Credit financing to further support the real economy in 2019: report

China's credit will grow within the range of 13.5 percent and 14 percent in 2019, and loans from financial institutions will further support the real economy, a report said. 

China’s credit growth will be in the range of 13.5 percent and 14 percent in 2019, and loans from financial institutions will continue to play a further important role in supporting the real economy, a recent industry report said.

Given the downward pressure of the macro economy, the liquidity within the financial system will remain at a reasonably abundant level for the whole year of 2019. But financial support for the real economy needs to be enhanced, as there will still be “bottlenecks” for the flow of funds, the financial research center at the Bank of Communications predicted.

Meanwhile, as the Chinese government is rolling out more favorable policies to boost the development of private businesses and small and micro-sized enterprises, the previously pent-up potential demand for credit is expected to be released, the report said.

The Shanghai-based lender expects a gradual increase of investment in the country’s infrastructure and therefore stable growth for corporate credit lending in 2019.

Household operating loans are also predicted to grow this year, as China is advocating mass entrepreneurship and innovation in the Internet age.

Credit financing from financial institutions to companies and households rebounded steadily in 2018, and loan structure was further improved during the past twelve months.

The outstanding yuan loans totaled 136.3 trillion yuan (US$20.23 trillion) by year-end, up by 2.64 trillion yuan compared to the year of 2017, and loans grew by 13.5 percent for the whole year of 2018, 0.8 percentage point faster than the previous year, the bank’s research team said.

The Bank of Communications’ study noted that as much as 65 percent of credit went into enterprises, which sought money for their daily operations and liquidity management.

Driven by the improved vitality of the real economy, there was a pronounced rebound of needs for short-term loans and notes financing, with the year-on-year growth rate returning to 6.7 percent in 2018 from close to zero in 2017.

However, due to slowing infrastructure investment and the lack of willingness to invest and expand among companies, long-term loans slowed down by 4 percentage points compared with the end of 2017, data from the central bank and the research center of the Shanghai-based lender showed .

Financial institutions have channeled more funding to small and micro-sized firms as well as rural sectors, spurred by a series of favorable policies from the People’s Bank of China. In 2018, micro finance was reported to have grown by 18 percent, or 1.22 trillion yuan, doubling the number recorded during 2017.

However, strict oversight on the real estate market has also led to a drop in credit granted to the property developers as well as the households.

Money lent to the real estate sector declined by 0.9 percentage point year over year to stay at 20 percent, and the proportion of housing loans in family debt portfolios has decreased to around 50 percent, the study added.

On the other hand, consumer loans maintained a growth rate of 20 percent in 2018, thanks to people’s evolving habits toward borrowing and consumption as well as emerging Internet finance.

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