| OPINION
A Comfort and a Curse
China's "big four" state-owned commercial banks—Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China and China Construction Bank—lent 188 billion yuan ($29.59 billion) in June 2012, much less than the 250 billion yuan ($39.35 billion) in May. The number is also much lower than market expectations.
Right now, stabilizing economic growth has been put on the country's top agenda. According to past experiences, bank loans are usually a major force in stimulating, ensuring and stabilizing growth. That's the reason for previous loan surges. Why is it different this time?
Cash-strapped companies are mired in production and operation difficulties, but they don't have strong demands for bank loans.
Enterprises that have seen decreasing profits or have turned into losses from profits are not willing to acquire bank loans, because more loans mean more interests. Many large enterprises, especially stateowned ones, prefer direct financing, such as issuing corporate bonds or getting listed, ending up with dwindling demand for bank loans. Banks themselves don't have a strong will to lend.
Amid economic slowdown, the more difficulties companies have in their business operation, the more lending risks banks will shoulder. Banks are now prudent and alert against lending risks.
Since the first quarter of this year, a strange phenomenon has appeared. Cashstrapped enterprises are not willing to borrow and banks are not willing to lend any more. The amount of newly added loans has been under market expectations for several consecutive months. It reflects the mounting pressure of an economic slowdown and the sluggishness of industrial enterprises.
However, each coin has two sides. What's comforting is that during this round of economic stimulus to stabilize growth, banks are not demanded to lend and commercial banks have total independence on the amount of loans they want to grant based on their risk control ability and liquidity situation.
Commercial banks have shown their rarely seen prudence and conservativeness by not emphasizing on the quantity but on the quality, safety, profits and liquidity of bank loans.
But what's worrying is that commercial banks' prudent and conservative attitudes are bad for stabilizing economic growth. China's economic growth partially relies on the financial support of bank loans.
Commercial banks, especially the "big four," should provide more support and speed up the loan process for key projects, affordable housing and small and medium-sized companies.
Otherwise, the risks for already existing loans will increase if there are no follow-up loans. For instance, if banks have provided a large amount of loans for a project but refuse to lend more, the project may fail, posing risks to previous loans.
Anyway, commercial banks, the "big four" in particular, should play a full role in stabilizing economic growth.
This is an edited excerpt of an article by Yu Fenghui, a business commentator, published in The Beijing News
THE MARKETS
Bank Acquisition
China's Xinjiang Hualing Industry and Trade (Group) Co. Ltd. announced that it had acquired a 90-percent of stake of the Georgian JSC Basisbank, becoming the first Chinese private enterprise to acquire a commercial bank overseas, according to a company statement on July 3.
The acquisition was completed after an agreement was reached between the European Bank for Reconstruction and Development (EBRD) and the bank's supervisory board Chairman Zurab Tsikhistavi. EBRD and Tsikhistavi, as the bank's single international shareholder and the founder, will each retain 5 percent of the equity stake.
The bank will change name and operate in Tbilisi and Kutaisi, Georgia's second largest city. Tsikhistavi will still chair the bank's supervisory board. Founded in 1993, the Basisbank ranked 11th among Georgia's 19 existing commercial banks in terms of total assets, with an asset value of 154 million Georgian laris ($94 million) at end of March. The bank's businesses include deposits, loans, guarantees, cash and account settlements and securities.
Furniture Show
Di Lusso Gaopin Impero (DGI), a leading force in China's high-end home furnishings sector, will hold an exhibition from July 6 to September 2 in Beijing. The exhibition will feature the long history of Italian furniture brands, artistic characters of high-end furniture brands and the latest fashion trend worldwide.
In a bid to introduce the leading-edge and top home furnishings styles and brands to China, DGI has inked cooperation agreement with Italian home furnishings brands, such as Poltrona Frau, Fendi Casa, ColomboStile and I-Dogi and the prestigious Italian designer Marco Piva, who participated in the design of the Port of Dubai.
"Different from other Chinese agencies, DGI doesn't simply sell furniture but introduce the culture and history of home furnishings art," said Gao Yan, President of DGI. "With the concept of overall design, we want to add taste to your home with one-stop services. By introducing the finest and most elite Italian home furnishing brands to China, we aim at bringing the concept of home furnishings to the country," said Gao.
NUMBERS
1.84 trillion yuan
From January to May, the profits of industrial enterprises above the designated size -- annual sales revenue of more than 20 million yuan ($3.15 million) -- stood at 1.84 trillion yuan ($290.34 billion), a 2.4-percent year-on-year decrease. trillion yuan
56.9%
From January to May, the ferrous metal processing sector saw a 56.9-percent year-on-year decrease in profits.
13
Among 41 industrial sectors, 13 witnessed year-on-year decreases in profits from January to May.
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