SHANGHAI ? ?China's biggest four banks barely issued any new yuan loans in the first two weeks of May, extending the country's weak credit growth last month, the state-run Shanghai Securities News reported Wednesday, citing an unnamed source.
The four banks--Industrial & Commercial Bank of China Ltd. (601398.SH), China Construction Bank Corp. (601939.SH), Bank of China Ltd. (601988.SH) and Agricultural Bank of China Ltd. (601288.SH)--usually account for 30% of new yuan loans issued by China's whole banking system.
The rare and unusually dismal performance by the banks is expected to fuel concerns that despite Beijing's efforts to step up credit easing, corporate demand for loans remains too weak to reverse the trend. It may also bolster the call for the Chinese central bank to cut interest rates, instead of continuing to rely on liquidity adjustment tools like banks' reserve requirements, as a more effective way to stimulate businesses' borrowing appetite.
Citing the unnamed source, Shanghai Securities News said two of the four major banks saw their new yuan loans grow by over CNY10 billion and "a few billion" in the first two weeks of this month. However, the other two equally unidentified banks suffered a decline in new lending during the same period, the newspaper said.
The paper also said the four banks' deposits have declined by around CNY200 billion as of May 13.
The weak credit growth among the four banks came after a sharp drop in new yuan loans across the country's financial sector last month.
Chinese financial institutions issued CNY681.8 billion of yuan loans in April, down from CNY1.01 trillion in March and lower than economists' median forecast of CNY750 billion.
The latest data from the four banks likely came as a surprise and worrying signal for economists who had expected a sharp turnaround for credit growth this month.
More bank loans will be needed in the short term as the Chinese government is expected to boost infrastructure investment to prop up a slowing economy, Yao Wei, an economist at Societe Generale, wrote in a recent research note.
"We expect new bank lending in May to reach CNY1 trillion," Yao said.
Faced with a slowing economy and sluggish lending growth, China's central bank said Saturday it will cut banks' reserve requirement ratio by 0.5 percentage point, effective from May 18, which will free up funds to be loaned out by the banking system.
It is the third cut in the reserve ratio so far in the current cycle of monetary loosening, with the previous two cuts in November and February.
The move came after data Friday showed China's industrial production rose 9.3% from a year earlier in April, down sharply from 11.9% in March, and substantially undercutting expectations for an acceleration to 12.2%.
Similarly, April data on bank lending, fixed-asset investment, exports and imports all came in lower than expected, indicating that the Chinese economy was slowing across the board.
The state-run China Securities Journal wrote in a commentary Monday that the authorities may lower banks' reserve requirements further this year, but should also consider cutting benchmark interest rates if the economy is too weak.
Newspaper website: http://www.cnstock.com
Copyright ? 2012 Dow Jones Newswires
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