China CITIC Bank sees 'K-shaped' economy reshaping corporate asset allocation

China's increasingly "K-shaped" economy — with some sectors surging ahead while others struggle to keep pace — is prompting banks to rethink where they deploy corporate credit, according to China CITIC Bank Vice-President Gu Lingyun.

The divergence is an inevitable part of China's shift toward higher-quality growth, Gu said at a news conference on Thursday to announce the bank's first-half financial results, adding that China CITIC Bank is calibrating its corporate asset allocation strategy around the three lines of the letter "K": the upward, downward and vertical lines.

"When looking at the letter K, in addition to the upward and downward lines, we must not overlook the vertical line that runs through the middle," said Gu.

He emphasized that the bank needs to "bolden and strengthen" the vertical line, which represents the foundation of Chinese banks' asset allocation.

Regardless of how the economic environment changes, China's infrastructure development and major strategic projects will remain the anchor of China CITIC Bank's asset allocation. These assets are currently represented by the "six networks" — the water network, the new-type power grid, the computing power network, the next-generation communication network, the urban underground pipeline network and the logistics network — and projects implementing major national strategies and building security capacity in key areas, as well as large-scale equipment upgrades and consumer goods trade-in initiatives.

They tend to involve large amounts of financing, long maturities and relatively low risks, giving them strong resilience across economic cycles, and therefore remain an important foundation for banks' asset allocation at all times, Gu said.

In the first half, China CITIC Bank extended 113.1 billion yuan ($16.82 billion) in medium- and long-term corporate loans for next-generation infrastructure and key national strategic projects. The bank's pipeline of related assets has now reached 500 billion yuan.

Gu also highlighted the need to capitalize on opportunities along the upward line of the K. This line mainly represents rapidly developing new quality productive forces, concentrated in areas of technological innovation such as artificial intelligence, semiconductors, biopharmaceuticals, commercial spaceflight and embodied intelligence.

As of the end of the first half, the bank's outstanding loans to strategic emerging industries and future industries had reached 780.7 billion yuan, an increase of 82.3 billion yuan from the beginning of this year. Such incremental lending accounted for 36 percent of its total increase in lending.

At the same time, Gu said the bank needs to make prudent adjustments and respond effectively to the downward line of the K, which represents industries facing greater pressure to adjust and transform.

"Our bank has stepped up structural adjustments for such clients, but this does not mean simply exiting these sectors. Instead, we continue to provide targeted support to high-quality companies in traditional industries that are capable of improving their fundamentals through high-end, intelligent and integrated transformation," he said.

In the first half, the bank's related lending increased by 27.5 billion yuan.

By adopting differentiated measures and coordinating efforts across the three lines of the K, China CITIC Bank achieved solid growth in corporate asset deployment during this period.

As of the end of June, the bank's outstanding renminbi general corporate loans had increased by 212.4 billion yuan from the beginning of the year. Within the total, outstanding technology-related loans increased by 129.1 billion yuan, outstanding green loans by 62.3 billion yuan, and outstanding medium- and long-term loans to advanced manufacturing by 31.5 billion yuan.

Overall, the bank's asset structure showed clear signs of becoming healthier, higher quality and more oriented toward new areas of growth, Gu said.

In the first half, the bank's loans to key sectors of the real economy maintained steady growth, with net profit attributable to its shareholders reaching 37.6 billion yuan, a year-on-year increase of 3.08 percent.

As of the end of June, its nonperforming loan balance stood at 68.95 billion yuan, up 2.57 percent from the end of last year; the nonperforming loan ratio was 1.15 percent, unchanged from the end of last year; and the loan loss provision coverage ratio was 203.12 percent, down 0.49 percentage points from the end of last year.