China to miss annual credit supply target

New loans extended by Chinese banks in July came to just US$84.9 billion against an expected US$110 billion, the lowest level since October 2011.

China’s banks led by the Big Four have responded to Beijing’s order to ramp-up lending, but might be too late to late to meet their target for the year. Economists are concerned the unusually low loan value in July threatens the annual credit supply target.

The Big Four consists of Industrial and Commercial Bank of China Ltd, China Construction Bank Corporation, Bank of China Ltd and Agricultural Bank of China Ltd.

Wang Jun, an economist with China Center for International Economic Exchanges, a government think tank, said July's figure was unusually low.

“If that continues, China won't even achieve its annual credit supply target, which is why credit release has accelerated in August."

Industry sources said that to reach the loan target for the year, new loans in August should range from US$94 billion to US$110 billion. The US$11 billion in new loans the first 15 days of August, however, is only a tenth of the target.

The quicker pace of new bank loans in August, however, reflected increased government concern over a further slowdown in the economy. China's economic growth in the second quarter slowed to 7.6%, the lowest since early 2009.

Boston Consulting Group said the Big Four have accelerated their loan issuance in line with government wishes. The Big Four are also publicly supporting the government's consolidating growth agenda with CCB announcing its support for this goal instead of its organizational objective of controlling financing to property developers.

Falling profits and rising overcapacity have also hindered corporate expansion, further draining credit demand, Wang added.