China’s economic growth is slowly deteriorating as policymakers seek to resume the best way to eradicate the epidemic without creating unforeseen debt.
China this week completely changed its currency for the 12th consecutive month, but other indications are that Beijing, which oversees its state-controlled banks more than most economies, is using alternative measures to reduce the risk of overheating in its more stable, corporate-recovery state.
Total financesDebt growth in the country, which brings home mortgage debt, increased by 12% annually in March, a slight decrease from April last year, according to a government report released this month.
Mike Riddell, chief financial officer at Allianz Global Investors, warned that China’s corporate finances are “the fastest growing in the world” because they “have run the world” so far.
Any other stimulus would attract global growth as recovery from the epidemic, he said.
Julian Evans-Pritchard, China’s chief economist at Capital Economics, said: “China was already the first economic powerhouse.”
The latest signs of debt crunch are coming soon after the central bank asks lenders where To resume their work in February. The policymakers have struggled with commercial sector Through a process called “three red lines”, which aims to reduce the maximum development of developers as measured by metric.
This approach was designed to reduce their access to credit, which has helped to drive construction projects that have forced steel production to a much higher level. last year.
Debt growth has risen sharply by mid-2020, driven by a one-year low interest rate – one of the tools used to control borrowing costs – which China released last April as the economic consequences of the epidemic began.
But by the end of 2020 debt growth has begun to fall compared to growth rates according to Evans-Pritchard’s climate change analysis. He added that interest in China relies heavily on the backward direction of banks.
“Reducing debt cuts at the end of the year is driven by policy makers – who have played a very important role,” said Michelle Lam, a Chinese economist at Société Générale.
Interest rates in the local stock market rose again at the end of last year and remain high. The 10-year government bond is up 3.16%, compared to 2.5% last year.
“In terms of major markets it has been growing,” said Zhikai Chen, chief executive of Asian organizations at BNP Paribas Asset Management.
Debt growth last year boosted China’s debt growth to GDP by 281% according to JPMorgan – the highest rate ever recorded. China is not the only one – the world’s largest debt crisis as governments seek to curb the epidemic – but Chinese lawmakers are more concerned about debt, according to experts.
Guo Shuqing, the country’s top bank manager, in March warned on external risks and the domestic market, as well as in January, the advisor to the People’s Bank of China raised the concern that the increase in revenue could lead to increased profits.
Evans-Pritchard said: “They seem to be more concerned with Covid financially than in most other countries, which is why they are moving so fast to establish policies.”
But Chinese lawmakers are taking part instead of raising prices – which could hurt the entire economy – among other things because recovery is difficult.
Although last quarter’s economic data recorded a sharp increase from the bottom of the first quarter last year, quarterly and quarterly growth was disappointing at only 0.6%. Prices have remained close to zero, although manufacturing prices have begun to rise sharply since the beginning of this year.
The government said in March at the National People’s Congress that its economic vision would continue.
“The economy seems to be in a downward spiral,” says Dariusz Kowalczyk, an economist at Crédit Agricole. “I think that’s why inflation rates have been led by PboC, that the economy is doing well.”
Interbank prices have risen – the three-month Shanghai Interbank Offered Rate is at 2.6%, compared to 1.4% last April, although it is below November 3.1%.
Steve Cochrane, an Asia Pacific economist at Moody’s Analytics, hopes the risk will not rise until next year. He also mentioned the risk that “small and medium enterprises could die of debt” if all prices were raised.
While global interest is focused on the US, where President Joe Biden’s investment in economic stimulus has boosted global economic growth, some traders are pointing to changes in China’s lending pattern as a small indication of global trends.
“The US financial system is seriously undermining inflation,” said Bhanu Baweja, chief technology officer at UBS business bank. “I’m amazed at the number of people who don’t talk about China’s current appeal.”
Additional reports of Wang Xueqiao in Shanghai