Banking insiders expect new lending in China to fall short of 1 trillion yuan in May, as well as continued tightening of personal home loans and contraction in shadow banking sector.
China Securities Journal reports that the consensus opinion amongst members of the banking sector is that credit extension tightened in May.
“Personal home loans have definitely continued to tighten this year, while business lending also eased in May,” said one executive from a large-state-owned bank. “In May our new loans definitely saw a year-on-year decline, and the situation at others banks is probably similar.
“Additionally, in order to satisfy the requirements of various regulatory assessments we’ve actively contracted off-balance sheet operations.”
Various analysts expect the scale of new loans in May to be approximately 900 billion yuan.
China International Capital Corporation expects new lending May to rise by approximately 900 billion yuan, new total social finance to fall slightly to 1.1 billion yuan, and year-on-year growth in the M2 money supply to ease from 10.5% in April to 10.4%.
Everbright Securities sees new lending at the same level, with the issuance of local debt swaps to the tune of 312.5 billion yuan constraining loan growth, while CITIC Securities puts new lending at between 900 to 950 billion yuan .
Personal homes loans set for further decline
While new credit in China may be hovering at a more or less stable level, many analysts see personal home loans entering a decline phase as Chinese regulators seek to suppress the formation of property bubbles.
Realtors in the Beijing area said to China Securities Journal that the second home loan rates have risen across the board by over 20%, and that some individual banks are even considering the complete suspension of second home loans.
Not only are lenders cancelling the rates discounts they provide for home loans, they are also tightening credit extension via a slower pace of approval and stricter examination procedures.
Xiong Yuan (熊园), an economic researcher at Renmin University’s International Monetary Research Institute said that growth in personal home loans had already slowed in April, but the absolute level remains high.
With the ongoing implementation of real estate adjustment policies as well as the unveiling of sales restrictions by local governments, he expects the scale of personal home loans to continue falling in May, and a marked decline in personal home loans as a percentage of new credit over the full year.
CITIC Securities chief economist Zhu Jianfang said that property transactions fell in May and foresees a fall in mortgage extension compared to their flourishing recent growth.
Shadow banking expects to shrink
Analysts and experts are unanimous in anticipating a contraction in China’s shadow banking as a result of rising regulatory pressure and an ongoing delivering drive.
Banks have previously been wont to use channels such as entrusted loans, off-balance sheet wealth management products and asset management plans to circulate funds amongst each other and invest the proceeds into those areas for which investment is usually restricted, such as real-estate and local government finance vehicles.
The crackdown launched by the China Banking Regulatory Commission in March, however, has scuppered many such operations, as well as forced assets back onto balance sheets and accelerated the pace of deleveraging.
CICC analysts note that off-balance sheet financing is continuing to return to balance sheets in the form of loans as a result of heightened regulatory scrutiny, and expect a contraction in shadow banking to be reflected in May by total new social financing only slightly edging ahead total new lending.