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After extending credit to small- and medium-sized companies in August 2008, China's central bank developed policies to lower both interest rates and bank reserve requirements, which would ease the loan conditions. But since banks have become parsimonious with loans, the increase of mid- and long-term loans began to slow down since the third quarter of 2008. By the end of September the balance of local and foreign currencies of China's financial institutions was RMB31,480bn, up by 14.73% year-on-year, while the balance of renminbi loans was rose 14.48% to RMB29,650bn.
Deposits increased to RMB6,560bn in China's financial institutions 01/2008-09/2008, up RMB1,810bn year on year. The variety of deposits shows that the contribution of non-financial companies and governments slowed, while deposits from residents accounted for a majority, and dominated by regular deposits. Data show that the share of regular deposits increased to 47.7% of the total in renminbi, up 1.5% from the previous quarter, and 1.2% from the previous month.
The gap between M1 and M2 in the third quarter grew to its widest since May 2006, showing that the money generation speed of China's financial system has slowed along with the demand of real economy. The fund chain of companies is under great pressure even if more bank loans become available.
With the expectation of a slowdown of macroeconomic growth and the lowering of interest rates, the outlook for corporate profit is negative - companies are less keen to invest, residents lose confidence on consumption and are less willing to spend on housing, and more regular deposits fuel the reduction of net interest margins. In addition, although the direct influence of the current global financial crisis is limited to China's banking industry, the potential risks the industry may face should not be ignored.
Contents:
Chapter One: Operation of China's Banking Industry
1.1 Deposits
1.1.1 Deposits in Financial Institutions have Greatly Increased
1.1.2 Increase of Deposits from Companies has Slowed while Deposits from Residents has Increased Rapidly
1.1.3 Regular Deposits Are Increasing
1.2 Loans
1.2.1 Increase of Mid- and Long-term Loans Is Slowing
1.2.2 Policies Ease Credit while Banks Tighten Lending
1.2.3 Foreign Exchange Loans Continue to Drop
1.2.4 Bill Discount Loans have Increased Slightly
1.3 Liquidity
1.3.1 Rate of Increase for M2 is the Lowest in Three Years while the Demand for Real Economy Slows in Step
1.3.2 Monthly Reductions of M1 Marks Pressure on Corporate Fund Chain
1.4 Interbank Market
1.4.1 Money Market Is Active
1.4.2 An Overall Increase of Interest Rates in Money Market
1.5 Investment in Securities Is Reducing Monthly
Chapter Two: Operation of China's Banking Industry in the First Three Quarters of 2008
2.1 Total Assets and Total Liabilities of Financial Institutions
2.1.1 Overall Situation and Mix
2.1.2 Situations of Different Financial Institutions
2.2 Non-Performing Loans in Commercial Banks
2.2.1 Non-Performing Loan Balance and Ratio
2.2.2 Mix of Non-Performing Loans
2.2.3 Non-Performing Loans of Different Financial Institutions
2.3 Operation of Foreign Banks in China
2.4 Operational Performance of Listed Banks
Chapter Three: Policies and Innovation of China's Banking Industry in the First Three Quarters of 2008
3.1 Dynamics of Policies
3.1.1 China Banking Regulatory Commission (CBRC) Becomes Strict with Loans to Two Industries
3.1.2 Banks Taking Strict Precautions against Risks of Car Loans
3.1.3 Banking QDII Has Obtained Permission to Invest in Japanese Stock Markets
3.1.4 Rural Commercial Banks Are Encouraged to Go Public
3.1.5 China's Central Bank Requires New Loans not to Exceed RMB3,630bn in 2008
3.1.6 Commercial Banks are Allowed to Engage in Gold Futures
3.1.7 Mid- and Large-sized Banks are Allowed to Set up Rural Financial Market Departments
3.1.8 Pilot Scheme of Microfinance Institutions has Been Initiated
3.1.9 Loans from Commercial Banks are Available to High-quality Venture Capital Firms
3.1.10 CBRC has Ordered a Halt to Commercial Banks' Business of Acting as Guarantors for Real Estate Companies to Get Loans from Trust Companies
3.1.11 CBRC Warns against Risks of Cashing with Credit Cards
3.1.12 CBRC Has Ordered a Halt to Financial Institutions' Foreign Exchange Margin Trading Business
3.1.13 Credit Lines Have Increased by 5%
3.1.14 China's Central Bank Raises Credit Lines for Commercial Banks
3.1.15 A Rise of 3% in Interest Rate of Small Loans Is Allowed
3.1.16 Stricter Control over Loans to Commercial Real Estate Projects
3.1.17 CBRC's Urgent Investigation in U.S.-related Assets
3.1.18 Central Bank Cuts Lending Rates and Reserve Requirements
3.2 Innovative Dynamics of Banking Industry
3.2.1 Innovative Dynamics of China's Banking Industry
Selected charts:
Amount of Deposits in Renminbi in China's Financial Institutions 09/2007-09/2008
YoY Rate of Increase for Corporate and Individual Deposits in China 09/2007-09/2008
Amount of Loans in Renminbi of China's Financial Institutions 09/2007-09/2008
YoY Rate of Increase for Loans of Different Terms in China 09/2007-09/2008
Increase of Loans in Renminbi of China's Financial Institutions 09/2007-09/2008
YoY Rate of Increase for M0, M1, and M2 in China 09/2007-09/2008
Categories of Terms of Interbank Lending in China in the First Three Quarters of 2008
Trend of Weighted Average Interest Rates of Interbank Lending and Buybacks in China 09/2007-09/2008
Use of Renminbi Funds in China's Financial Institutions 01-09/2008
Total Assets and Total Liabilities of China's Financial Institutions by the End of the Third Quarter 2008
Shares of China's Financial Institutions in Total Financial Assets by the End of the Third Quarter 2008
Total Assets and Total Liabilities of China's State Banks by the End of the Third Quarter of
