The China Bank Lending Survey - April 2010

"Bankers we spoke to this month expect the recent moderation of bank lending to continue, and project cutbacks in loans to property developers and local governments. Bank lending fell to RMB 510.7 billion in March, from RMB 700.1 billion in February, suggesting that tightening measures implemented by regulators and the central bank are having the desired effect.

New lending in Q1 totaled RMB 2.6 trillion, down significantly y-o-y and accounting for around 34% of the government’s RMB 7.5 trillion annual new lending target this year, in line with seasonal norms. Since 2005, Q1 lending has accounted for 30 40% of the full-year lending total every year except for 2009, when Q1 lending accounted for almost half of the annual total.

In order to ascertain whether this lending slowdown continued into April, what the future lending outlook is among grass-roots bankers, and how rigorously central government policy is being enforced at the local level, we spoke to contacts in charge of lending at 100 city-level commercial banks, located in 11 provinces across east, north and central China. In comparison with the big-four banks and nationwide commercial banks, city commercial banks tend to lend more to the private sector and to small- and medium-sized enterprises (SMEs) than to state-owned enterprises (SOEs).