Through the month of May, we learned a number of times that Chinese banks’ new loans were weak. In the first two weeks, the big four banks loaned virtually nothing, and in the first 20 days, the big four banks loaned close to nothing.
However, I have also noted a marked change in tone in favour of stimulus (even though the government subsequently denied any plan for large stimulus), so banks could be once again forced to lend for the sake of manufacturing GDP growth by providing funding to projects that make little commercial sense. Not to mention that Chinese banks have a habit of doing things towards the end of the period.
So what is the outcome? Well, for the full month of May, the big four banks loaned RMB253, up from RMB34 billion in the first 20 days according to China Securities Journal. And consistent with the recent trend, a large proportion of the new lending was in the form of short-term bill financing, not medium to long term loans. At the same time, bank deposits at big four banks fell again by RMB220 billion for the full month of May.
Currently, the big four banks account for roughly 40% or so of total loans outstanding. If this proportion is the same for new loans in May, the total new loans will be around RMB600 billion, while the Chinese Securities Journal goes for RMB700 billion. Whatever the final number is, credit demand is still clearly weak, and we will still be wondering if the current “stimulus” will be able to boost lending in the months to come.