Already a subscriber?China’s central bank boss has acknowledged that deepening problems in the real estate sector and for debt-laden local governments mean the country’s banks will struggle to boost lending enough to bolster economic activity.
Pan’s comments reflect the problems being faced by the country’s state-owned banks to maintain growth and profitability, as they face pressure from Beijing to boost lending as well as to provide support for debt-laden property developers and local governments.regain some momentum is placing huge strains on their profitability and asset quality.
People’s Bank of China governor Pan Gongsheng sees the decline in the growth rate of credit as “natural”.And the country’s banks are feeling the pain. The combined profits of China’s commercial banks rose by a modest 3.2 per cent to 2.38 trillion yuan last year, the slowest pace since 2020. Meanwhile, the level of bad loans sitting on their books climbed to a record 3.23 trillion yuan.
Instead, China’s housing market woes deepened in May, with new home prices in major cities falling 4.3 per cent in May compared with a year earlier, which was worse than April’s 3.5 per cent drop. Prices in China’s secondhand home market fell 7.5 per cent, compared with a 6.8 per cent decline in April.
But local government finances came under intense strain during the COVID-19 pandemic, as land sales – which were a major source of revenues – dried up.