Client loans could reach US$18.7t in 2017.
According to BMI Research, supported by a backdrop of economic growth - albeit one which has slowed over recent years - credit growth in China continues to accelerate. Despite increased regulatory oversight, domestic bank lending is on a charge at present and borrowers are only too happy to take advantage of the favourable borrowing conditions.
"So, with Chinese firms increasingly able to secure the financing to either pay down existing debt, or fund strategic growth, we expect to see a strengthening flow of both bond and M&A deals being announced over the coming quarters, as boardrooms are able to take on more debt or strike growth transactions as a result of having the necessary financing to do so," the firm added.
Here's more from BMI Research:
The banking sector's lending trajectory is looking consistent. Out to 2020, we see average annual loan growth in the Chinese banking sector reaching a level of 7%. In 2017, we see client loans reaching a level of CNY128,261.3b (US$18.7t), an increase from CNY116,601.2b secured in 2016 - a trend supported by an uptick in the number of larger loan transactions being completed. In 2018, we see lending activity accelerating to a level of CNY137,239.6bn.
Within 2017's haul of deals, we note that last week saw the announcement of a loan deal that both caught the eye thanks to its size and which also served to highlights how Chinese lenders are working together to provide companies with larger amounts of credit.
Guangzhou Metro Group's (GZ Metro) RMB17.0bn facility ranks as the third largest loan deal to be inked in China in 2017, the proceeds of which are set to go towards capital expenditure (capex) purposes.
We note that while Bank of China (BoC) acted as the sole mandated lead arranger, the further syndication of the deal saw Bank of Communications join as arranger and Agricultural Bank of China, China Construction Bank, China Everbright Bank, and Postal Savings Bank of China all provide further support on the deal.
Given GZ Metro's strong credit rating, mainland lenders were only too happy to support the deal. Indeed, as a recently as in Q416, Fitch Ratings affirmed the company's long-term foreign- and local-currency issuer default ratings (IDRs) at 'A' with a stable outlook.
The firm's operation in a growing sector certainly helped to secure funding too: in the view of BMI's Asia team, China's transport infrastructure industry is forecast to grow by 9.0% in real terms in 2017 and average 7.6% annually over our 10-year forecast through 2026. Within this, rail transit is becoming increasingly important to solving congestion problems in urban centres such as Guangzhou.
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