China banks continue to support key economic sectors

China’s State-owned banks increased their lending to the country’s businesses in the first half of 2022 (H1), with new loans supporting infrastructure development, manufacturing and other key economic drivers.

The latest half-yearly reports of the six largest State-owned commercial banks showed that four of them issued more than 1 trillion yuan ($145 billion) of new loans in H1.

Domestic loans made by China’s biggest commercial lender, the Industrial and Commercial Bank of China (ICBC), reached 1.61 trillion yuan during the first six months of 2022. And the Agricultural Bank of China (ABC), Bank of China (BOC) and China Construction Bank (CCB) made loans of 1.6 trillion yuan, 1.02 trillion yuan and 1.54 trillion yuan respectively.

Sectors benefitting from the most loans were infrastructure development, manufacturing, inclusive finance and green finance, according to the banks.

By the end of June, the CCB’s infrastructure-related loans reached 5.5 trillion yuan ($825 billion), accounting for nearly 52% of its corporate loans.

Credit for organisations working in key economic sectors such as manufacturing also increased in H1, compared with the same six-month period in 2021. New loans issued by the ICBC to the manufacturing industry hit 628.1 billion yuan in H1 2022, almost four times more that of the same period last year.

Even with more lending, banks saw an improvement in their balance sheets, according to their reports. Gu Shu, chairman of the ABC, attributed the banks’ performance China’s macro-economic policies designed to help companies do business.

Since the beginning of the year, the country has implemented measures including tax and fee cuts and tax credit refunds. Official figures show that China's value-added tax credit refunds exceeded 2 trillion yuan by 20 July 2022, more than three times the total amount recorded last year.

Bank executives said that they would continue to increase lending to help companies grow and to promote consumption.

Lin Jingzhen, executive vice-president of the BOC, said the organisation would increase financial support for transport, power generation, water conservancy and other major infrastructure projects.

 

SMEs continue to recover

Small and medium-sized enterprises (SMEs) in China maintained their recovery in August, as a package of government policies to stabilize the economy took effect, an industry index showed.

The Small and Medium Enterprises Development Index, based on a survey of the country’s 3,000 SMEs, came in at 88.3 in August, the same as the level registered in July, said the China Association of Small and Medium Enterprises.

The sub-index for accommodation and catering went up 0.3 points in August, marking the most significant increase among all sectors. The sub-index for industry went up 0.1 points, reversing a decline seen in July.

The BOC's inclusive loans to micro and small firms in H1 increased by 223.5 billion yuan, up 41% year-on-year.

 

China looks to join digital standards setter

China has set up a working team in to help facilitate its entry to the Digital Economy Partnership Agreement (DEPA).

Set up by New Zealand, Singapore and Chile in June 2020, DEPA coordinates international policy for the digital economy and is the first organisation of its kind in the world. It covers key sectors in  the digital economy, including e-commerce, trade and personal data security.

While the DEPA is relatively small at present, China’s signing up would highlight the need for cooperation on rule-making in trade in digital services and the digital economy.

Following the implementation of the Regional Comprehensive Economic Partnership agreement at the start of 2022, RCEP members have agreed to open more than 100 services sectors to trade. These include finance, telecommunications, transportation, tourism and innovation, with a six-year transitional period.