China's banks encouraged to join forces on financing

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Lending through consortium loans -- a form of financing provided by a group of banks to a single borrower -- has grown increasingly important to China's national economic development, according to the China Banking Association (CBA).

Pan Guangwei, vice president of the CBA, said consortium lending had steadily expanded in recent years and was increasingly active in the market as an indispensable financial service, with the bulk of financing directed towards infrastructure development.

Data from the CBA showed aggregate consortium loans provided by Chinese banks reached 6.97 trillion yuan (about one trillion U.S. dollars) in the first half of 2018, up 8.87 percent from the end of last year.

The funds have mainly gone into infrastructure development, including housing, transportation, warehousing, manufacturing, water conservancy, the environment and public utilities, according to the CBA.

Compared to conventional loans extended by a single bank, consortium loans are often led by large banks and enjoy the advantages of dispersing loan risks, reducing peer competition and encouraging profit-sharing among lenders.

Speaking at a forum in Beijing last week, Pan advised domestic banks to become more involved in joint lending to ease the financing difficulties of private enterprises, especially those engaged in the Belt and Road Initiative.

"Cross-border financing is relatively tougher for private enterprises as they know insufficiently about the market and legal environments as well as social and economic backgrounds of the host countries," Pan said.

Through consortium loans, banks could make full use of their advantages in different spheres, share information and jointly cope with the risks that may pop up in a foreign country, he said.

A big data information sharing platform may help banks to do cross-checks, share customer resources and boost financial innovations, he said, adding that the association was leading the implementation of a pilot mechanism on joint credit granting to facilitate consortium loans.

So far, the association has enlisted 443 enterprises to join in the experiment, with hundreds of cooperation agreements clinched among banks and enterprises.

Source(s): Xinhua News Agency