China

Bank lending to households represent half of GDP and 82% of disposable income in 2017.

A recovering domestic economy is boosting loan demand.

They are likely to help the continued penetration and popularity of e-payment systems.

The country's deleveraging campaign boosted return of funding demand to on-balance sheets.

Its cross border financial assets was valued at US$2t in Q3.

Chinese banks seem to have made meaningful progress in the resolution of problem loans. The aggregate amount of the announced debt-to-equity (D/E) swaps has reached 1 RMB trillion, to 19.5% of problem loans by the end of 2017. However, words are louder than actions as only 15.7% of the total announced D/E swaps have been executed. Banks clearly need to move faster in their cleanup and Chinese regulators are not only aware but also increasingly supportive. To this end, the big five banks have established their own asset management companies (AMCs) to help carry out debt-to- equity swaps. The way in which banks and their asset management companies will operate for the loan cleanup was clarified in a new guideline jointly published by regulators last January.

The lower non-performing loan rules will allow banks to extend more credit.

Shadow lenders in the country account for about 15% of global high-risk non-bank loans.

The move aims to further open the country’s banking sector.

The slowdown is a welcome development as risks particularly in shadow banking are reduced.

This will be driven by infrastructure loans, residential mortgages, and personal consumption loans.

One of the solutions enables direct RMB and Thai baht trade.

There was a 17% YoY reduction of total social financing.

Loan growth may moderate by 1-2 ppt in 2018.

It also expects $138b of new loans.

They expect improvement in overall asset quality with bad loans resolution.