Banks still pushing to maximize lending

BEIJING - Chinese banks are still trying to lend as much as possible, which is likely to lead to more non-performing loans, said a source close to government decision-makers on Monday.

"It would be very hard for the central bank to rein in banks' strong desire to lend. Banks should take responsibility for possible non-performing loans instead of seeking help from the government," said the source, implying that more loans would mean more risks.

In the final two days of November, the four large State-owned commercial banks suddenly accelerated lending, extending about 70 billion yuan ($11 billion), compared with loans of 100 billion to 140 billion yuan during the first 28 days.

Dong Wenbiao, board chairman of China Minsheng Banking Corp, said banks would always tend to lend as much as possible because, under the current regulations, they must rely heavily on net interest margins to make a profit.

Analysts have said that the credit policy during the fourth quarter, especially in the final two months, will be relatively loose, and new yuan-denominated lending by domestic commercial banks will total nearly 7.5 trillion yuan in 2011.

In October, commercial banks extended 586.8 billion yuan in loans, taking total new loans for the first 10 months to 6.28 trillion yuan.

In 2010, new yuan lending totaled 7.95 trillion yuan, above the government's target ceiling of 7.5 trillion yuan.

Lian Ping, chief economist at Bank of Communications Co Ltd, estimated that new yuan lending had totaled about 550 billion yuan in November, and lenders see very weak deposit growth and undergoing the effects of loan-to-deposit ratio requirements.