Chinese banks are under pressure to boost credit growth to support a slowing economy. The People's Bank of China (PBoC, the central bank) has asked some banks to slow their lending rates to limit risks after new loans spiked to a record in January.
Specifically, bankers said the PBoC sent informal instructions earlier this month to a number of lenders and asked them to grant loans "at an appropriate growth rate."
According to the source, banks were also required to control the size of new loans in February to avoid issuing new loans at a too fast rate.
Chinese banks are under pressure to boost credit growth to support a slowing economy, after COVID-19 control measures and a crisis in the property sector slowed the pace China's 2022 Gross Domestic Product (GDP) growth fell to its worst rate in nearly half a century.
China's real estate market is going through a historic downturn. As of December 2022, new home prices fell for 16 consecutive months. Sales of China's top 100 companies in 2022 are only 60% of 2021.
China's central bank has told some banks to slow the pace of lending to contain risks after new bank loans jumped to a record in January, three bankers with knowledge of the matter said.
The banks were told to control the scale of new loans in February to avoid issuing new loans at a too-rapid pace, the sources said.
Chinese banks are under pressure to accelerate credit support to prop up a slowing economy after harsh COVID-19 measures and a crisis in the property sector dragged China's 2022 GDP growth down to one of its worst rates in nearly half a century.
New bank loans in China jumped more than expected to a record 4.9 trillion yuan (US$713.51 billion) in January.
However, the loan growth was mainly underpinned by state-backed infrastructure projects, while actual business demand remained weak. "If banks are blindly pursuing the increase in the scale of loans, that may not be sustainable," one of the bankers said. In addition, the pressure on banks to extend more loans to boost consumption has led to the misuse of such funds. Some homebuyers, for instance, borrowed cheaper consumer loans to repay their mortgages, a practice that is banned by regulators. China's banking regulator on Friday imposed fines on five financial institutions over irregularities, including illegal property loans and misuse of consumer loans. The PBOC did not immediately respond to requests for comment. The central bank also issued guidance to headquarters of some major state-owned banks in January asking them to book some of their loans made that month to later months for accounting purposes, a fourth banker with knowledge of the matter said. The move aimed to avoid an abrupt surge in bank lending figures, the source said.