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2022 Chinese Banking Sector Interim Review and Outlook

Published date: 28 September 2022

In the first half of 2022, slowed global economic growth, geopolitical conflicts, recurring COVID-19 outbreaks, and other factors had varying degrees of impact on the business environment in the global banking industry. China's economy generally saw a good start to 2022, but further economic growth faces uncertainty due to unexpected factors at home and abroad. The Chinese Government took proactive measures to pursue progress while ensuring stability, achieving positive results in its COVID-19 response and driving continued economic recovery and development.

In the first half of 2022, China's GDP grew 2.5% year on year and CPI rose by 1.7%. Meanwhile, China intensified the implementation of prudent monetary policy and maintained sound and ample liquidity. As of June 2022, China's broad money supply, or M2, was RMB258.15 trillion, up 11.4% year on year, with growth 2.8 percentage points faster than in the same period of 2021. China's banking sector increased credit supply to support the real economy and keep economic fundamentals stable. As of June 2022, the balance of RMB and foreign currency loans totaled RMB212.34 trillion, up 10.8% year on year. RMB loans increased by RMB13.68 trillion, up RMB919.2 billion from the same period of 2021. The asset scale of China's banking sector maintained growth in the first half, with financial institutions' local and foreign currency assets totaling RMB367.7 trillion, up 9.4% year on year. The outstanding non-performing loans (NPLs) of commercial banks amounted to RMB2.95 trillion, an increase of RMB106.9 billion from the start of 2022 and representing an NPL ratio of 1.67%, down 0.06 percentage points. The quality of assets remained stable.

At the same time, the Chinese banking sector stepped up efforts to dispose of non-performing assets and shrink high-risk shadow banking business, supported economic transformation, upgrading, and high-quality development, and sought to serve more technologically innovative and "specialized and sophisticated" enterprises. It also adhered to the direction of "houses are for living in, not for speculation", and implemented differentiated credit policies based on the conditions of local property markets to prudently resolve risks in the real estate sector. In general, operations in the Chinese banking sector were stable, and its risk-resistance capacity continued to improve.

In the second half of 2022, the Communist Party of China (CPC) will convene its 20th National Congress, which will have a far-reaching impact on China's future economic and social development. However, due to weak demand and other impacts of COVID-19, the foundations of the domestic economic recovery need to be consolidated. The Chinese banking sector should stick to "ensuring effective COVID-19 control, stabilizing economic performance, and maintaining safe development", pursue steady progress, enhance the growth stability of credit supply, reduce enterprises' financing costs, and scale up support for key areas, weak links, and industries hit hardest by the pandemic, to keep the economy running at an appropriate pace and promote high-quality economic development.

In this report, the Deloitte China FSI research team reviews economic and financial developments, analyzes the performance and business operation of Chinese listed banks in the first half of 2022, and covers a host of hot topics. Taking 10 representative commercial banks in China as a sample, the report also provides an overview of the Chinese banking sector’s achievements in the first half of 2022 and identifies key development trends based on a systematic analysis of the profitability, assets, liabilities, and capital positions of listed banks. It also gives an overview of business development, operating models, and regulatory change in the sector.

To draw on the best practical experiences of Chinese banks’ international peers, the report also analyzes six non-Chinese Global Systemically Important Banks (G-SIBs), which were all top banks in The Banker's 2022 world ranking.

In addition, the report will take you deep dive into a host of industry hot topics, including the lead bank's operation principle transformation, government-guided funds reform via digitization and smartization, ESG risks and climate risks in banking, best practices in managing expected credit losses for commercial banks, credit cards business sustainability strategy, and the evolving wealth management landscape. Leveraging our experience and Deloitte's smart compliance tool namely, D.FINE, you will learn more about how we integrate digital into financial regulatory compliance.

We hope this report provides valuable reference for Chinese commercial banks.


2022 Chinese Banking Sector Interim Review and Outlook

download report (Simple Chinese version only)


1. 2022 H1 economic and financial sector review

2. 2022 H1 interim performance analysis of Chinese listed banks

2.1 Profitability
2.2 Assets
2.3 Liabilities
2.4 Capital positions

3. Observation of Chinese listed banks' business in 2022 H1

3.1. Active support to the real economy, with increasingly diverse mix of incremental assets and liabilities
3.2. Steadily progress of the integration of wealth management businesses to drive continuous growth and competitiveness
3.3. Real estate risks gradually transferred to individual housing loans (IHL), commercial banks take measures to promote a healthy market development

4. Hot topics

4.1. FPA: return to the original principle of "lead bank"
4.2. Government-guided funds reform via digitization and smartization: shift from "land" to "capital" as attractions for investors
4.3. Practice experience in ESG risks management in banking and our recommendations
4.4. A 360-degree perspective in climate risks management
4.5. How D.FINE, Deloitte's smart compliance tool, help financial institutions optimize regulatory compliance and penalty analysis
4.6. Understand the policies on expected credit losses measures for commercial banks
4.7. What to do with the "dormant" credit cards business? Is "euthanasia" really a solution?
4.8. Strategize with trends at the time and stay ahead – build up the defense mechanism in wealth management business

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