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Credit growth outpaces GDP in Asia-Pacific

Credit growth outpaces GDP in Asia-Pacific

(21 March 2013 – Asia) A new report has highlighted a key risk for Asia-Pacific banks, being a rise in credit growth, which has outpaced gross domestic product (GDP) growth. Credit to the non-financial corporate and household sectors in key regional economies in Asia-Pacific has risen sharply since 2005 according to a new source.

As a share of GDP, it is now significantly higher in Australia, China, Hong Kong, Korea, Singapore and Vietnam.

In a further report, the source said China’s economic rebound had eased its banks’ asset quality pressure, with the acceleration in 2012 fourth-quarter economic growth of 7.9 percent lowering the risk of hard landing in the country.

The source said the economic rebound likely eased quality pressure at banks further and increased their appetite for lending.

"The central government's more relaxed attitude in 2012 to debt rollovers by local government financing platforms reduced credit risk from these companies.

"With better economic prospects, the major Chinese banks have reportedly been growing their new lending to the extent allowed by their monthly lending quota in January," according to the source.

"The Chinese government continued to make small steps in liberalizing its monetary regime. The People's Bank of China extended its bilateral currency swap arrangement to the Bank of England, its first G-7 partner.

"It also allowed renminbi settlement in Singapore, the first location outside of Greater China. The first renminbi loan in China to be made without reference to the central bank policy interest rate was also done in the Qianhai region of Shenzhen in early 2013," the source said.
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