China
Beijing Goes on the Hunt for Hidden Lending
2010 was a tough year for China’s financial regulators. While on the face of it banks sharply reduced their lending, in line with Beijing’s decision to call an end to economic stimulus spending, the reality was banks lent just as much as the year before but hid a lot of it off-balance-sheet. Though the China Banking Regulatory Commission has been trying to bring wayward lending back onto the books, the genie is out of the bottle. And in a country where new loan data is one of the key determinants of monetary policy, that’s a real problem. Now moves are being made to do something about it. In an essay posted on its Web site Thursday, the People’s Bank of China proposed a radical overhaul of how monetary policy wonks look at the economy. “New yuan loan data no longer actually reflects the extent of financing in the real economy,” said the essay ( in Chinese ), authored by Sheng Songcheng, director of the PBOC’s Survey and Statistics Department. Sheng proposes a new formula that includes more than just loan data. “That will help avoid overly focusing on the size of loans and needing to play whack-a-mole, where one problem pops up while you’re dealing with another, such as banks using off-balance sheet lending to avoid credit limits,” Sheng wrote. While banks formally lent 7.95 trillion yuan, or roughly $1.2 trillion, in loans last year, according to the essay, the use of entrustment loans (where-by banks match-make lenders and borrowers and take a fee for their pains) and bank acceptance bills (a type of bank guarantee) meant off-balance-sheet lending inflated banks’ credit creation by a further 3.47 trillion yuan. An Fitch Ratings report issued in December estimated “credit leakage” from the banking sector at more than 3 trillion yuan . The new formula to calculate what the PBOC has termed “social financing” adds yuan loans to foreign currency loans, entrustment loans, trust loans, bank acceptance bills, corporate bonds, funds raised by share sales of non-financial companies, insurance payouts, insurance companies’ investment properties and “others,” and leaves open the option of including private equity and hedge funds in the future as those sectors mature. According to the essay, focusing on new loan data once made sense in an economy where the banks were by and large the only source of financing, but the development of China’s capital markets over the last nine years now means at the end of last year loans accounted for less than 60% of all financing. Despite the fairly holistic attempt to paint a snapshot of actual fundraising in the economy, there’s still one notable emission from the formula: China’s informal lending sector. China’s banks have long neglected lending to entrepreneurs and small firms. Beijing has been trying to redress the problem in recent years by launching a raft of small-scale financial institutions to plug the gap and by encouraging the major commercial banks to set up SME funding units. Still, there is a major unregulated cottage industry for loans, the relative size of which varies from year to year: According to some estimates informal lending was about a third of the size of total new banks loans in 2007, a year when monetary conditions were significantly tighter than the last couple of years. With the banks sloshing money around over the last couple of years, the informal lending networks, loans between family and friends, and underground banks have been relatively less important. And Beijing may now feel that its efforts to encourage formal institutions to extend credit to smaller firms is also reducing the overall importance of informal lending. But if monetary policy does start to tighten meaningfully this year, it Beijing might find its new indicator comes up short. –Dinny McMahon
2010 was a tough year for China’s financial regulators. While on the face of it banks sharply reduced their lending, in line with Beijing’s decision to call an end to economic stimulus spending, the reality was banks lent just as much as the year before but hid a lot of it off-balance-sheet. Though the China Banking Regulatory Commission has been trying to bring wayward lending back onto the books, the genie is out of the bottle. And in a country where new loan data is one of the key determinants of monetary policy, that’s a real problem. Now moves are being made to do something about it. In an essay posted on its Web site Thursday, the People’s Bank of China proposed a radical overhaul of how monetary policy wonks look at the economy. “New yuan loan data no longer actually reflects the extent of financing in the real economy,” said the essay ( in Chinese ), authored by Sheng Songcheng, director of the PBOC’s Survey and Statistics Department. Sheng proposes a new formula that includes more than just loan data. “That will help avoid overly focusing on the size of loans and needing to play whack-a-mole, where one problem pops up while you’re dealing with another, such as banks using off-balance sheet lending to avoid credit limits,” Sheng wrote. While banks formally lent 7.95 trillion yuan, or roughly $1.2 trillion, in loans last year, according to the essay, the use of entrustment loans (where-by banks match-make lenders and borrowers and take a fee for their pains) and bank acceptance bills (a type of bank guarantee) meant off-balance-sheet lending inflated banks’ credit creation by a further 3.47 trillion yuan. An Fitch Ratings report issued in December estimated “credit leakage” from the banking sector at more than 3 trillion yuan . The new formula to calculate what the PBOC has termed “social financing” adds yuan loans to foreign currency loans, entrustment loans, trust