More Than Two-Thirds of Chinese Bankers Are Not Optimistic About China’s Economy: Survey

A new survey shows more than two-thirds of Chinese bankers are not optimistic about China’s current macroeconomic climate.

On June 29, the People’s Bank of China released its latest nationwide Banker Survey Report (pdf), showing various indices about the country’s macroeconomic climate, banking industry, loan demand, and monetary policy.

The central bank report indicated that only 33.1 percent of Chinese bankers considered the country’s current macroeconomic climate “normal” in the second quarter (Q2), a sharp drop of 29 percent from the first quarter.

Meanwhile, 12.7 percent more bankers considered the country’s monetary policy “eased” compared to the previous quarter. In an easing policy environment, the central bank lowers rates to stimulate economic growth. Lower rates lead consumers to borrow more, increasing the money supply.

On the other hand, bankers’ macroeconomic heat index (BMHI) was down 16.6 percentage points from the first quarter. BMHI is an indication of the country’s overall macroeconomy; it includes trends such as the GDP, inflation, employment, spending, and monetary and fiscal policy.

Likewise, in a downward trend, the overall loan demand index (OLDI) fell 13.9 percentage points compared to the period last year and down 15.8 percentage points from the previous quarter. OLDI reflects the loan demand of various sectors, including wholesale, retail, real estate enterprises, and other large to small-sized businesses.

The banking industry climate index (BICI) and the banking profitability index also dropped by 3.6 and 3.7 percentage points compared to the same period last year and are down 6.1 and 5.3 percent, respectively, compared to the previous quarter.

BICI reflects the overall operation of the banking sector, including evaluating financial risks in the current economic climate.

Among the various indices, the monetary policy sentiment index (MPSI) was the only one that saw an increase, with 12.7 percent more bankers considering the country’s monetary policy “eased” compared to the previous quarter. However, only 57.9 percent of bankers consider the country’s monetary policy stance was  “moderate,” down 12.6 percentage points from the first quarter.

The Chinese central bank has conducted the nationwide Banker Survey Report since 2004. The survey targets the heads of banking institutions across China, including foreign-funded commercial banks, as well as the executives of various credit businesses within the country.

Albert Song, a current affairs commentator and expert on the Chinese financial system, told The Epoch Times that Beijing’s zero-COVID policy was the primary cause of China’s bearish macroeconomic climate.

“In China, a few new COVID-19 cases can cause citywide lockdowns that pause economic activities and cut off supply chains. Businesses find it difficult to survive with the stop-start pandemic restrictions. And consequently, they failed to pay back their bank loans,” Song said.

“Banks are eager to see high loan demand. On the other hand, businesses are afraid or disinclined to borrow,” Song explained. “The Chinese economy faces three main pressures—shrinking demand, disrupted supply, and weak expectation, with the weak expectation being its biggest challenge, meaning the general public and businesses lack confidence in the economy.”

The lack of confidence in the Chinese economy is also reflected in the money raised by newly-launched private funds in China. In the first half of 2022, newly-registered private funds totaled $102.7 billion, down 60 percent compared to the same period last year. Meanwhile, 15 funds failed to launch during that period, according to Finance China.

“The failure to raise those funds is mainly due to the bad economic environment, weakening investment expectations, and lack of good investment opportunities,” Song said, adding that the average return of bond funds has been negative since 2022.

He said the financial risks in China are increasing substantially as some funds have very risky investment themes, which will inevitably incur losses to investors.

As more negative news emerges, banking risks have become a hot topic in China for both investors and borrowers.

In April, nearly one million Chinese people were unable to access their bank deposits in central China’s Henan province. Shortly after, residents in east China’s Shanghai, south China’s Shenzhen, north China’s Dandong, and central-east China’s Jiujiang also reported difficulties in withdrawing cash from their bank accounts, and many have yet to be resolved.

Some banks reportedly will only serve a limited number of customers daily, some limit each client’s withdrawal to no more than 1,000 yuan (about $149), and others close their branches and leave most of their ATMs empty.