Foreign bank lending to China
6 December 2015
(Extract from pages 18-19 of BIS Quarterly Review, December 2015)
The BIS consolidated banking statistics (CBS) on an immediate counterparty basis indicate that foreign claims on Chinese residents, including local claims booked by foreign banks' offices in China, amounted to $1.2 trillion at end-June 2015. This was down from an all-time high of $1.3 trillion at end-September 2014. As of mid-2015, almost two thirds of these foreign claims were booked by banks headquartered in BIS reporting countries (Graph A, left-hand panel). Banks headquartered outside BIS reporting countries but with offices located in BIS reporting countries - for instance, Chinese banks located in Hong Kong SAR - accounted for more than a third of the foreign claims on China at end-June 2015. The claims of this group of so-called "outside area banks" contracted from $512 billion at end-September 2014 to $460 billion at end-June 2015. Unlike the claims of banks headquartered in BIS reporting countries, those of outside area banks are reported on an unconsolidated basis and thus include intragroup positions.
A large share of the growth in foreign claims on China over the past several years has taken the form of credit to banks (Graph A, centre and right-hand panels). The outstanding stock of these interbank claims accounted for more than half of international claims on China at the end of Q2 2015. However, these claims declined from $660 billion at mid-2014 to $532 billion at mid-2015 (Graph A, centre panel). Interbank positions include renminbi-denominated claims that are the counterpart to offshore deposit liabilities. By contrast, international claims on the Chinese non-bank private sector continued to grow at the steady pace seen in the past few years, lifting their outstanding stock from $91 billion at mid-2010 to $395 billion at mid-2015.
Short-term claims have mirrored the recent declines in interbank lending to China (Graph A, right-hand panel). Claims with remaining maturities of up to one year, which accounted for 75% of the total stock of international claims on China as of end-Q2 2015, have contracted from $858 billion at mid-2014 to $737 billion at mid-2015. Thus, they constituted most of this period's overall decline in international bank lending to China.
Foreign claims comprise local claims of the bank's offices abroad as well as cross-border claims of the bank's offices worldwide. A list of countries in the BIS reporting area is available on the BIS website: www.bis.org/statistics/rep_countries.htm. China does not report international banking statistics to the BIS. However, the locational statistics and consolidated statistics on an immediate counterparty basis capture the positions of Chinese and other banks headquartered outside the BIS reporting area to the extent that these positions are booked through offices in a BIS reporting country. International claims are defined as the sum of cross-border claims denominated in all currencies and foreign offices' local claims denominated in foreign currencies. Changes in the consolidated banking statistics are not adjusted for exchange rate movements. To the extent that claims are denominated in currencies other than the US dollar, an appreciation of the US dollar will result in a decline in the reported US dollar value of outstanding claims in those currencies. See R McCauley, "Capital flowed out of China through BIS reporting banks in Q1 2015", BIS Quarterly Review, September 2015, pp 28-9.