Chinese banks were eager to meet the state’s annual loan quota by purchasing low-risk financial instruments rather than issuing loans last month. Bankers and analysts said this surge reflects the vigilance of financial institutions towards China’s economic slowdown.
Increased demand for bank acceptance bills (guaranteed by the issuer and technically classified as loans) reduced the interest paid by banks in the second half of December to nearly 0%. It hit a record low of 0.007% on December 23.
This is much lower than the average cost of capital of 2.5% of Chinese banks over the same period, which means that they are more willing to lose money on low-yield bank acceptances, rather than risking greater risk of loss and issuing their own loans at higher interest rates.
President Xi Jinping’s government hopes that banks will provide more loans, especially to small and medium-sized enterprises in agriculture and new energy vehicles, which are favored by the government.However, banks are reluctant to do this because they believe that China’s Economic slowdown Reduce the number of qualified borrowers.
Loan officials stated that purchasing bank acceptances to meet their year-end loan quotas is the safest way to support government policy goals.
“Supporting the wider economy is a political task that we cannot say’no’,” said an executive at Zhongyuan Bank in downtown Zhengzhou who asked not to be named. “Our loss of buying banker guarantees is smaller than lending to unqualified companies.”
The company uses bank acceptance drafts as a method of payment, and the holder can cash it with the issuing bank. They can also be bought and sold on the open market, such as the Shanghai Commercial Paper Exchange.
The loan officer told the Financial Times that Xi Jinping’s Regulatory crackdown Many of the best borrowers in areas such as real estate and private education have been hit, but there is no sign that the situation will improve anytime soon.
“The authorities want us to support the real economy while controlling bad debts,” said a loan officer at Hangzhou Zheshang Bank who asked not to be named. “This is difficult to achieve in the current business environment.”
Zhuang Bo, an analyst at asset management company Loomis Sayles in Singapore, added: “This is a problem that cannot be solved by the current policy mix.”
China’s total social financing is the most extensive indicator of credit supply. It has declined year-on-year for three consecutive years from July to September, reflecting the government’s efforts Eliminate the real estate bubble By tightening mortgages.
Credit crunch has been pushed China Evergrande Group The breach of contract with other over-leveraged developers prevented the completion of condominiums funded by advance payments from home buyers.
Central and local government officials have begun to worry about protests from aggrieved home buyers, and Retail investor Those who purchase investment products issued by developers and unpaid construction workers may threaten social stability.
This led to a mild shift in monetary policy, as the People’s Bank of China announced a series of measures last month, including lowering the benchmark interest rate. Lending rates After months of austerity policies, liquidity was injected into the reserve requirements of the real economy.
Communist Party officials have vowed not to deviate from their larger policy goals, which include a more affordable housing market and greater restrictions on “disorderly expansion of capital”-political norms for stricter regulation of some of China’s largest private companies .
But at the December year-end policy meeting, they also emphasized the importance of stabilizing the economy before the party’s 20th National Congress this year. Xi Jinping is expected to ensure a stable economy at the meeting. An unprecedented third term As the head of the party, army and government.
Additional reporting by Tom Mitchell in Singapore