China eases on the brakes
(27 May 2011 – China) Beijing has had an official warning from Standard & Poor (S&P) that anti-inflation efforts are likely to squeeze profits at China’s banks.
The tighter monetary policy on lenders that have poured out credit in recent years to help drive growth in the world’s economy could have a world-wide impact.
The efforts are likely to take a toll on the profitability and credit quality of even the country's biggest lenders. But S&P and other analysts said China's smaller banks may be particularly hard hit by Beijing's efforts to cool China's economy.
'Inflation and a possible economic slowdown stemming from tightening measures could lead to a spike in credit losses over the next two to three years,' the ratings company said in a report.
'Chinese banks' profitability could slip in the remainder of 2011 and drop further in the next two years.'
The S&P report comes amid broader worries that China's economy could slow significantly this year. Part of the concern is that banks could throttle back on credit too quickly.
Separately, the Organisation for Economic Co-operation and Development revised its forecast for China's gross domestic product growth this year down to 9.0 percent, from a projection of 9.7 percent made in November. China's GDP grew 10.3 percent in 2010.
Although about two-thirds of the banking system's assets are concentrated in a handful of commercial and joint-stock banks, in total China has more than 3500 banking institutions, many of which provide vital financing to local areas.
The efforts are likely to take a toll on the profitability and credit quality of even the country's biggest lenders. But S&P and other analysts said China's smaller banks may be particularly hard hit by Beijing's efforts to cool China's economy.
'Inflation and a possible economic slowdown stemming from tightening measures could lead to a spike in credit losses over the next two to three years,' the ratings company said in a report.
'Chinese banks' profitability could slip in the remainder of 2011 and drop further in the next two years.'
The S&P report comes amid broader worries that China's economy could slow significantly this year. Part of the concern is that banks could throttle back on credit too quickly.
Separately, the Organisation for Economic Co-operation and Development revised its forecast for China's gross domestic product growth this year down to 9.0 percent, from a projection of 9.7 percent made in November. China's GDP grew 10.3 percent in 2010.
Although about two-thirds of the banking system's assets are concentrated in a handful of commercial and joint-stock banks, in total China has more than 3500 banking institutions, many of which provide vital financing to local areas.
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