PBOC Professor Says Record China Loan 'Blowout' Needs Monitoring

  • New bank loans may have soared to 2 trillion yuan last month
  • Professor at central bank academy writes in Securities Times

China’s bank lending may have soared last month to a record 2 trillion yuan ($304 billion) amid slowing economic growth and weak credit demand, according to a central bank researcher.

Policy makers should pay close attention because such a surge in new loans is rare while lending demand in the economy is shrinking, Wang Yong, a professor at the People’s Bank of China’s training school in Zhengzhou, wrote Tuesday in the state-run Securities Times. Banks made 1.7 trillion yuan of new loans in the first half of January, and the monthly total could exceed 2 trillion yuan without proper controls, Wang wrote.

Wang’s article did not explain why loans were surging as corporate demand for credit was in decline, but in the past funds have been channeled to speculative ventures and so-called “shadow banking” investments.

“The government needs to better guide banks with its lending policy, carefully manage the destination of credit, and make the best efforts to help the real economy,” Wang said.

Loan demand from companies fell to a record low in the third quarter of last year and remained almost unchanged in the fourth quarter, according to the PBOC’s bankers survey on loan demand.

Banks made 598 billion yuan in new loans in December, the latest data available, bringing the 2015 total to 11.7 trillion yuan. The monthly record of 1.89 trillion yuan was set in March 2009 amid stimulus during the global recession. The PBOC releases the new bank loan tally about two weeks after the end of each month.

The surge in new loans reduces liquidity in the banking system, which has also been affected by capital outflows, Wang wrote in an opinion piece for the paper, an affiliate of the People’s Daily.