Chinese Banks Increase BRI Lending Amid Liquidity Squeeze
(8 July 2024 - China) Chinese banks such as BOC and CCB are looking abroad to boost their loan books and fund Belt and Road Initiative (BRI) projects.
The BRI was strongly supported by Beijing and endorsed by President Xi Jinping in Q4 2013, seeking to improve trade and economic integration across Asia, Europe and Africa.
Their strategic approach may not be pursued by lenders lacking requisite credit risk assessment capability in BRI countries.
"According to our data, nearly half of Chinese overseas loans are in yuan, which is huge compared to a few years ago. We estimate that China Development Bank loaned US$100 billion while Bank of China (BOC) extended US$20 billion in credit lines" commented Natixis APAC Chief Economist, Alicia Garcia Herrero.
"Liquidity conditions in China are very tight and even if the People’s Bank of China (PBoC) were to inject funds and make conditions accommodative, liquidity is leaving the country, which is reflected in reserves hardly increasing despite the large trade surplus" Garcia Herrero added.
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