FT Adviser (02/05/2019) – The global economy is set to improve due to an increased credit stimulus programme by China in response to growing US-Sino trade tensions, industry participants said.
This comes as China’s “credit impulse”- a measure of the change in new credit issued as a percentage of GDP- has been increasing.
China, the world’s largest economy, is cutting reserve requirements, incentivising lending and extending credit in some parts of the economy to respond to growing trade tensions between China and the US.
Some of China’s policies to counter the trade threat include issuing higher than expected monthly loans of 3.3trn yuan ($0.49trn) instead of 3.3trn in January 2019.
This marked the highest amount of monthly loans issued since 1992.
But Ricky Chan, director and chartered financial planner at IFS Wealth and Pensions, warns that a higher credit impulse will not necessarily translate into a bullish outlook.
He said: “You would expect higher credit to feed through to helping companies to expand its operations, hire more staff, which naturally feeds through to improve the overall economy (so higher tax receipts for the government too).
“But it also means businesses would be higher leveraged on loans which could be risky when things take a turn for the worse.”
Full article link: https://www.ftadviser.com/investments/2019/05/02/chinese-credit-stimulus-to-boost-global-economy/