Chinese banks increase overseas loan activity

Foster's Group Ltd, Australia's biggest brewer, never borrowed from China until this year, when Bank of China helped arrange $500 million in loans to refinance debt.

Chinese lenders are "injecting large amounts of liquidity", said Peter Kopanidis, group treasurer at Melbourne-based Foster's.

The combination of the world's fastest-growing economy and "a very different deposit base" is helping Bank of China "contribute more at a time when some banks may be capital-constrained", he said.

Industrial & Commercial Bank of China (ICBC) and Bank of China underwrote $25.6 billion of syndicated loans in the Asia-Pacific region outside Japan this year, or 14.5 percent of the total, up from 4.9 percent a year earlier, data compiled by Bloomberg show.

They're providing capital as Western banks from New York-based Citigroup Inc to Royal Bank of Scotland Group Plc in Edinburgh retrench after global financial institutions took $1.7 trillion of write-downs and losses since the start of 2007.

China's banks boosted overseas syndicated loans to $4.9 billion in the first 10 months of this year, up from $3 billion in the same period of 2008. In fact, their growth in the market is the biggest of any nation, Bloomberg data showed. Meanwhile, the US and European banks' Asia-Pacific share slumped to 14.3 percent, down from 30 percent in 2008.

Lending encouraged

In the United States, about $111 billion of leveraged loans, or those made to speculative grade borrowers, have been made in 2009, down from $804.9 billion in the comparable period of 2007.

The State Administration of Foreign Exchange in Beijing is encouraging lenders to make yuan-denominated loans overseas to reduce exposure to consumers amid concerns that too much cash may cause the nation's stock and real estate markets to overheat.

The Shanghai Composite Index of stocks has climbed about 82 percent this year, compared with 21 percent for the Standard & Poor's 500 Index.

The Banking Regulatory Commission told city banks last month to avoid the "blind" pursuit of size after domestic lending surged to a record 8.9 trillion yuan in the first 10 months of 2009, up from 3.7 trillion in the same period a year earlier.

China may need to rein in credit growth to stem inflationary pressures and reduce banks' risks of future bad loans, the Paris-based Organization for Economic Cooperation and Development stated in a recent report.

"We are seeing signs of potential asset bubbles" in Asia, said Ronald Arculli, chairman of Hong Kong Exchanges & Clearing Ltd.