China’s retail-sector borrowing ‘fell off a cliff’ in late 2020, with many small firms unable to access credit, report says

China Beige Book International, a provider of independent economic data, said loan-rejection rates in the retail sector increased to 38 per cent in the year’s fourth quarter

Report says China continues ‘to show a less robust recovery than official statistics’ indicate, as it seeks to bounce back from the economic impact of the coronavirus

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The report also highlighted that its indicators showed that goods prices, wages and other input costs have been rising since the second quarter contrasts to the official measures of producer and consumer prices, which both showed deflation in November. Photo: AFP

Published: 2:14pm, 29 Dec 2020Updated: 10:58pm, 29 Dec 2020

Borrowing by China’s already struggling retail sector “fell off a cliff” at the end of this year, with small firms also still struggling to access credit amid a weak recovery in consumer spending, according to a new report.

Loan-rejection rates in the retail sector increased to 38 per cent in the final quarter of 2020 from 14 per cent in the third quarter, according to the latest quarterly report from China Beige Book International, which conducts an independent survey of different aspects of the Chinese economy.

Rejection rates for small and medium-sized (SMEs) businesses rose to 24 per cent in the final quarter from 14 per cent in the third quarter, but the rate for microenterprises fell to 16 per cent from 30 per cent.

In contrast, rejection rates for large firms rose marginally to 12 per cent from 10 per cent during the same period.

“Retail borrowing fell off a cliff in quarter four, due in large part to skyrocketing loan rejections. This occurred despite some of the cheapest rates [for those that could borrow] in almost a decade. SMEs are similarly getting cut out of the buffet line,” the report said.

“Large firms continued to gobble up whatever credit was available, enjoying much lower capital costs than their smaller counterparts, alongside higher loan applications and still-falling rejections,” it added. “This is the opposite of the quagmire [that] small-and-medium enterprises find themselves in, with their falling borrowing levels due primarily to a giant surge in loan rejections. SMEs that can sell bonds are doing more of that, but the cost is notably higher yields than their big-company counterparts.”