Sustained Optimization of China’s Credit Structure

China has enhanced the pertinence and effectiveness of financing in serving the real economy.

In the process of transformation and upgrading of China's economy from high-speed growth to high-quality development, finance serves as the "booster" and "absorbant," which provides necessary capital for economic restructuring, transformation, and upgrading. It further allows old-fashioned, excess, and invalid production capacity to be phased out in a market-oriented approach to prevent and control risks. To make the best of finance means, China has enhanced the pertinence and effectiveness of financing in serving the real economy, so as to realize mutual support, symbiosis, and shared prosperity of finance and the real economy.

1

According to the latest data released by the People's Bank of China, by the end of January 2020, the loan balance of financial institutions reached RMB 156.45 trillion, up 12.1 percent year on year; in January, the amount of loans was increased by RMB 3.34 trillion, a growth of RMB 110.9 billion year on year. The structure of credit supply continues to be optimized, and the loans of non-financial enterprises and organizations, mainly the loans for real economy, increased by RMB 2.86 trillion, with the proportion of longterm loans increasing steadily, while the proportion of short-term loans gradually decreased.

2

China has introduced a raft of policies to push the medium and long-term loan balance of the manufacturing industry, which increased by 14.9 percent year-on-year at the end of 2019, 4.4 percentage points higher than that at the end of the previous year, the highest level since 2012, with an obvious recovery. In particular, the medium and longterm loans of the high-tech manufacturing industry have maintained rapid growth. In 2020, the People’s Bank of China and the China Banking and Insurance Regulatory Commission require banks to increase the proportion of medium and long-term loans and credit loans in the manufacturing industry. It is expected that the medium and long-term loans in the manufacturing industry will continue to increase in 2020.

3

Internet financial risk resolution has always been the focus of China's regulatory authorities, and the Internet lending industry as a "worst-hit sector" is the focus that should be accorded consideration. At the end of 2018, the Office of the Leading Group for the Special Campaign against Internet Financial Risks and the Office of the Leading Group for the Special Campaign against Peer-to-peer Lending Risks jointly issued the opinions on classified disposal and risk prevention of online loan institutions, which first proposed to "adhere to the main work direction of institution withdrawal, and guide the transformation of some institutions," setting the industry's keynote of retreat and transformation in 2019, and the special rectification of the online loan industry which entered the “deep-water zone” in 2019. At present, the special rectification work has made phased progress. By early March 2020, the number of online lending institutions in normal operation was 772, which has declined for 27 consecutive months, and there has been no new increase since December 2018.

4

Since the end of 2018, the Chinese government has actively guided and supported financial institutions to increase financial support for small and mediumsized enterprises, and loans to them have accordingly increased significantly. By the end of 2019, the loan balance (referring to loans for small and micro enterprises, loans for individual businesses, and loans for small and micro enterprise owners) of China's banking financial institutions for small and micro enterprises was RMB 36.9 trillion, which kept rising, and among which the loan balance for inclusive small and micro enterprise loans (single customer credit of RMB 10 million and below) stood at RMB 11.7 trillion, an increase of 24.6 percent over the beginning of the year, 12.3 percentage points higher than the growth of various loans. Since the beginning of 2020, the regulatory authorities have issued a number of policies to support small and medium-sized enterprises, which require "to ensure that the credit balance of small and medium-sized enterprises in 2020 is higher than the overall balance of the same period in 2019.

5

Supply chain finance, with the dual attributes of industry and finance, can provide business-based financing services for the upstream and downstream enterprises in the industry chain, and has achieved steady development. In July 2019, the China Banking and Insurance Regulatory Commission issued the guidance on promoting supply chain finance to serve the real economy to major banks and insurance companies. At the same time, the application of big data, artificial intelligence, and other emerging technologies can effectively avoid risks and save costs through efficient use of information technology. It is expected that supply chain finance will achieve faster growth than expected. The China Business Research Institute, a Chinese industry research company, forecasts that it will exceed RMB 27 trillion by 2020.