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Banks to increase lending, but keep eye on risks
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09:24, November 14, 2008

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China's largest banks may be stepping up the pace at which they give out credit, but they are still keeping a careful eye on risks.

Their move is in line with the country's 4-trillion-yuan economic stimulus package, in which commercial banks' credit ceilings will be abolished to channel more lending to priority projects, small firms, rural areas and technical innovation.

Chen Yuan, president of China Development Bank, said on Tuesday that the bank plans to issue a further 40 billion yuan in loans before the end of year.

"The newly added loans will mainly go to key infrastructure projects, to livelihood-related items such as low-cost housing, as well as medical and education projects," Chen said. "And we will also help key enterprises get better financed for mergers and acquisitions."

The bank has sped up the loan approval process for 22 railway projects, including the Beijing-Shijiazhuang and Guizhou-Guangzhou railways.

The Agricultural Bank of China has decided to give out more than 100 billion yuan in new credit to farmers, rural areas and smaller counties in 2009.

"But it is never an easy job. On the one hand, we have to offer more credit at a quicker pace. On the other hand, we have to ensure liquidity and that the loans go to the right projects," said a bank official.

Guo Shuqing, president of China Construction Bank, told a recent internal meeting that the bank would offer an additional 30 billion to 50 billion yuan in credit by the end of this year.

"But we should also strengthen our internal risk management, ensuring loan quality when speeding up our business development," said Guo.

A report from the National Bureau of Statistics shows that Chinese banks' non-performing loan (NPL) ratio has dropped from around 30 percent in 1978 to 8 percent today, and that the average NPL ratio of listed banks has been cut to 2 percent, approaching the international level.

"To strengthen risk management, it is essential for banks to select the right customers," Pierre Mirabaud, chairman of Swiss Bankers Association, said at a financial seminar held by Zurich Financial Group.

According to Frank FX Gong, chief China economist at JP Morgan, banks are not expected to take many risks since large-scale infrastructure is usually guaranteed by governments.

Source: China Daily

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