BOFIT Weekly Review 2016/29
Foreign banks pulled back on their China lending last year
The Bank for International Settlements (BIS) reports that cross-border lending to China declined by $250 billion last year, down about 25 % from 2014. At the end of 2015, the stock of lending of foreign banks to Chinese entities amounted to $760 billion. Cross-border lending globally fell by 3 % last year. The decline in China’s cross-border lending was influenced by China’s weak growth outlook and increased downside risk. Moreover, the drop in global commodity prices and weak foreign trade performance, which directly affected the volume of foreign trade financing.
In conjunction with the BIS Quarterly Report, June 2016, BIS for the first time released information on the international activities of Chinese banks. The statistical data cover all commercial and investment banks located in China (including subsidiaries of foreign banks), as well as intra-group liabilities. The figures show that banks located in China are net borrowers on international markets. As of end-2015, banks had foreign liabilities of $940 billion and foreign assets of $720 billion. Part of this is explained by the fact that many Chinese banks are listed on foreign exchanges (including Hong Kong), where their market capitalisations on those exchanges are counted as foreign debt. In addition, foreign debt includes offshore yuan deposits hold in Chinese banks (roughly $440 billion at the end of 2015).
Even if the significance of Chinese banks as an international provider of credit has increased, only 3 % of all cross-border lending in 2015 originated from banks in China. Banks in China mainly make foreign loans in dollars (nearly 75 % of foreign lending as of end-2015).