Private Enterprise Loans Surge over 37% in Q1 2023: CBIRC Q1 Banking Report

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Lending by Chinese banks to private businesses has seen a surge of over 37% compared to the same period last year, according to the latest figure from China’s banking regulator.

A report released by the China Banking and Insurance Regulatory Commission (CBIRC) on 26 April highlights a leap in private enterprise lending in tandem with slight declines to interest rates, as Chinese policymakers push for greater financial inclusion to drive post-pandemic economic recovery.

According to the report, loans to private enterprises grew 3.7 trillion yuan in the first quarter of 2023, for a year-on-year (YoY) increase of 1 trillion yuan, or over 37%. The average interest rate for loans to private enterprises edged lower 0.06 percentage points compared to 2022.

The king’s share of new lending to private enterprises was made to smaller businesses, amidst an ongoing push for greater financial inclusion from Chinese policymakers.

Financial inclusion loans to Chinese micro-and-small enterprises grew by 2.3 trillion yuan in the first quarter, for a YoY increase of 808.8 yuan billion. The average interest rate for financial inclusion loans decreased by 0.38 percentage points compared to 2022.

Lending to the manufacturing sector also posted robust growth, with a rise of 2.2 trillion yuan in the first quarter, for an increase of 381.9 billion yuan compared to the same period last year.

“The efficiency of the banking and insurance sector in servicing the real economy has continued to improve,” CBIRC said in the report on the banking and insurance sectors in the first quarter (2023年一季度银行业保险业运行情况)).

“[The banking sector] is actively supporting technological innovation and green development, and continuously increasing funding support for new energy, artificial intelligence, bio-manufacturing, and other fields.”

Chinese banks also saw a leap in lending to sectors deemed to be of strategic priority by Beijing in the first quarter.

As of the end of the first quarter, the balance of loans for high-tech manufacturing increased by 28.6% YoY, while the balance of loans for strategic emerging industries leaped by over 50% in YoY terms, and the balance of green loans rose by 34%.

CBIRC also highlighted an increase in lending to support improvements to living standards, in the form of first home loans and growth in credit for education and entrepreneurship.

According to the report, 92% of mortgages were used to support the purchase of first homes by borrowers, while rental housing loans increased by 93.5% YoY.

Entrepreneurship and guarantee loans increased by 17.6% YoY, while loans for education, student assistance, healthcare and social work increased by 17.5%, 21.5%, and 18.5% respectively.

China’s banking system is also beginning to pick up the slack in the aged care system that analysts frequently point to as a drag on consumption by households. Pension financial products saw a YoY surge of 173.3% in the first quarter, while the balance of pension savings deposits hit 33.6 billion yuan.

According to the report, the Chinese banking system remains in reasonable health with regard to risk resistance.

Preliminary data from CBIRC indicates that the balance of non-performing loans (NPL) in the banking sector was 3.9 trillion yuan at the end of the first quarter, for an increase of 125.9 billion yuan compared to the start of the year. The NPL ratio was 1.68%, for YoY decline of 0.09 percentage points.

CBIRC said that overall risk resistance capability remains strong, with a provision coverage ratio of 205.2% for commercial banks as of the end of the first quarter.