Banks and lending in China

Main article: Economy of China

2024

The first reduction in bank loans in almost 20 years

China's first bank loan cut in nearly 20 years in July 2024 has heightened fears that the world's No. 2 economy is headed for a "balance sheet recession," as it did in Japan decades ago.

Stagnation of lending

Zhongzhi Enterprise Group bankruptcy

In January 2024, China's Zhongzhi Enterprise Group filed for bankruptcy, claiming insolvency.

2023

China's corporate debt 166% of GDP, more than a third - debts of construction companies

China's corporate debt in the second quarter of 2023 reached record levels - 166% from GDP, which is another anti-record.

According to this indicator, China is not equal, because the corporate debt of the United States (76.5%), the Eurozone (97%), Britain (66%) and even Japan (116.2%) is much lower.

China has been operating with high corporate debt for several years - about this level, the debt of non-financial companies approached in 2016 (161% of GDP), since 2009 it has steadily exceeded 100%.

Then the Chinese government took a number of measures to resolve the uncontrolled growth of debt: tightening regulation of banking legislation, increasing capital reserve requirements for banks, macroprudential risk limits. This knocked down exponential growth, but did not reduce the debt burden.

According to preliminary data, about 35-37% in the structure of China's total corporate debt ($28.3 trillion) are debts of construction companies, industrial companies - 27%, wholesale and retail trade - 14%, transport and logistics - 8%.

About 15-17% ($4.3-4.8 trillion) are external creditors, mainly direct investors in the industrial sector of China from developed countries, but the bulk of domestic corporate debt is formed by Chinese banks (60%), financial companies (23%) and non-bank creditors (private investors, hedge funds).

Despite the fact that the cost of servicing Chinese corporate debt is quite low at a weighted average interest rate of 5.1-5.5%, the total load is very high due to the huge debt. 9-10% of GDP goes to servicing obligations and only in the non-financial sector of China, excluding the state and the population.

The murderously high cost of servicing debt has already caused a cascade of problems in the property sector for more than three years.

The vulnerability lies in the fact that there are no good solutions for such a volume of debt, Spydell Finance wrote, and everything rests on business margins (downward trends), economic growth (downward trend) and interest rate levels (so far stable in China).

Western banks lose profits in China and cut employees

Western financial institutions in China have cut the largest number of investment banking employees in recent years after a slowing market hit profits and halted years of expansion in the country.

Five of the seven Chinese securities units that make up Wall Street and European banks either suffered losses or reported lower profits in 2023.

Average household debt: 62% of GDP

Growth of deposits of individuals

Difficulties of regional banks

As in the United States, in March 2023 China , there is a problem with small regional ones banks that own assets worth more than 100 trillion yuan (14.5 trillion), dollars have difficulties obtaining loans, burdened by bad debts.

In recent years, China has taken measures to reduce financial risks.

2022

Introduction of a ban on withdrawal and deposit of cash by individuals for large amounts without registering the source of funds

From March 1, 2022, individuals in China are required to register the source of funds when depositing and withdrawing cash in an amount exceeding 50,000 yuan (600,000 rubles). For example, large banks will not accept funds related to cryptocurrency.

Corporate lending slump

In the first 5 months of 2022, Chinese corporate lending activity is the lowest since 2015.

2018: Bank profits rise 4.72% to $273 billion

At the end of 2018, the total net profit China of commercial banks increased by 4.72% and amounted to 1.83 trillion yuan ($273 billion), according to data from the State Committee for Control and Management of Banking and Insurance Activities.

The share of bad loans at the end of December dropped to 1.83%, compared with 1.86% three months earlier.

The balance of debt on "bad" loans issued by PRC banks decreased by 6.8 billion yuan over this period - to 2.03 trillion yuan.

The total assets of banks as of December 31 were 268 trillion yuan, an increase of 6.3% over the year. Their liabilities increased by 5.9% to 247 trillion yuan^[1] of^[1]

2012

In July 2012, the volume of new bank loans China in decreased by 41.3 percent compared to the previous month, AFP reports, citing data from the People's Bank. China Banks issued loans worth 540 billion yuan (85 billion). dollars The result was much lower than analysts' forecasts, predicting a figure of 665 billion yuan^[2].

See also

• Banks in Russia
• Banks of Europe
• Banks in the United States

Notes