loans, bank acceptance bills, corporate bonds, funds raised by share sales of non-financial companies, insurance payouts, insurance companies’ investment properties and “others,” and leaves open the option of including private equity and hedge funds in the future as those sectors mature. According to the essay, focusing on new loan data once made sense in an economy where the banks were by and large the only source of financing, but the development of China’s capital markets over the last nine years now means at the end of last year loans accounted for less than 60% of all financing. Despite the fairly holistic attempt to paint a snapshot of actual fundraising in the economy, there’s still one notable emission from the formula: China’s informal lending sector. China’s banks have long neglected lending to entrepreneurs and small firms. Beijing has been trying to redress the problem in recent years by launching a raft of small-scale financial institutions to plug the gap and by encouraging the major commercial banks to set up SME funding units. Still, there is a major unregulated cottage industry for loans, the relative size of which varies from year to year: According to some estimates informal lending was about a third of the size of total new banks loans in 2007, a year when monetary conditions were significantly tighter than the last couple of years. With the banks sloshing money around over the last couple of years, the informal lending networks, loans between family and friends, and underground banks have been relatively less important. And Beijing may now feel that its efforts to encourage formal institutions to extend credit to smaller firms is also reducing the overall importance of informal lending. But if monetary policy does start to tighten meaningfully this year, it Beijing might find its new indicator comes up short. –Dinny McMahon
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Beijing Goes on the Hunt for Hidden Lending
Business
HSBC Chairman to Head Key UK Business Delegation to China
HSBC Chairman Mark Tucker will lead a UK business delegation to China next month to boost trade and investment, amid concerns over national security and improving UK-China relations.
HSBC Chairman Leads UK Delegation to China
HSBC Chairman Mark Tucker will lead a pivotal British business delegation to China next month, marking the first significant visit since 2018. The trip aims to enhance Chinese investment in the UK, guided by Chancellor Rachel Reeves. Tucker, a seasoned financier with extensive Asia experience, is regarded as essential in resetting UK-China relations.
Reviving Economic Dialogue
Tucker will accompany senior bankers in seeking to rejuvenate trade, specifically focusing on financial services. Although there are apprehensions among some UK lawmakers regarding national security threats posed by closer ties to Beijing, the UK Treasury spokesperson confirmed Chancellor Reeves’ upcoming discussions on economic cooperation in Beijing.
A Shift in UK-China Relations
Since suspending most dialogues following China’s imposition of a national security law in Hong Kong, UK-China relations have soured. Nevertheless, the Labour government is prioritizing improved ties with China, emphasizing investment opportunities. Reeves asserts the necessity of a pragmatic approach to benefitting national interests amid ongoing concerns voiced by some lawmakers about security risks.
Source : HSBC Chairman to lead pivotal UK business delegation to China
China
China’s November 2024 Economy: Navigating Mixed Signals and Ongoing Challenges
In November 2024, China’s economy exhibited mixed results: industrial production rose by 5.4%, while retail sales grew only 3%, below forecasts. Fixed asset investment also faltered. Policymakers are anticipated to introduce measures to stimulate domestic demand and combat deflation.
China’s economy showed mixed performance in November 2024, with industrial production and exports showing resilience, while retail sales and fixed asset investment underperformed, amid ongoing challenges in the property sector. Policymakers are expected to implement targeted fiscal and monetary measures to boost domestic demand and address deflationary pressures.
The National Bureau of Statistics (NBS) has released China’s economy data for November 2024, revealing a mixed performance across key indicators. Retail sales grew by 3 percent year-on-year, a significant slowdown from October’s 4.8 percent growth and well below the 4.6 percent forecast. Industrial production, however, showed resilience, rising by 5.4 percent and exceeding expectations of 5.3 percent growth.
The property sector continued to drag on the broader economy, with real estate investment contracting by 10.4 percent for the January-to-November period, further highlighting the challenges in stabilizing the sector. Fixed asset investment also fell short of expectations, growing by 3.3 percent year-to-date, down from 3.4 percent in October.
In November, China’s industrial value added (IVA) grew by 5.4 percent year-on-year (YoY), slightly accelerating from the 5.3 percent recorded in October. This modest improvement reflects continued recovery in key industries, supported by recent stimulus measures aimed at stabilizing the economy.
The manufacturing sector led the growth, expanding by 6.0 percent YoY, while the power, heat, gas, and water production and supply sector grew by 1.6 percent. The mining industry posted a 4.2 percent YoY increase. Notably, advanced industries outpaced overall growth, with equipment manufacturing and high-tech manufacturing rising by 7.6 percent and 7.8 percent YoY, respectively, underscoring the resilience of China’s innovation-driven sectors.
