Ltd (渣打台灣銀行) said on Thursday. The bank said that the US Federal Reserve since last month has been buying bonds issued by US companies to curb default rates. The US dollar is forecast to be weaker against the pound, the euro and the yen, as well as the Canadian dollar, the Swedish krona and the Swiss franc, as the greenback lacks high investment returns after the Fed in March slashed the benchmark interest rate
‘SENSITIVE MARKETS’: The previously unannounced project would involve the company handing over control of data to a third party to sidestep privacy concerns Google has abandoned plans to offer a major new cloud service in China and other politically sensitive countries due in part to concerns over geopolitical tensions and the COVID-19 pandemic, two employees familiar with the matter said, revealing the challenges for US tech giants to secure business in those markets. In May, the search giant shut down the initiative, known as “Isolated Region” and which sought to address nations’ desires to control data within their borders, the employees said. The action was considered a “massive strategy shift,” said one of the employees, who added that Isolated Region had involved hundreds of employees