In September 2020, new renminbi loans to China rose by 595.5 billion yuan.
This new loan figure was released by China’s central bank, the People’s Bank of China, on October 14th. This amount is slightly lower than the 646.4 billion yuan in August, but it remains higher than the average for the first seven months of 2020.
The primarysource of new loans in September was the banking sector, which accounted for 94.4% of total new loans and issued 562.5 billion yuan in renminbi credits — an increase of 4.5% from the previous month. Of this sum, the amount extended to small and medium-sized companies increased by 29.3%, while loans to individuals climbed by 24.6%.
Analysts attribute the increase in September lending to the Chinese government’s unprecedented stimulus measures and more lenient credit policies, which were implemented to offset the economic damage caused by the COVID-19 pandemic. Banks have been instructed to prioritize the approval of new loans to small businesses, rural households and those industries most affected by the pandemic, such as transportation and tourism. Furthermore, local government initiatives and subsidies, as well as easier monetary policy conditions, are all encouraging banks to lend more freely and promote economic recovery.
Though the total volume of new credit has increased in September, the quality of new loans has also improved. Delinquency rates among small and medium-sized companies have declined since the start of the year, and total non-performing loans have decreased for nine straight months. This indicates that economic conditions and corporate performance have been steadily improving since the eased credit policies were implemented.
The rapid credit growth in September is indicative of a gradual recovery of China’s economy. Although the banking sector’s new loan figures are slightly lower than August’s, credit is still playing a key role in supporting investment and consumption and stimulating economic activity. This is especially true for the small and medium-sized companies which are largely neglected by the traditional lending channels and are often in need of financing.
Overall, the introduction of stimulus policies and easier banking regulations, along with the steep increase in new loan figures, is a sign that China’s economy is well on the way to recovery. The government’s focus on credit availability and risk prevention shows that it is committed to stabilizing the economy, and the people’s increasing confidence in the banking sector is a further sign that China is on the right track.
