Chinese firms are turning to Hong Kong’s banks for loans as the central government tries to bring the inflation rate down from a three-year high by reducing access to credit.
Financial institutions’ claims on Chinese mainland companies rose fourfold to 1.6 trillion yuan or US$250 billion since May 2009. They will provide another 700 billion yuan to 1 trillion yuan of loans to mainland firms in the second half of 2011.
New loans in Hong Kong grew by HK$940 billion or US$121 billion last year, up 29 percent from the year before, according to an April 11 letter from Norman Chan, the chief executive of the Hong Kong Monetary Authority. A total of HK$440 billion was lent to mainland non-bank customers, an increase of 47 percent. In comparison, property lending in Hong Kong rose 19 percent, Chan wrote.
Most of the mainland borrowers were state-owned enterprises or “companies owned by provincial or municipal governments,” he said in the letter. Sixty-percent of the lending was either fully collateralized by bank deposits on the mainland or backed by guarantees by major mainland lenders.
“If you borrow in Hong Kong it’s a hell of a lot cheaper than in the mainland,” Jim Antos, a banking analyst at Mizuho Securities Asia, said in a telephone interview from Hong Kong on August 10. “The money is easily repatriated or sent to China.”
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