China’s Banks Are Still in Trouble
A new lending scheme will buy some time. But it can’t fix larger problems.
New tricks, same old problems.
Photographer: Qilai Shen/Bloomberg
You wouldn't know it from the government's optimistic pronouncements, but China's banks are still under significant stress. Although the latest plan to help them out won't solve any fundamental problems, it will buy time -- maybe enough to come up with better ideas.
By several measures, Chinese banks are strained. Their official loan–to-deposit ratio increased from 65.8 percent in June 2015 to 71.2 percent at the end of March. New deposits peaked in 2015 and have since failed to keep up with lending growth. Last year, new loans amounted to 100.1 percent of new deposits. Through the first five months of this year, they were running at 104 percent.