Chinese Bank Lending Hits Record On Corporate Finance Demand

Demand for corporate finance helped propel China’s banks to new lending records in November, according to news from Reuters on Monday (Dec. 11).

Chinese banks provided $169.27 billion in new loans during the month, the publication said, citing data from the People’s Bank of China. That figure surpassed analysts’ expectations, especially considering China’s efforts to reduce risk tied to a surge in corporate debt.

An earlier survey from Reuters found analysts predicted new yuan loans in November to hit 800 billion, up from October’s figure of 663.2 billion yuan. But Chinese banks recorded 1.12 trillion yuan, reports said.

“New loans exceeded expectations due to strong corporate financing demand, with medium- and long-term corporate and household loans expanding sharply,” said Ciatong Fund Management Analyst Zheng Lianghai in an interview with Reuters.

A surge in bank lending may also be attributed to regulators’ efforts to curb shadow and off-balance sheet lending, as well as a downturn in the nation’s corporate bond market, which has pressed companies to seek financing from traditional bank loans.

Earlier this year, reports in The New York Times said China has made headway in its anti-shadow banking efforts. The Prudential Regulation Bureau announced in August it reached initial targets to combat illicit lending in China and had, so far, developed 20 new rules for regulators to heighten oversight of shadow banking activity in the country.

Reuters also said the surge in new loans for November is particularly noteworthy considering regulatory efforts to impose stricter rules on the nation’s financial services market to curb risk.

Last month, Chinese authorities introduced new rules for the asset management industry as part of this effort, reports said. They have begun to address the micro-loan sector to address rising household debt levels.

While demand for corporate lending has increased, analysts are also increasingly worried about rising bad corporate debt levels in China. Last year, Bloomberg said the number of corporate loan defaults had tripled since 2015 levels, while analysts at Seeking Alpha suggested a “banking crisis” may be in the future due to rising bad corporate debt, which account for more than 150 percent of China’s GDP.