subject: Aarkstore Enterprise Annual Report On China's Banking Industry, 2008 [print this page] At the end of December, 2008, the loans extended by Chinese financial institutions in both the domestic currency and foreign currencies amounted to a combined balance of RMB 32.01 trillion, an increase of 17.95% year on year on a comparable basis. Various loans denominated in Renminbi hit a balance of RMB 30.34 trillion, a growth of 18.76% from a year ago on a comparable basis, representing a growth rate 2.66 percentage points higher than the previous year. Among the loan portfolio in December, 2008, the discount loans extended to non-financial institutions jumped 50% from a year earlier, presenting a still robust growth. However, the proportion of the discount loans in the total loans declined, a possible evidence that the phenomenon that banks and enterprises are reluctant to lend and borrow has changed for the better to some extent.
At the end of last December, the deposits in Chinese financial institutions in both the domestic currency and foreign currencies stood at RMB 47.84 trillion, a rise of 19.30% year on year. The balance of the loans denominated in Renminbi reached 46.62 trillion, up 19.73% compared to the corresponding period of last year. On the side of structure, the fiscal deposits decreased considerably, compared to the sharp growth of the deposits of residents and enterprises. On the side of term, the outstanding demand deposits of the residents and enterprises grew 16.12% and 6.30% over the previous year respectively, while the outstanding time deposits saw an even higher increase of 32.67% and 28.74% respectively. However, the trend of the time deposits slowed down somewhat in terms of the link relative ratio compared to the prior month.
At the end of last December, M2 expanded 17.82%, terminating the continuous downward trend since last May. The rapid M2 growth indicated the monetary policy had become relatively inflationary after a series of interest rate cuts. In the fourth quarter of last year, the positive fiscal policy and the inflationary monetary policy started to take effect, and M1, a barometer for the economic activity, also presented a rebound, signifying the economic climate slightly changed for the better.
As a result of the widespread pessimistic expectation for the economic prospect in 2009-10, Chinese enterprises will have to face the most difficult two years in operation. On the bank side, the average time lag from the credit extension to the formation of non-performing loans is 2 years. Therefore, the rebound in the non-performing loans among the loans extended during the rapid economic growth period and the high interest rate period is possible to take shape in the first half of 2009, and this trend is forecasted to span from the second half of 2009 through 2010. These factors will come as a true touchstone for the asset quality of Chinese banks.
