China credit growth slowing down: Fitch

The broad credit growth in China continues to decelerate, adding to recent pressures on the economy, rating agency Fitch Ratings said in a comment published on June 5.

Fitch said that 2012 is shaping up to be the first year since 2008 in which the net amount of new credit extended to the economy falls below the previous year.

Even with a modest economic stimulus such as the one recently announced, Fitch's adjusted Total Societal Financing measure is on pace to reach 16.5 to 17 trillion yuan ($2.62 trillion to $2.68 trillion) in 2012, down from 2011's 17.5 trillion yuan, it said.

"Absent stimulus, credit growth could be even lower," Fitch said.

"Broad credit growth began to moderate in the second half of 2011, and this slowdown has accelerated in 2012," said Charlene Chu, head of Chinese banks' ratings at Fitch. "Weakening demand for credit as well as resource constraints from thinning bank liquidity have been weighing on bank lending," she added.

Fitch noted that offshore credit has been particularly sluggish amid renewed China hard landing fears and European banks' deleveraging. Domestic non-bank credit has been more resilient, but is expected to come in below 2011 levels.

The slowdown in credit is being met with an equivalent moderation in gross domestic product growth, suggesting that the economic return on credit remains weak.

"Since the global crisis, the Chinese economy has become increasingly reliant on abundant, cheap financing to propel GDP growth. Therefore, it is not a surprise to see GDP growth slowing in tandem with broad credit growth," Chu said.

"By the same token, it will be difficult to see a significant turnaround in economic growth absent a rebound in credit," she added.

China's new yuan-denominated lending has repeatedly fallen short of expectations since the year began. Banks extended 739.6 billion yuan in local currency loans in April, down 20.8 billion yuan from a year earlier, according to central bank data.

The Beijing-based China Securities Journal reported on Tuesday that the four largest State-owned commercial lenders - the Industrial and Commercial Bank of China Ltd, China Construction Corp, Bank of China Ltd and Agricultural Bank of China Ltd - made yuan loans of 253 billion yuan in May.

Analysts have forecast the total lending among banks would stand at 700 billion yuan in May.

As of May 20, the four biggest lenders extended only 34 billion yuan last month, while their deposits declined by 270 billion yuan, local media reported earlier.

wangxiaotian@chinadaily.com.cn