Chinese investors shun long-term corporate loans

Chinese businessmen continue to avoid taking out medium- and long-term bank loans over short-term worries about China's rapidly decelerating economy.

E. Yongjian, an analyst at the Bank of Communications, said " . . . medium- and long-term corporate lending is still lower than the historic average. There is no substantial rise in corporate lending."

Concerns over lending growth became increasingly intense after banks lent just US$85 billion in July, the lowest level since October 2011.

Analysts have questioned whether Beijing's grand plans to stimulate the economy will work if businessmen hesitate to secure medium- and long-term bank loans. This reluctance is apparent despite a US$186 billion infrastructure stimulus package announced by Beijing last week.

The National Development and Reform Commission approved subway, road, port and other infrastructure construction projects last week. Before that, local officials announced investment plans valued at some US$1.1 trillion.

Some analysts believe the reason for the tepid loan take up is the reluctant by banks to be saddled with more non-performing loans.

"Banks have become more prudent when extending loans as they're faced with pressure from deteriorating asset quality," said Guo Tianyong, banking research director at the Central University of Finance and Economics.

In June, commercial banks' non-performing loans reached US$72 billion while special-mention loans, or debts that could potentially turn sour, stood at US$231 billion.

On the other hand, short-term loans are increasing. New corporate lending maturing in more than one year increased by US$4.5 billion from a month earlier because of a spike caused by infrastructure stimulus.

Medium- and long-term consumer loans increased by US$26 billion last month, up 40% from the US$18.5 billion in July, the biggest rise since April 2011.