## Figure 1.28. Chinese Banks: Financial Policy Tightening and Credit Growth Capacity

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**Canonical URL:** [Figure 1.28. Chinese Banks: Financial Policy Tightening and Credit Growth Capacity](https://www.imf.org/-/media/files/publications/gfsr/2017/october/chapter-1/pdf-data/figure1-28.pdf)

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### Realized and Projected Credit Growth Capacity
- 2016 (actual) credit growth shown.
- 2017 total credit growth capacity:
  - 11%
  - 8%
  - 7%
- Actual credit growth and projected credit growth capacity are shown separately.
- Curbing shadow credit slows overall credit ...... and would reduce vulnerabilities only gradually.
- ... especially if other weaknesses are also addressed ...

### Net New Bank Credit, Realized and Projected Capacity
- Units: Trillions of renminbi; percent.
- Projected credit growth capacity assuming shadow credit growth of 27 percent year over year. (Footnote 2)
- Projected credit growth capacity assuming shadow credit growth of 0 percent year over year. (Footnote 3)
- 2013 14 15 16 17E timeline shown for net new bank credit (0 to 800 scale implied by axis labels).
- Small and medium-sized banks and Big 5 banks are distinguished in the projections.

### Shadow Credit to Capital and Shadow Credit Growth Assumptions
- Shadow credit growth assumption examples:
  - 27%
  - 0%
- Shadow credit to capital shown in percent.
- Shadow credit refers to nonbond, nonloan credit to nonfinancial private borrowers, both on and off balance sheet. For a complete definition, please see footnote 33.

### Sensitivity and Risk Considerations
- ... or increased capital against 10 percent of shadow credit
- ... with a 25 bps fall in ROA ...
- No shadow credit growth ...
- Changes in shadow credit affect the CET1 available to support credit growth.

### Key Methodological Notes and Assumptions
- Credit growth capacity is calculated at the bank level for 32 firms as the maximum net new credit possible given assumptions for growth in shadow credit (on and off balance sheet) and common equity Tier 1 (CET1) capital.
- New shadow credit is assumed to carry regulatory capital risk weightings of 25 percent, whereas off-balance-sheet shadow credit carries a risk weighting of zero.
- Assumes firm-level profitability, dividend payout ratio, CET1 ratio, and loan mix from 2016 stay constant.
- bps = basis points; E = estimated; ROA = return on assets.

*Sources: Company annual reports; SNL Financial; and IMF staff calculations.*

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_Source: https://www.imf.org/-/media/files/publications/gfsr/2017/october/chapter-1/pdf-data/figure1-28.pdf_