Banks in China have become the chief lenders in the global economy as Western banks continue to cut back on lending to practice a more defensive operational strategy in order to ride out the ongoing recession.
Lending from Chinese banks in 2009 grew by three times the amount they lent out in 2008, offering companies the capital they needed to survive and grow during these difficult economic times.
Some of the focus of Chinese lending has included Brazil, where China is eyeing the much-needed commodities to continue to drive their own economic growth. They grew their bank presence in Brazil in 2009, and are expected to become a significant player there.
Statistics provided from the People’s Bank of China say they’ve lent out over $1.3 trillion in the first nine months of 2009, with much of that, as mentioned above, going to the airline industry in several countries, including Southwest Airlines (NYSE:LUV) in the U.S.
While this is helping the Chinese economy diversify, as their exposure to U.S. Treasury’s has been something they’ve been slowly cutting back on, as the ongoing printing of money by the Federal Reserve continues to put downward pressure on the U.S. dollar, even though they could be a temporary rally for the greenback in 2010.
Bank analysts’ estimates are about 11 percent of the new loans from Chinese banks are going to foreign companies, effectively doubling its overseas lending over the last 12 months, although China hasn’t released figures on the amount of domestic and foreign loans they’ve put together.
The majority of the Chinese loans has been domestic, as China focused on infrastructure projects during the global recession in order to maintain stability and prop up their job market.
Chinese regulators have become concerned over the quick growth of foreign loans, and have been warning the state-owned banks to be wary of implementing a strategy which could cause them to grow too fast too quickly. They added if they continue to pursue this type of growth, they could end up in the same position as their Western rivals.
For the first ten months of 2009, Chinese banks had outstanding loans worth $5.8 trillion, an increase of 22 percent. In contrast, banks in Europe didn’t add any more to their outstanding loans, and U.S. banks’ outstanding loans dropped by 7 percent overall to $6.7 trillion.
