Stock of Chinese bank loans soars

The stock of yuan-denominated loans increased in October by 13.1 % y-o-y. In the first ten months of this year, new bank lending valued at 13.8 trillion yuan (2 trillion dollars) was issued, up from 11.8 trillion yuan in the same period in 2017. Foreign-currency-denominated lending represented only about 4 % of China’s bank lending stock overall.

Official efforts to improve corporate access to financing this year are only evidenced in bank lending figures in the explosive growth in “bill financing.” In January-October, banks granted nearly 1.3 trillion yuan in this form of short-term credit. Bill financing is usually used for trade financing, so its risks are more limited than traditional bank loans. Such lending can easily be used to boost overall lending when authorities ask banks to do so. In the first ten months of this year, the volume (5.1 trillion yuan) of new long-term lending to firms and state organisations contracted by 12 % from last year and the volume (600 billion yuan) of other forms of new short-term credit than bill financing was less than half that granted in the same period last year. In addition, the stock of lending off bank balance sheets, i.e. shadow banking sector instruments (trust and entrusted loans, or banker’s acceptances) has decreased this year.

While the growth of new loans granted to households this year has decelerated, the stock of loans continues to grow at 18 % a year. The popularity of short-term loans has increased this year, while long-term lending (mostly housing loans) to households has declined from last year. In the January-October period, households accounted for 45 % of new bank lending.