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Chinese banks have reduced their lending due to the impact of the economic downturn

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Chinese banks rushed to meet the debt demanded by the government last month by purchasing less risky financial instruments instead of lending, an amount that banks and experts say is showing concern for financial institutions in the country’s economic growth.

The rise in the demand for bank securities, which are guaranteed by issuers and professionally classified as loans, reduced the interest rate offered by almost zero percent in the second half of December. A record low of 0.007 percent was reached on December 23.

This was significantly lower compared to the average rate of 2.5% of Chinese banks at the same time, meaning that they tend to lose money on low-income bank loans instead of putting themselves at a higher risk of losing their loans at a higher interest rate.

The government of President Xi Jinping wants banks to lend more money, especially to small and medium-sized businesses located in government-friendly areas such as agriculture and new electric vehicles. Banks are reluctant to do so, however, because they believe in China economic decline has reduced the number of eligible lenders.

Officials say buying bank certificates to meet their borrowings at the end of the year is the best way to help achieve government goals.

“Financial support is a political activity that we cannot deny,” said a Zhongyuan bank official in central Zhengzhou, who asked not to be named. “Our losses in buying bank guarantees are less than lending to unsuitable businesses.”

Companies use bank approval as a payment method, which the owner can redeem with the bank that offers it. They can be repurchased and traded on open markets, such as the Shanghai Commercial Paper Exchange.

Debt management told the Financial Times that Xi breaking the rules had severely affected many of their tenants in areas such as real estate and private education, with no indication that things would change soon.

“The authorities want us to support real wealth and keep bad debts,” said a credit bureau at Zheshang Bank in Hangzhou, who asked not to be identified. “This is difficult to achieve in today’s business environment.”

Bo Zhuang, a Singaporean researcher at Loomis Sayles, an economist, added: “This is a paradox that recent integration cannot solve.”

All Chinese currencies, which are the largest source of debt, are said to have fallen three times in a row each year from July to September, reflecting the government’s efforts to reduce spending. destroying the boiling of the house on mortgage lending.

Debt losses have risen Opinions of the company China Evergrande Group and more and more developers failing, preventing the completion of housing provided with prepaid payments from home buyers.

Central and local government officials have begun to complain about protests by potential buyers, as well as retailers who have purchased material from the manufacturer and unpaid construction workers, may threaten the peace.

This led to a slight change in monetary policy as China’s central bank last month unveiled a number of options, including a benchmark cut. rental price and to maintain the requirements for water money to enter the real economy after several months of maturity.

Communist party officials have vowed not to deviate from their main goals, which include a cheap housing market and a ban on “stagnant economy” – political policies that impose strict rules on the country’s largest corporations.

But at their end-of-year meeting in December, he reiterated the importance of financial stability in preparation for this year’s 20th party conference, with Xi expected to stabilize. the third stage which has never happened as the leader of the party, army and government.

Additional reports of Tom Mitchell in Singapore

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