Chinese regulators have relaxed the extra reserve requirements they had imposed on some banks in 2010 to stop too much lending, says Reuters.
So goodbye, crazy Chinese lending growth?
Maybe ask the head of the planet’s biggest bank first (via China Daily):
BEIJING – The Industrial and Commercial Bank of China (ICBC), the world’s largest bank by market value, will double its lending to China’s new strategic industries, including those involved in high-end manufacturing, the service industry and the green sector, during the next three to five years, the bank’s president said on Sunday…
By the end of last year, ICBC had extended loans of more than 610 billion yuan ($93.8 billion) to the country’s new strategic industries. The growth rate of these new loans in 2010 was 17 percent, which was higher than the bank’s average credit growth, said Yang…
That’s more than all the new lending that Chinese banks officially made in February (RMB 600bn), for context. Chinese M2 growth has also recently reached 17 per cent year-on-year, coincidentally.
Which makes ICBC’s commitment really quite big, no?
Furthermore, we wonder if the commitment is another sign that parts of China’s former lending boom are being shuffled from one state-backed area — property, notably — to another. Remaining bank lending is fading away only to re-appear as ‘society-wide’ refinancing, such as inter-company loans or bond issuance in the Hong Kong market.
It’s a confusing shuffle of liabilities, and one that might eventually prove harder to solve than the banking crisis the shuffle was likely designed to avoid.
We’ve been expecting much more bank lending to these ‘new’ industries. Purely by virtue of taking pride of place in the 12th Five-Year Plan — they have considerable state backing. Where there is state backing, there are loans. Unfortunately — where there has been state backing before, there has eventually been trouble.
Related links:
The great flaws in China’s financial system – FT Tilt
Doubts are mounting about synthetic RMB bonds – Reuters
The Chinese SIV - FT Alphaville