This Bystander has noted before that it is state-owned enterprises rather than the private sector that is getting the lion’s share of the stimulus money being channeled through bank lending. The Economist puts some flesh on that particular bone in a note on April’s new bank lending.
The government is keen to see lending extended to a broader range of sectors—the China Banking Regulatory Commission has required banks to open up lending departments to target small and medium-sized enterprises. However, such steps have had limited effect, partly owing to banks’ reluctance to shift lending towards firms that are not in effect backed by the government, and partly because of weaker demand for borrowing amid the economic downturn.
The National Association of Industry and Commerce says that short-term lending to private firms dropped by 700 million yuan between December 2008 and January 2009, to 421 billion yuan, despite a surge in total lending.
Bloomberg recently reported that the biggest borrower in the first quarter of 2009 was AVIC, the SOE that is the country’s largest aerospace company, which got 336 billion yuan in credit lines from 11 banks in January-April.
To counteract the trend (and to promote domestic demand), look for an expansion of consumer finance. The CBRC is prepping trials in Beijing, Shanghai, Tianjin and Chengdu of personal loans to buy consumer durables and to fund travel and education, though not car or home purchase loans.