CBIRC Wants Banks to Unleash More Lending

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China’s banking and insurance regulator has called for the country’s banks to extend more credit to the real economy, amidst concerns that trade tensions with the United States will hamper growth.

An official announcement issued by the China Banking and Insurance Regulatory Commission (CBIRC) on 11 August said that the authority would “smooth out monetary policy transmission mechanisms, strengthen the ability and willingness of banking and insurance entities to service the real economy, raise the efficiency of financial resource allocation and expedite positive feedback between the real economy and financial sector, by driving mechanism innovation, expanding policy support and improving incentive measures.”

CBIRC highlighted plans to “guide banking and insurance entities to expand the vigour of capital provision, and protect the effective financial demand of the real economy.”

The authority said that it would “guide banking and insurance entities in precisely grasping the relationship between expediting economic growth and preventing and controlling risk; correctly interpreting regulatory and policy intentions, and making full use of the current, advantageous conditions of ample liquidity and declining financing costs to expand the vigour of loan provision, and expand financial support for the real economy.”

CBIRC points to a marked increase in loan provision of late, with its preliminary data indicating that new renminbi loans hit 1.45 trillion yuan in July, for a year-on-year increase of 623.7 billion yuan.

In the same month new infrastructure sector loans were 172.4 billion yuan, for an increase of 46.9 billion yuan compared to June.

As on-balance sheet lending accelerates, CBIRC says that shadow banking activities are on the ebb, pointing to a “trend of easing in trust loans, entrusted loans, and other forms of off-balance sheet financing.”

 

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