China’s bank lending falls 43% in Q1

China lendApr10.pngThere are increasing signs that China is getting serious about tightening its lending policies. The above chart, from China’s central bank, shows how lending has fallen since January. Then, it was 14% down versus 2009. But by the end of Q1, lending was down 43% versus Q1 2009.

In addition, the government has begun to take major steps to cool the housing bubble. House prices in some areas, such as Hainan, have risen 53% over the past year. Now, banks have been told to stop loans for purchases of 3rd homes, whilst buyers also have to provide tax returns and proof of social security contributions.

China Daily notes that 2-bedroom apartments in Shanghai are now selling at 20-30 times annual average earnings, well above comparable costs elsewhere in the world. It also suggests that a property tax may soon be introduced in some cities on a pilot basis.

As the blog warned in February,chemical companies therefore need to carefully reassess likely levels of Chinese demand for their products, given that key elements of last year’s major stimulus programmes may now start to be removed.”

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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