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.
RECORD LOANS
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.
CASH-FLUSH
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.
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