Chinese overseas lending slowed last quarter
hina’s outbound investments fell by 35% in the third quarter of 2016, with a 90% decline in direct government to government (G2G) loans. Just 12 governmentrelated loans (including those by policy bank and China’s multilateral agencies) were signed in Q3, worth US$14.7bn. This represents a 40% decline in overall statebacked lending volume and value compared to Q2. Overseas lending last quarter consisted of nine policy bank loans, one government loan, one New Development Bank (NDB) loan and just one loan from the Asian Infrastructure Investment Bank (AIIB). Analysts from Grisons Peak, a merchant bank that compiled the data, attribute the slump in part to the G20 Summit which took place in Hangzhou in September. During this, China’s President
Xi Jinping met with more than 30 national and organisational leaders, entering into 33 multi-deal agreements. These will expect to filter through in the next few months and should boost overseas lending in the quarter to come. “In this quarter, China entered 33 multi-deal G2G agreements, up 83% from Q2 [18 agreements] and an all-time high in our eight years analysing this component,” analysts write, adding that significant amounts can expect to be disbursed from Q4 as a result. The decline, however, runs counter to an expansion in domestic lending in China.
China’s banks issued new loans worth Rmb1.22tn (about US$181bn) in September, an increase of 29%. Grisons Peak data does show that seven of 12 government-related loans in Q3 were to countries involved in China’s One Belt One Road (OBOR) initiative, mainly in Africa and Asia. OBOR was first presented in 2013 and aims to develop two corridors linking China to the world. There are 65 countries involved and the huge base of projects is designed to spur US$2.5tn of cross-border trade every year. This year, it’s estimated that Chinese companies have
Just 12 governmentrelated loans were signed in Q3. This represents a 40% decline in overall state-backed lending.
signed 4,000 engineering contracts connected to OBOR worth US$70bn. However, HSBC has warned that western companies are failing to take advantage of the opportunities that OBOR presents to them, despite the fact that many are already versed in using the Chinese currency. According to a survey the bank conducted of 1,600 decision-makers in 14 countries, 24% are using renminbi (Rmb), but just 41% are aware of the opportunities OBOR presents.
Rmb notes Pace of global Rmb payments growth remains slow
he value of global Renminbi (Rmb) payments increased by almost 5% between July and August – but this significantly trails the rise in payments across all currencies. Payments across all currencies increased by 7.21% over the period, compared to 4.81% for Rmb payments, as the volatility and slowdown in China’s economy affects the currency’s usage overseas. The Rmb remains the fifth most-used world payment currency, ahead of the Canadian dollar, but it accounts for just 1.86% of
42 | Global Trade Review
global trade settlements. Having grown significantly in the run-up to 2015, it seems to have plateaued over the past year and shows no signs of overtaking the Japanese yen, which is in fourth place on 3.37%. Since September 30, the Rmb has been included in the IMF’s special drawing rights (SDR) basket of reserve currencies. Announced more than one year ago, this led many to believe the pace of internationalisation would accelerate. In addition to this, a memorandum signed between
Swift and China’s new Cross Border Inter-Bank Payments System (CIPS – described by some as the “Chinese Swift”) in March was expected to speed things along. Progress has been slower than expected. Anecdotal evidence from the market suggests that few are using the Rmb as a currency for trade finance outside of Mainland China. Most of the trade is being done by Chinese institutions. Experts claim that the lack of real connectivity is hindering progress and that the integration of settlement
Having grown significantly in the run-up to 2015, the Rmb seems to have plateaued over the past year and shows no signs of overtaking the Japanese yen.
infrastructure is essential if the Rmb is to expand more rapidly.