trending Market Intelligence /marketintelligence/en/news-insights/trending/p9r5xj-yqvqqbssi8hscwa2 content esgSubNav
In This List

Moody's: Digital transactions over Chinese New Year credit positive for banks

Podcast

Street Talk Episode 87

Blog

A New Dawn for European Bank M&A Top 5 Trends

Blog

Insight Weekly: US banks' loan growth; record share buybacks; utility M&A outlook

Blog

Banking Essentials Newsletter 2021: December Edition


Moody's: Digital transactions over Chinese New Year credit positive for banks

The significant increase in electronic payments and digital transactions during the Chinese New Year holiday are credit positive for Chinese banks as such transactions alleviate the historical liquidity pressure on the banking system, Moody's said March 1.

The rating agency's comments follow the Feb. 21 release of an Alibaba Group Holding Ltd. report that showed a surge in digital transactions on the companies' ecosystem's 10 internet platforms during the Chinese New Year holiday. On the same day, Tencent Holdings Ltd. announced that during the Chinese New Year period from Feb. 15 to Feb. 20, there was 10% year-over-year rise in the number of people that sent and received digital hongbao, gifts of money traditionally wrapped in a red envelope, over its communications product Weixin Pay.

As there is historically liquidity pressure on the banking system from massive cash withdrawals during holiday period, the rise electronic payments and digital transmission of hongbao is credit positive for Chinese banks, particularly state-owned lenders Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., Bank of China Ltd. and Agricultural Bank of China Ltd., Moody's said.

The rating agency said that electronic payments reduce the liquidity and administrative pressure from massive cash withdrawals because such payments are transacted and settled within the banking system among different bank accounts, or in some cases, within a single bank account. As such, no money leaves the banking system, which helps maintain overall system liquidity even when transaction volume spikes, Moody's added.