Chinese investors in massive retreat from loans

China’s Big Four banks have less and less to cheer about as the year stumbles on.

Industrial & Commercial Bank of China Ltd, China Construction Bank Corporation, Bank of China Ltd and Agricultural Bank of China Ltd together extended new loans amounting to US$11.1 billion in the first three weeks of February, which is uncharacteristic said state-run Shanghai Securities News without giving comparable data.

The Big Four traditionally account for a third of all new loans. They normally front-load lending in the first few months every year to boost market share.

Analysts noted this abnormally slow lending pace is worse than January when the entire banking industry issued US$117 billion in new loans, a 29% plunge year-on-year. The amount is the lowest for new loans for a January since 2007.

China International Capital Corporation, however, said banks could issue up to US$127 million in new loans this month. Citic Securities estimated that overall new loans could reach US$270 billion in February and March.

Analysts said the disappointing result could have been caused by weak demand for funds amid the economic slowdown the central government's stiff curbs on the property market.

Chinese banks are required to maintain a loan-to-deposit ratio of about 75% daily. With deposit growth weak, investors are chasing higher returns in the face of rising inflation.

In a bid to boost lending, the People's Bank of China, the central bank, said it was cutting banks' reserve requirement ratio by 0.5 percentage point effective Feb. 24.