FEBRUARY 17TH 2016
CREDIT BOOM A GOOD SIGN FOR CHINESE ECONOMY
Chinese banks have presented a record score of credits during January 2016. In total, 2.52 billion yuan (US$386,000 millions) were delivered as loans by Chinese financial institutions, an increase of 71% from compared to January last year.
This credit boom follows the decision of the People’s Bank of China of providing liquidity to the financial system through massive cash transfers, all with the objective of counterbalancing current economic deceleration.
According to the Financial Times, ‘credit surge in January shows Beijing values development more than taming its debt bubble’. Beijing is deploying all of its economic capacity to avoid a ‘hard landing’, mainly relieving debt-laden companies, cranking-up investment, boosting the property market, paying off foreign loans and using the bond market to effectively bail out local governments.
The concerns of Chinese authorities are not only on the financial sector, but also on boosting the real economy. According to Chen Ji, analyst with the Bank of Communications in Shanghai, this move cannot be considered as recovery yet, but it certainly is a sign of hope. The argument is further supported by Julian Evans-Pritchard, a China economist at Capital Economics Ltd., stating that the move will help the economy over the next 12 months, but it does add risks on the long term.
Chinese authorities seem to be on the right track, and despite all difficulties, the voices of the financial community coincide on a positive outlook for the year.
Sources:
Market Intelligence Citi Bank.
http://www.wsj.com/articles/why-chinas-credit-boom-might-not-pack-a-punch-1455616828
http://www.ft.com/cms/s/3/83ff9bfa-d4ed-11e5-8887-98e7feb46f27.html#axzz40QZPiXIc
Annex Asia Publishing
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Image: WSJ
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