Asset Optimisation by Chinese Banks Means Better Servicing Real Economy: BOC Researcher

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A leading banking expert in China says optimisation of the asset structure of lenders in the country will entail better servicing the real economy as the Chinese economy continues to change and evolve.

The “2022 Second Quarter China Monetary Policy Execution Report” (2022年第二季度中国货币政策执行报告) released by the People’s Bank of China (PBOC) on 10 August called for “greater focus on stabilisation of quantities and structural improvement” when it comes to credit extension by banks.

“In future, loan growth will adjust to the transition of the Chinese economy from high-speed growth towards high-quality development,” said the PBOC report.

Zheng Chenyang (郑忱阳), researcher from the Bank of China (BOC) Research Institute, said to state-owned media that “structural improvement” stressed by regulators when it comes to credit creation will invariably involve better servicing business and enterprises in the real economy.

“In future, China’s credit structure will adjust to new economic development conditions, and adapt to new demands for transition in the real economy,” said Zheng in an interview with Financial Times – the official news agency of China’s financial regulatory agencies.

“[It will] continue to optimise and adjust, increase the efficiency of the allocation of financial resources, and improve mechanisms and systems for finance to effectively support the real economy.”

Zheng said that data from the Q2 monetary policy execution report pointed to ongoing optimisation of China’s credit structure since the start of the year, in the form of stronger long-term support for business and manufacturing.

As of the end of June enterprise (institutional) medium and long-term loans had increased 6.2 trillion yuan compared to the start of the year, to comprise 54.6% of all enterprise loans.

Manufacturing sector medium-and-long term loans had grown 29.7% year-on-year (YoY), 18.5 percentage points ahead of the growth rate for all lending.

Financial inclusion micro-and-small loan balance grew 23.8% YoY, 12.6 percentage points ahead of the growth rate for all lending. The number of recipients of financial inclusion micro-and-small loan totalled around 52.39 million, for a YoY rise of 36.8%.

“The source of optimisation in the loan structure is changes in China’s economic structure,” Zheng said.

“China has already entered the high-quality development phase – transformation of the economic structure and upgrade of the industrial structure is steadily advancing…tech innovation, green development, inclusion and digital technology have become the new drivers of economic growth.

“The transition from old to new drivers requires large-scale support in the form of financial resources, and changes in the loan structure that adapt to the new needs of economic development in a new era, in order to better service the real economy.”