China’s central bank has called on lenders to rein in credit flows, as debt relief has rekindled concerns about a country’s debt-fuel coronavirus recovery, resource bubble and financial stability.
In the first two months of the year, the growth of new loans came to 1 per cent. The People’s Bank of China in February instructed domestic and foreign donors operating in the country to keep new loans at almost the same level as in the first quarter of the year, if not less, according to people familiar with the situation.
This directive could significantly reduce bank financing, which is the second largest source of finance in the world.
The move emphasizes a shift in policy focus as Beijing removes regular investigations instead of controlling credit risk under regular supervision. Economic growthWhich has already returned to pre-epidemic levels.
China’s gross domestic product expanded .5.5 percent in the last quarter of last year, making it one of the few countries to register full-year economic growth. Beijing has already set at least one target Per percent growth For 2021.
Larry Hu, chief economist at Hong Kong’s McCurry Group, said: “Concerns about the epidemic-driven recession are gone. “The top priority is to reduce the debt burden of the economy.”
The rise of nding donations in early 2021 was followed by a sharp recovery in Chinese real estate transactions and investment in Beijing as a pandemic. Lifting the local housing market.
Chinese new home sales rose 133 percent in January and February this year, and property investment rose 36 percent. This demand boosted real estate loan growth by 14 percent over the same period, a seven-year high.
“Working with real estate is the safest industry since very little collateral is better than physical apartments,” says a Shanghai-based banker.
But as home prices spread across China’s coastal centers, Beijing took various measures aimed at controlling the housing boom, which led to A crackdown On the misuse of business loans in the purchase of real estate.
Which has put pressure on asset financing and made the payer a significant target of recent carbs with heavy exposure to the sector.
In December, the PBOC also tightened its limits on cross-border nnding, which significantly undermined the expansionary capacity of foreign banks in China, while promising to continue liberalizing Beijing’s capital controls. Permission for foreign players In its financial markets.
The sanctions were intended to slow down The rise of the renminbi, Which reached close to per cent against the US dollar in 2020.
However the rise of the currency threatens to slow down China’s growing exportsThat pushed the country’s trade surplus to a monthly record on epidemic-driven demand, rising more than 18 percent in December.
Another Shanghai-based banker said many small banks, including foreign lenders, were pressured to reduce the new “n” radicalization that had recently crossed the regulator’s doorstep.
“It is very difficult to keep a small amount of real estate nd in a book of real estate when other industries carry more risk,” said the banker.