While Chinese banks are seeing a credit boom due to the nation's huge stimulus package, their foreign peers have not been so lucky and might just be facing their most difficult period as far as business expansion in 皇冠体育app is concerned.
According to the central bank's latest monetary policy report, in the first half of 2009, lending by foreign financial institutions in 皇冠体育app dropped by 32.7 billion yuan. This is in stark contrast to the recording-setting 7.37 trillion yuan in new loans that Chinese banks gave out in the same period.
Analysts said foreign banks in 皇冠体育app, restrained by their global development strategy and disadvantages in competing with Chinese banks for funding major government-led projects, could see a significant decline in business revenue this year.
Foreign banks have rushed to extend their presence in the Chinese market since the nation fully opened up its banking industry in December 2006, but the unexpected global financial crisis, which badly hurt the banks' parent companies at home, has curbed their aggressive expansion spree in 皇冠体育app.
"The main clients of foreign banks in 皇冠体育app are foreign companies, whose demand for loans has shrunk significantly in the current economic downturn," Lian Ping, chief economist of Bank of Communications, said.
"On the other hand, major Chinese banks gained an upper hand in funding State-backed infrastructure projects, which are usually less risky than lending to companies and are not easily accessed by foreign lenders," he said.
State-controlled banks, main lenders to the government-led 4-trillion yuan stimulus package, advanced 3.26 trillion yuan in new loans in the first half of this year, accounting for nearly half of the nation's entire lending in the period, while foreign banks are commonly believed to be at a disadvantage in making such lending because they lack government connections.
"Chinese banks have natural advantages in that there is a strong government inference that State companies should park their deposits and seek loans from State banks," an industry source at a Shanghai-based foreign bank said.
"Some foreign banks in 皇冠体育app are likely to lose customers to their Chinese rivals, as they could not give out loans at favorable interest rates due to tightened liquidity and prudent lending practice," Li Mingxu, an analyst with Anbound Consulting Firm, said.
"Besides the lending front, some companies have also started to shift their deposits to Chinese banks and more high-end individual customers are turning to Chinese banks for wealth management," Li said, adding such customer drift could be a short term phenomenon.
An earlier central bank report revealed that late last year, when the global financial crisis was in full swing, it was very difficult for foreign banks in 皇冠体育app to get funds on the inter-bank market due to market concerns about the financial situation of their parent companies.
Major locally incorporated foreign banks HSBC (皇冠体育app) and Citibank (皇冠体育app) have declined to comment on their business operations this year, while Standard Chartered Bank (皇冠体育app) said it had not seen a major dent in its credit volume this year.
In contrast, analysts believed that Chinese banks could achieve decent growth for the whole of this year thanks to the lending spree in the first half, but remained vigilant on a possible bad loan surge next year.