The central bank of China reiterated the sector’s willingness to tolerate more bad loans to support the ongoing coronavirus crisis.
Vice governor of the People’s Bank of China Fan Yifei said in a news conference that it would continue to push financial measures to provide support, adding that the downturn remains manageable due to a relatively low bad-loan ratio.
«We will support qualified firms so that they can resume work and production as soon as possible, helping maintain stable operations of the economy and minimizing the outbreak's impact,» Fan said, according to a «Reuters» report.
Acceleration of Lending
Other senior figures also attempted to inspire calm including China Banking Insurance and Regulatory Commission vice-chairman Liang Tao who committed to the acceleration of lending to key investment projects, and vice head of China’s foreign exchange watchdog Xuan Changneng who expects a small current account surplus and balance in international payments to be maintained.
Despite assurances from the top, the reality on the ground reportedly illustrates a stark contrast. A «Caixin» report citing an unnamed customer manager at a rural commercial bank in southeastern China said that application procedures were made more tedious to delay approvals in order to avoid risks to business performance.
Bubble Risk
Whilst lending has sped up for critical businesses such as producers of medical equipment, other affected sectors have not obtained buffer as easily such as restaurants and logistics firms, said another source from a joint-stock bank.
Pure willingness aside, pundits also underline the bubble risk of providing ample financing to businesses that are not seeking to scale short-term growth for immediate demand such as face mask manufacturers. Looser lending to sectors, such as retail, which are struggling to generate sales rather than realize unmet demand will instead add balance sheet risk and further demotivate financing when such borrowers are indeed ready to resume operations.
