What Australian Banks Cutting Back Lending to China Means for Aussies

By Uwear

During this rapid period of expansion for the Australian economy, the growth in Australian bank lending to China has slowed to a crawl.

Australian bank exposure to China dipped by US$700 million during the December quarter to US$33.7 billion, and according to figures from Bank for International Settlements last week, its annual growth rate has slowed significantly over the past year.

After Australian bank exposure to China went up by 70 per cent in 2013, the yearly growth rate dropped 10 per cent last year. The dip in foreign lending began as the Chinese economy continues to slow, leading to higher debt for banks, as well as a blow to foreign lenders through weaker flows in their trade finance businesses.

RELATED TOPICFTA With China: Two Mining Companies Ready For Non-Mining Business

 The global banking community is now at a standstill, and just like when China’s economy previously slowed, most will hesitate to make a move while waiting to see where the cycle goes from here. Some believe softer lending to China’s economy was sparked by the possibility of rising debts and slower growth, which recently sparked China’s central bank to lower reserve requirements for banks last week.

As the Chinese economy strives for sustainable – yet slower – growth, its numbers remain among the most important international data for Australia. Yearly retail sales are expected to increase by 11.7 per cent, while industrial production is believed to grow by 7.4 per cent, and fixed asset investment –property in particular – by 15.7 per cent.

RELATED TOPICWill ANZ Top Australia's Big Four Banks With Home Loan Rate Cut?

Since China buys the most iron ore in the world by far, slower growth and less credit in China will put more pressure on an Australian economy that relies heavily on resource exports. China is expected to import a record 938 million tonnes of iron ore this year.

In the end, a dim credit cycle in China could put commodity prices under an even brighter spotlight, eventually leading to a fall in mining capital expenditure and possible job losses for Aussies.


Featured Articles

Nirvik Singh, COO Grey Group on adding colour to campaigns

Nirvik Singh, Global COO and President International of Grey Group, cultivating culture and utilising AI to enhance rather than replace human creativity

How Longi became the world’s leading solar tech manufacturer

On a mission to accelerate the adoption of sustainable energy solutions, US$30 billion Chinese tech firm Longi is not just selling solar – but using it

How Samsung’s US$5billion sustainability plan is working out

Armed with an ambitious billion-dollar strategy, Samsung is on track to achieve net zero carbon emissions company-wide by 2050 – but challenges persist

UOB: making strides in sustainability across Southeast Asia


Huawei smartwatch goes for gold with Ultimate Edition


How IKEA India plans to double business, triple headcount

Corporate Finance