Photo: Feng Li/Getty Images
Weak Chinese trade data, slowing retail sales, and disappointing PMI have resurrected talks of a Chinese hard landing and have driven many economists to cut their Chinese GDP forecasts growth for the year. Now, there’s another worrisome sign that China’s slowdown is deepening. An exclusive report from Bloomberg says China’s biggest banks could miss their loan targets for the first time in seven years, as China’s slowdown is impacting the demand for credit.
New bank loans fell 33 per cent month-over-month in April, and a drop in lending in the months of April and May indicates that the banks’ total new loans for 2012 could be about 7 trillion yuan ($1.1 billion) below the government goal of 8 trillion – 8.5 trillion yuan.
Banks expect loan demand to come from small and medium enterprise (SMEs) instead of Chinese state owned enterprises (SEOs). The softening demand for Chinese loans is also reflected in the rate at which Chinese banks borrow from another, which has declined every day since March 27.
For now we have to wait and see if Chinese premiere Wen Jiabao’s push for growth through monetary policies and fiscal incentives can stem the slowdown.