China’s banking leaders seek to calm concerns
China’s top banking regulators and the chairmen of the four largest banks tried to allay concerns on Sunday that the country was allowing its banking system to grow at a reckless pace as a way to sustain short-term economic growth. The regulators and bank chairmen said during a rare joint news conference that they were managing the industry prudently and that effective measures had been taken to limit risk even as lending expands briskly. “The risks are within control,” Shang Fulin, the chairman of the China Banking Regulatory Commission, said on two separate occasions.
Loans have been climbing steeply as a share of the economy for four years, prompting foreign bank analysts to question the sustainability of an economic model based on ever more debt invested in a wide range of industries that are already facing overcapacity.
Chinese households and businesses have also begun shunning the very low, regulated interest rates offered by the giant state banks in favour of more speculative financial products. The central bank has been helping commercial banks sustain extremely heavy lending this autumn by pumping record sums of money into the financial system.
Commercial banks have also shifted toward a heavy emphasis on one-year loans to corporate borrowers instead of multi-year loans, even for construction projects that may take years to complete. The one-year loans make bank loan portfolios appear less risky on paper, but their use in financing multiyear projects means that it might be almost impossible to actually collect the money after one year, because
Be the first to comment.