Industrial and Commercial Bank of China (ICBC), China's biggest lender by assets, said loans in 2008 increased at the fastest rate among all Chinese banks, partly because of rising demand from large-scale government related projects.

The bank also said it has adjusted its loan portfolio in response to the government call to help promote domestic economic growth by expanding credit to small- to medium-sized enterprises and businesses related to individual consumption.

Chinese commercial banks are expected to set a higher lending growth target for 2009, as increased bank lending is seen as key to sustaining domestic consumption and GDP growth amid a deepening world economic recession, economists said.

ICBC said its newly increased loans in 2008 rose by 14.2 percent from 2007 to a record high of 530 billion yuan.

"The continued record growth in bank lending in December is consistent with our view that banks have the liquidity and are willing to increase lending after the abolishment of the lending quota in early November (2008)," said Wang Tao, head of China economic research at UBS Securities.

Banks added 772 billion yuan in new loans in December 2008, bringing the last month lending growth to almost 19 percent from 16 percent in November.

"The surge in loan growth bodes well for the stabilization and eventual recovery of investment and production. We expect bank lending to grow by 16 percent in 2009, which means new loans would be 4.8 trillion yuan," said Wang at UBS Securities.

Economists and analysts said the government's monetary easing and fiscal stimulus plans are both important in bringing forward lending growth.

"Banks are being afforded more flexibility to determine appropriate lending rates to facilitate the funding needs of corporations and key infrastructure projects. At the same time, they have been urged to finance sound companies that may be encountering temporary cash flow difficulties and to provide assistance to qualified first-time homebuyers," said Jing Ulrich, managing director and chairwoman of China Equities at JP Morgan.

ICBC said in a statement on Monday it would expand new financial services in 2009, including M&A loans and individual credit consumption loans, to shield the bank against the risks from narrowing interest rate spread and shrinking income in intermediary businesses.

(China Daily January 20, 2009)