Key product categories showed robust output gains in November:
From January to November, IVA increased by 5.8 percent YoY, maintaining steady growth over the year despite headwinds from a slowing property market and external uncertainties.
| This article was first published by China Briefing , which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, and India . Readers may write to info@dezshira.com for more support. |
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China
Ukraine war: 10% of Chinese people are willing to boycott Russian goods over invasion – new study
Since Russia’s 2022 invasion of Ukraine, some Chinese citizens express dissent through potential boycotts of Russian goods, reflecting a complex relationship despite government support for Russia.
Since Russia invaded Ukraine in 2022, the Chinese government has been criticised for its refusal to condemn the war. In 2024, the economic and diplomatic relationship between the two nations appears stronger than ever.
Because of strict censorship and repression imposed by the Chinese Communist Party (CCP), it is difficult to know the extent to which the general public shares their government’s support of Putin’s regime. But a newly published study I carried out with colleagues found that more than 10% of Chinese people surveyed were willing to boycott Russian goods over the war in Ukraine.
This is a surprisingly large figure, especially since existing surveys indicate that Chinese people hold a broadly positive view of their neighbour. We used a representative sample of 3,029 Chinese citizens for this research, to dig into public attitudes to Russia. The survey was done in 2022 after the Ukraine invasion.
We were aware that due to widespread censorship, our participants might not be willing to give honest answers to questions about Russia’s actions in Ukraine. They might also not feel safe to do that in a regime where disagreement with the CCP’s position is often met with harsh punishment. This is why we asked them to tell us if they would be willing to boycott Russian products currently sold in China.
We felt this question was a good indicator of how much the participants disapproved of Russian foreign policy in Ukraine. More importantly, we were also curious to find out whether Chinese citizens would be willing to take direct political action to punish Russia economically for its aggressive behaviour.
In our study, we split respondents into the three different ideological groups in China: “liberals”, who support the free market and oppose authoritarianism; “the new left”, who sympathise with the policies pursued in China under Mao Zedong; and “neo-authoritarians”, who believe the Russian-Ukrainian conflict is an extension of the rivalry between authoritarian China and the liberal United States. These groups were based on the main political beliefs in China.
We found that liberals were most likely to say they were willing to boycott Russian products. Liberals believe that China should work with, rather than against, western democracies. They also place a high value on human rights and democratic freedoms. Because of their beliefs, they are likely to think that Russia’s actions against Ukraine were unprovoked, aggressive and disproportional.
Chinese and Russian economic and diplomatic relations seem closer than ever in 2024.
American Photo Archive/Alamy
The new left and neo-authoritarians we surveyed were more supportive of Russian products. The new left see Russia as a close ally and believe that Nato’s expansion in eastern Europe was a form of aggression. Neo-authoritarians, on the other hand, believe that supporting Russia, an allied autocracy, is in China’s best interest.
Boycotting Russian goods
Asking Chinese participants if they are willing to boycott Russian products might seem like a simple matter of consumer preferences. However, our study reveals a great deal about the way in which regular citizens can express controversial political beliefs in a repressive authoritarian regime.
Boycotting products of certain companies has long been studied in the west as a form of unconventional political action that helps people express their beliefs. However, in the west, boycotting certain products is simply one of many ways people are able to take political action. In a country such as China, boycotting a Russian product might often be the only safe way to express disagreement with the country’s actions.
This is because citizens do not have to tell others they chose not to buy a product, and their actions are unlikely to attract the attention of the authorities.
Since Russian goods are readily available to Chinese consumers and China is encouraging more Russian exports to reach its market, the Russian economy could be significantly affected by an organised boycott campaign in China. The considerable level of support for a boycott expressed by some of our participants, as well as previous acts of solidarity with Ukraine in China, suggest that such a campaign could already be taking place in the country.
This could harm Russia because it regularly exports a number of different products such as meat, chocolate, tea and wine to China. These goods made up 5.1% of China’s total imports in 2023 – and this figure is likely to increase if Russia becomes more isolated from the west, and therefore more dependent on China for its trade.
While 5.1% of the Chinese market might seem like a low figure, China is home to over 1.4 billion people. In this context, even a small boycott could result in a serious loss to Russian companies.
Our research shows that Chinese citizens don’t always support the official position of the communist party. It also shows that many people there will express even the most unpopular political opinions – if they can find a safe way to do it.
This article is republished from The Conversation under a Creative Commons license. Read the original article.
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- Ukraine war: 10% of Chinese people are willing to boycott Russian goods over invasion – new study
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