China Construction Bank sees strong growth in yuan loans

The Hong Kong branch of state-owned China Construction Bank Corporation plans to double its yuan-denominated assets.

China Construction Bank (Asia) Corporation said these assets should eventually account for a fifth of its total loans. CCB (Asia) held the equivalent of US$17.4 billion in total assets last year.

CEO Miranda Kwok said the bank intends to achieve its goal of doubling its yuan-denominated assets by 2013 or 2014.

She noted that the yuan’s internationalization is advancing further with fewer restrictions and more flexibility. She said this will create more room for Hong Kong banks to grow their businesses.

CCB (Asia)’s outstanding yuan loans jumped 73% to 6.18 billion yuan in 2011 from 2010 and total yuan assets stood at HK$12.63 billion last yeart. The unit’s yuan trade settlement jumped almost seven fold in 2011 from 2010.

Yuan trade settlement handled by Hong Kong banks jumped some four fold in 2011 to 1.91 trillion yuan from a year earlier, said the Hong Kong Monetary Authority. Lending in the yuan rose 16 fold to 30.8 billion yuan in Hong Kong last year from 2010.

The People’s Bank of China, the central bank, in October 2011 allowed foreign direct investment with yuan raised offshore. This spurred corporate demand for yuan loans in Hong Kong where borrowing costs are lower than in China. Funds are then used for mainland investment.

The yuan lending interest rate in Hong Kong is lower than in China and will help bolster the lending business in Hong Kong.