BEIJING (Reuters) – Chinese banks fell on Friday as investors are worried about moving the government to limit the volume of loans that banks can offer to China's private sector.
"At least a third of the new loans offered by banks should be for businesses or non-state entities," said Guo Shuxing, head of the China Banking and Insurance Supervision Commission. The share of outstanding loans to the Chinese banks in September in the private sector was less than a quarter.
The development of the share of credit indicators reflects the urgent need of Chinese tax politicians when they try to prevent a slowdown in economic growth in the country when the trade war with the United States escalates, bankruptcies reached the record and the market has fallen, Bloomberg reported.
Whilst they could achieve the objective of private sector lending, analysts and investors are raising concerns about the increasing pressure from Chinese regulatory and supervisory authorities on banks to work with a difficult private sector, which could lead to a higher share of doubtful debts.
This is the first time that China has set an official share of private sector loans, but this has not yet affected the time of the global financial crisis that erupted in the autumn of 2008.
The package of tax incentives provided by the then Chinese government raised the level of dubious debts that are now threatening to use all new assets injected into private companies.
According to Bloomberg, the bankruptcy of private companies in China left the outstanding debts of 67.4 billion yuan ($ 9.7 billion) this year, which is equal to 4.2 times of outstanding debts due to bankruptcy of companies in 2017.
The industry and commercial bank of China, which is the largest bank in the world, fell by 2.9 percent, the biggest drop since October 11.
China's construction bank fell 2.4 percent, while HSBC Holdings fell 1.6 percent, Bank of China 2.3 percent, and China's trade bank fell 5.4 percent.
The private sector plays an important role in the Chinese economy, contributing more than 50 percent of tax revenues, 60 percent of GDP, 70 percent of technological innovation, 80 percent of urban employment, and 90 percent of new jobs and new businesses.
The People's Bank of China intends to provide guidelines to support the issuance of bonds to private companies by providing part of the company's founding capital and increasing the share of rebate and rebate in order to ensure the transfer of loans to private companies.
With the resurgence of the central private sector bodies, its capacity will be further liberalized. Over the last 40 years, the private sector has become an indispensable force in China's development.