Since 2007, China has entered a brand-new inflation cycle. As of August, 2008, the consumer price index of China increased by 4.9% year-on-year, and the growth rate dropped for four consecutive months. However, the ex-factory price of industrial products rose by 10. 1% year-on-year, hitting a new high of nearly ten years. Since May 2008, the deviation between PPI and CPI has further expanded, but the increase of PPI will be transmitted to CPI, so CPI may rise again in the future. While the shadow of inflation still exists, the leading index of national economy shows that the downward trend of economy is becoming more and more obvious. Therefore, the influence of inflation on commercial banks has become a hot issue in the macro situation in the new period.

(A) the impact of inflation on China's commercial banks and its reasons

In the context of inflation, China has to implement a tight monetary policy. However, the persistence of China's tight credit policy and the economic downturn may make banks face great credit risks. Although the profit growth of China's commercial banks has maintained a good level recently, the macro-control policies have controlled the loan scale and lending rhythm, which has slowed down the expected profit growth of banks and thus promoted the credit risk of commercial banks. The reasons why inflation brings risks to commercial banks in China mainly include the following aspects:

1. With the continuation of China's tight credit policy and the economic downturn, the profitability of most enterprises is not good, and the willingness and ability of repayment of many enterprises have declined, which has led to the sudden outbreak of some existing credit risks, especially medium and long-term credit risks, and the risks of some off-balance-sheet businesses such as bank guarantees, commitments and financial derivatives transactions have increased accordingly. At the same time, with the strengthening of the implementation of national industrial policy adjustment, such as restricting the development of "two high" and overcapacity industries, the risks of banks' stock loans and incremental loans to the industries involved have also increased accordingly.

2. Under the condition of depressed stock market and tight credit policy, the financial risks of some enterprises have increased, and the credit risks of corresponding lending banks have intensified. A large part of the income of some enterprises in China comes from the investment income of the asset market. The change of enterprise income caused by the fluctuation of asset market may impact the credit chain of enterprises and even enterprise groups, and then affect the loan quality of banks.

3. With the deepening of China's real estate regulation and control, some real estate developers may have capital chain problems, leading to an increase in bank credit risk. If the real estate price drops by more than 20%, or even more than 30%, the adverse impact on banks will be even greater. In addition to the direct impact on the quality of bank assets, it may also affect the value of bank credit assets through the change of collateral value. If with the deterioration of bank balance sheet, interest rate rises, stock market falls and uncertainty increases, adverse selection and moral hazard in credit market will intensify, which will make the asset quality of China's banking industry face greater risks.

(B) Suggestions for China's commercial banks to resist the adverse effects of inflation

1. Promote the adjustment of business strategy and ease the pressure of loan scale adjustment through structural adjustment.

When allocating credit funds, commercial banks should consider the impact of inflation on various industries, increase the proportion of credit funds allocated to industries with strong profitability and product prices, reduce the proportion of credit funds allocated to industries that are greatly affected by macroeconomics, and actively provide credit support to industries that can resist inflation and economic cycles and have clear national policy support orientation. Commercial banks should pay close attention to the changes of national industrial policies, guard against the credit risks of related industries, grasp the profit opportunities brought about by industrial restructuring, and improve the operational level of banks.

2. Vigorously develop intermediary business, increase income channels and improve profitability.

Commercial banks should give full play to and cultivate the advantages of human capital, customer base and investment scale, increase the pace of financial innovation in intermediary business, seize opportunities, highlight key points and build intermediary business brands. Improve the employee incentive and assessment mechanism, strengthen marketing, accelerate the development of non-interest income businesses such as investment banking, wealth management and asset custody, increase the proportion of non-interest income, and promote the management level of banks.

3. Strengthen credit risk management in an all-round way to promote sustained and steady business development.

In preventing credit risk, commercial banks should strengthen risk management and improve credit risk pricing ability. Closely monitor the business risks of enterprises, especially pay close attention to the credit risk changes of real estate, "two high and one capital", export and other industries under the tight monetary policy environment, pay attention to prevent the risk of capital chain breakage of enterprises or groups, and maintain and improve the quality of credit assets.