The following is a press release from Fitch Ratings: - Link to...

The following is a press release from Fitch Ratings:


- Link to Fitch Ratings' Report: Chinese Banks: Growth of Broad Credit Decelerating But Still Outpacing GDP

- http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=680989

- Fitch Ratings-Beijing/Singapore-04 June 2012: Fitch Ratings says broad credit growth in China continues to decelerate, adding to recent pressures on the economy. In a comment published today, the agency highlights that 2012 is shaping up to be the first year since 2008 that the net amount of new credit extended to the economy falls below the prior year.

Even with a modest economic stimulus such as the one recently announced, Fitch's adjusted Total Societal Financing (TSF) measure is on pace to reach CNY16.5trn-CNY17trn in 2012, down from 2011's CNY17.5trn. Absent stimulus, credit growth could be even lower.

"Broad credit growth began to moderate in the second half of 2011, and this slowdown has accelerated in 2012," said Charlene Chu, Head of Chinese banks' ratings at Fitch. "Weakening demand for credit as well as resource contraints from thinning bank liquidity have been weighing on bank lending."

Fitch notes that offshore credit has been particularly sluggish amid renewed China hard landing fears and European banks' deleveraging. Domestic nonbank credit has been more resilient, but is expected to come in below 2011 levels.

The slowdown in credit is being met with an equivalent moderation in GDP growth, suggesting that the economic return on credit remains weak. Fitch estimates that in 2012 each CNY1 in new financing will yield only CNY0.39 in new GDP versus CNY0.73 pre-crisis.

"Since the global crisis, the Chinese economy has become increasingly reliant on abundant, cheap financing to propel GDP growth. Therefore, it is not a surprise to see GDP growth slowing in tandem with broad credit growth," Chu said. "By the same token, it will be difficult to see a significant turnaround in economic growth absent a rebound in credit."

The report, "Chinese Banks: Growth of Broad Credit Decelerating, But Still Outpacing GDP", is available on www.fitchratings.com or by clicking on the link above.

Contact:

Charlene Chu

- Senior Director

- +8610 8517 2112

- Fitch Ratings (Beijing) Ltd.

- 1903, 19/F, PICC Tower

- 2 Jianguomenwai Avenue

- Beijing 100022

Chunling Wen

- Associate Director

- +8610 8517 2105

Hiddy He

- Associate Director

- +8610 8517 2135

Media Relations: Wai Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: [email protected].

Additional information is available on www.fitchratings.com

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.



(END) Dow Jones Newswires

June 04, 2012 21:02 ET (01:02 GMT)