A leading Chinese state-owned bank has been instructed to lend to the fisheries sector in Hainan as the country’s lopsided banking sector continues to favor large state-owned corporations and real estate conglomerates over small business.
The provincial office of the Postal Savings Bank of China (PSBC) is dispensing CNY 1.2 billion (USD 180 million, EUR 156 million) to 4,300 fishing companies and aquaculture establishments in Hainan for capital projects and to support the Hainan’s free trade zone. Hainan has been declared a tax-free zone to encourage investment by outside companies in a region that is aiming to shift from an agrarian economy into a tourist destination for Chinese and Russian sun-seekers.
Hainan is one of the centers of Chinese tilapia production, and its ports are home to fleets fishing the contested waters of the South China Sea. PSBC’s 40,000 branches nationwide claim to focus on under-banked rural dwellers, but in many cases, deposits taken at rural level are lent onwards to urban projects like real estate developments.
The PSBC claims to have the second-largest number of branches after the Agricultural Bank of China, which has in recent years focused on the corporate and real estate sectors that have traditionally been thought of as offering faster returns than lending to agricultural enterprises, which are also seen as harder for bankers to assess for risks. But much of China’s lending is also politically directed, with local bank branches being roped in to lending to projects preferred by local government. As a result, Chinese rural credit cooperatives, part of a central government effort to improve banking to rural areas, have struggled as a result of political interference.
Big banks are also dealing with government intervention. China’s central government has taken action in recent years to break up acquisitive conglomerates carrying huge debt piles owed to state banks. Chinese bankers have been watching if and how government intervenes in the case of Evergrande, a huge real estate developer struggling to make payments on bonds and loans. The firm, which is impacted by central government efforts to deleverage corporations and to achieve “common prosperity,” or more equitable income distribution, faces a “challenging and deteriorating operating environment,” according to the China offices of French investment bank Natixis.
PSBC minority shareholder investors include Temasek Holdings of Singapore, UBS, and Morgan Stanley, as well as Chinese tech giants Tencent and Ant Financial, a unit of Alibaba.
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