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Finance vehicle loans to local govts up in H1

By Wang Xiaotian (China Daily)

13:26, September 04, 2012

Industrial and Commercial Bank of China Ltd's booth at an exhibition in Fuzhou, Fujian province. (Photo/China Daily)

Risk to State-owned banks 'still there' as stimulus projects ratchet up pressure

Large State-owned lenders had more loans made to local governments through financing vehicles in the first half of 2012 than in the previous six months.

Most large State-owned lenders, including the Bank of China Ltd, China Construction Bank Corp and Agricultural Bank of China Ltd, reported that they had more outstanding loans to the vehicles from the beginning of the year to the end of June than in the immediately preceding six months. The one exception was Industrial and Commercial Bank of China Ltd.

The banks, collectively called the Big Four, had 2.6 trillion yuan ($410 billion) in outstanding loans on their books by the end of June, up by 500 billion yuan from six months before.

Bank loans are the source of about 80 percent of all local government debts taken out through financing vehicles, and the Big Four were the source of nearly 50 percent of the total, according to official statistics released last year.

"Apparently, the risks related to these loans are still there," said Guo Tianyong, banking research director at the Central University of Finance and Economics. "But generally speaking, the current situation is better than at the end of last year, as there is a lower ratio of non-performing loans among these loans and higher provision coverage.

"And banks may have increased lending to certain projects to overcome their temporary liquidity difficulties."

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