• Analytics
  • News and Tools
  • Market News
  • China's soaring loan growth is a worrying signal - ING
China's soaring loan growth is a worrying signal - ING
12.07.2019, 13:05

China's soaring loan growth is a worrying signal - ING

ING notes that Cina's credit grew at an exceptionally fast pace in June mainly due to financing for infrastructure projects. However, the implication is that if there were no fiscal stimulus, the economy would be deteriorating.

Total financing increased by CNY2.26 trillion in June, with yuan loans increasing by CNY1.66 trillion.

Credit growth was exceptionally strong and this worries us. It means the Chinese economy needs a lot of funds to keep infrastructure investment growing at a level that can maintain GDP growth above 6% at a time when manufacturing PMIs and export growth are negative. 

There will still be big funding needs in China in 2H19, as we expect infrastructure projects to double from 2 trillion yuan to 4 trillion yuan.

These projects will raise funds from local government special bonds (net issuance of these bonds amounted to 1.19 trillion yuan), but at a later stage, when there are manufacturing activities from these projects, there will be sizeable demand for loans from manufacturers.

The central bank is expected to divert targeted liquidity to smaller manufacturers. We therefore expect two targeted RRR (required reserve ratio) cuts, one in 3Q and one in 4Q, each at 0.5 percentage points. 

If the economy needs further credit, we expect these targeted measures could become broad-based, although this is not as likely as targeted RRR cuts.

© 2000-2020. All rights reserved.

This site is managed by Teletrade D.J. Limited 20599 IBC 2012 (First Floor, First St. Vincent Bank Ltd Building, James Street, Kingstown, St. Vincent and the Grenadines).

The information on this website is for informational purposes only and does not constitute any investment advice.

AML Website Summary

Risk Disclosure

Making transactions on financial markets with marginal financial instruments opens up wide possibilities and allows investors who are willing to take risks to earn high profits, carrying a potentially high risk of losses at the same time. Therefore you should responsibly approach the issue of choosing the appropriate investment strategy, taking the available resources into account, before starting trading.

Privacy Policy

Use of the information: full or partial use of materials from this website must always be referenced to TeleTrade as the source of information. Use of the materials on the Internet must be accompanied by a hyperlink to teletrade.org. Automatic import of materials and information from this website is prohibited.

Please contact our PR department if you have any questions or need assistance at pr@teletrade.global.

Feedback
Live Chat E-mail
Up
Choose your language / location