Is China’s ‘cheap money’ era over as credit shrinks and interest rates rise?
Credit in China’s economy plunged an unprecedented 20 per cent in the first quarter as banks were allowed to raise their interest rate ceilings, indicating an era of easily available cheap funds has ended
Credit in China’s economy plunged close to an unprecedented 20 per cent in the first quarter as banks were allowed to raise their interest rate ceiling, indicating the era of easily available cheap funds in the country has ended.
Social financing, a broad measure of credit and liquidity in the world’s second biggest economy, fell 1.33 trillion yuan (US$211.85 billion) from a year earlier to 5.58 trillion yuan, the People’s Bank of China said on Friday.
During the first three months of the year, the bulk of financing – 87 per cent – took the form of bank loans.
“Shadow banking financing” shrank, as Beijing continued its crackdown on illicit deals and strived to pare debt to stem systemic financial risks, according to the central bank.
“The fall in the outstanding amount of broad social financing is bigger than expected,” Ding Shuang, chief China economist for Standard Chartered in Hong Kong, told the South China Morning Post.