Chart of the week
China’s credit figures surged in January, in stark contrast to recent months. Although January is typically a strong month, this upturn has exceeded any seasonal effects. Bank lending was particularly buoyant. The rise took total credit growth to 10.4%, putting a halt to the downturn that started in 2017.
OUR ANALYSIS
In addition to the upturn in credit, the government’s fiscal measures demonstrate that the short-term official emphasis has shifted back to growth. Whereas China’s authorities focused on deleveraging in 2018, even at the expense of constraining the economy, at a recent Politburo meeting President Xi Jinping firmly underscored the need for solid growth. A statement (1) from the meeting clarified that risk prevention should be done on the basis of stable growth. In similar vein, the PBoC’s (2) latest quarterly report insisted less on the need to lower debt levels and announced that looser monetary policy would continue.
The Chinese authorities are not seeking to trigger a sharp upturn in the economy, but rather to avoid a steep slump as the country’s growth model transitions to relying less on investment and more on consumption. These shifts should help stabilise growth in the months ahead, although success hinges on the nation’s ability to curb its dependence on debt.
(2) The People’s Bank of China or PBC is the central bank of the People’s Republic of China
The opinion expressed above is dated February 28th, 2019, and liable to change.
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