China's massive infrastructure lending is posing increasing risks for the banking system, a senior regulator said in comments published on Tuesday. Wang Huaqing, the discipline commissioner at the China Banking Regulatory Commission (CBRC), said banks should spread risk by syndicating big loans for projects like railways and airports.
"With the expansion of bank credit, the risk of over concentration is becoming more and more pronounced. New bank loans may have been concentrated too much on certain sectors and clients," Wang said on the agency's website, www.cbrc.gov.cn. Bank lending has exploded since Beijing launched its $586 billion stimulus package last November. Total bank lending is likely to top 10 trillion yuan ($1.46 trillion) in 2009, beating the government's initial target of at least 5 trillion yuan.
Most loans have been used to finance major, long-term projects, and China's central bank governor Zhou Xiaochuan has warned that the investors behind some projects may find it hard to repay their debts. Wang said banks should syndicate loans to fund projects in the transport, petrochemical, telecom and power sectors. Syndicated loans are growing fast, but from a low base. The outstanding total of such loans at the end of 2008 was 956.6 billion yuan, up from 233.6 billion yuan in 2005, Wang said. Overall loans in the banking system exceeded 30 trillion yuan.