Syndication
CONCERNS about policy tightening in China had pushed up interest rates on informal loans, a barometer of funding cost for smaller businesses, central bank officials said over the weekend.
Zhang Jianhua, head of research at the People’s Bank of China, said a central bank survey completed in the first quarter of 2010 showed lending rates fell from 2008 as China implemented loose monetary policy to counter the global financial crisis.
“But since then, rates have been creeping up as the central bank started to tighten liquidity in the second half of 2009,” he said, while noting the central bank did not officially announce a shift in monetary policy until late last year.
“The lending rates must be higher now,” he said, citing anecdotal evidence because his research team has not conducted any new nationwide survey since March 2010.
In Jiangsu Province, active borrowing from individuals and companies — as opposed to those from banks and special lending entities — helped push the average one-year rate up moderately to 13.8 percent in the second quarter of 2010 from 13.3 percent three months earlier, according to Li Xiangning, a director from the central bank’s Nanjing branch.
Private lending is an important channel for smaller firms in China, who are often neglected by big banks despite regulatory efforts to guide more loans to them.
Willingness to offer such loans is also strong as there are limited investment channels for funds in private hands. Such activities are particularly active in provinces including Zhejiang, Hainan, Hunan, Shandong and Shanxi.
Zhang said private loans stood at around 2.4 trillion yuan at the end of March in 2010, accounting for 5.6 percent of the country’s total lending, down from 8.5 percent two years earlier.
Although mostly without guarantees, the default rate of such loans is very low and still declining, central bank surveys show.
Zhang Jianhua, head of research at the People’s Bank of China, said a central bank survey completed in the first quarter of 2010 showed lending rates fell from 2008 as China implemented loose monetary policy to counter the global financial crisis.
“But since then, rates have been creeping up as the central bank started to tighten liquidity in the second half of 2009,” he said, while noting the central bank did not officially announce a shift in monetary policy until late last year.
“The lending rates must be higher now,” he said, citing anecdotal evidence because his research team has not conducted any new nationwide survey since March 2010.
In Jiangsu Province, active borrowing from individuals and companies — as opposed to those from banks and special lending entities — helped push the average one-year rate up moderately to 13.8 percent in the second quarter of 2010 from 13.3 percent three months earlier, according to Li Xiangning, a director from the central bank’s Nanjing branch.
Private lending is an important channel for smaller firms in China, who are often neglected by big banks despite regulatory efforts to guide more loans to them.
Willingness to offer such loans is also strong as there are limited investment channels for funds in private hands. Such activities are particularly active in provinces including Zhejiang, Hainan, Hunan, Shandong and Shanxi.
Zhang said private loans stood at around 2.4 trillion yuan at the end of March in 2010, accounting for 5.6 percent of the country’s total lending, down from 8.5 percent two years earlier.
Although mostly without guarantees, the default rate of such loans is very low and still declining, central bank surveys show.
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25 Jan 2011