Chinese Bankers Want More Active Fiscal Policy, Over 60% Say NPL’s the Biggest Risk: Survey


A new survey has found that Chinese bankers approve of the country’s monetary policy settings yet would prefer more active fiscal policy from Beijing.

The China Banking Association and PricewaterhouseCoopers jointly released the “2018 China Banker Survey Report” (2018中国银行家调查报告) in Beijing on 26 February.

First launched a decade ago, the report covers a total of 12 areas including the macro-economic environment, development strategy, business development, risk management and internal controls and regulatory assessment.

The latest report sees a declining overall score for assessments made by Chinese banks in 2018 of macro-economic policy outcomes.

The report divides macro-policy into the four categories of monetary policy, fiscal policy, industrial policy and regulatory policy, with monetary policy posting the highest score in the 2018 iteration.

According to the report this indicates that most Chinese bankers approve of the Chinese central bank’s “steady and neutral monetary policy” which has the goals of “stable leverage” and “risk prevention.”

Over 80% of bankers surveyed believe that the Chinese central bank should strengthen the flexibility and effectiveness of liquidity management, and maintain “rationally stable” liquidity in the banking system.

More than 70% of survey respondents said that the central bank should improve interest rate corridor mechanisms, and paths for transmitting the impact of policy rates to the financial markets and the real economy.

Chinese bankers also stressed the need to prevent cross-border capital flow risk, with over 50% of respondents stating that the central bank should optimise cross-border capital flow macro-prudential policies.

Out of the four policy areas assessed Chinese bankers gave their lowest marks to fiscal policy, with the report stating that bankers would look forward to more active fiscal policy.

32.4% of Chinese bankers surveyed said that growth in non-performing loans was their biggest source of pressure, while 60.8% said that the main risk faced by the banking sector was a sudden explosion in NPL’s.

Over 50% said that they believed local government debt risk needed attention, while over 60% believed that there is the possibility that the NPL ratio will rise in future.

“Lacklustre debt growth” was a concern for 19.6% of bankers, while “risk compliance regulation pressure” was a worry for 19.2% of respondents.

According to the report the inclusion of off-balance sheet wealth management products in the Chinese central bank’s macro-prudential assessments will increase compliance costs and pressure for commercial banks, with regulators further heightening regulation of cross-border capital flows, cross-sector financial risk and anti-money laundering measures.