SINGAPORE (S&P Global Ratings) Nov. 23, 2023--China's strengthening funding buffer is one bright spot in its economy.
High household saving rates in the wake of the pandemic, and weak credit demand amid a fragile economic recovery, have led to the first decline in the loan-to-deposit ratio (LDR) for the overall banking sector since 2014.
This is according to a chartbook-style commentary we published today, titled "Chinese Bank Funding: Rebuilding Buffer Amid Fragile Confidence."
Other key takeaways include:
- The reported LDR for the overall banking sector fell to 78.8% in 2022, from 79.7% in 2021. That's the first decline since 2014. It fell further, to 77.7%, as of end-June 2023.
- Capital controls limit funds from leaving China. As households boost savings, this will strengthen the ability of Chinese banks to increase lending, which will help China's economic growth when confidence returns.
- The falling average LDR of joint-stock banks (JSBs) is a particularly important indicator of improved funding stability in the system. Many JSBs are systemically important in China.
- JSBs' average LDR fell below 100% in 2022 and in the first half of 2023. JSBs are less influenced by the central government's lending policies than China's six largest state-owned banks, giving them more scope to reduce lending when demand is weak.
- Systemwide funding, meaning the range and stability of funding options available, is a strength of the Chinese banking system.
This report does not constitute a rating action.
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| Primary Credit Analyst: | Ming Tan, CFA, Singapore + 65 6216 1095; ming.tan@spglobal.com |
| Secondary Contact: | Ryan Tsang, CFA, Hong Kong + 852 2533 3532; ryan.tsang@spglobal.com |
| Research Contributor: | Jiawen Zhang, CRISIL Global Analytical Center, an S&P Global Ratings affiliate, Hangzhou |
| Media Contact: | Michelle Lei, Beijing + 86 10 6569 2961; michelle.lei@spglobal.com |
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