China is open to taking on more debt if that’s what it takes to support the economy from wisepowder's blog

As China recovers from the coronavirus pandemic, the country’s central bank is more open to increasing loans to an already debt-heavy system than it is to cutting back.To get more China latest news, you can visit shine news official website.

The People’s Bank of China on Wednesday disclosed data for the first three quarters of the year that showed steady loan growth.

Total social financing, a broad measure of credit and liquidity in the economy, rose by nearly 3.5 trillion yuan ($522 billion) in September to a total of 280.07 trillion yuan. That was a 13.5% increase from a year ago — faster than the 12.8% pace recorded at the end of the second quarter, and 2.8 percentage points above the same period last year.

The head of the central bank’s statistics department, Ruan Jianhong, pushed back against the idea that the pace of debt increase in the third quarter was “rapid,” saying it was still “reasonable,” according to a CNBC translation of her Mandarin-language remarks at a Wednesday press conference.

Covid-19 hit China early this year just as the country was in the early years of attempting to cut its reliance on debt for growth. Total Chinese debt across household, government, financial and non-financial corporate sectors rose from over 300% of GDP to nearly 318% in the first quarter, according to estimates published in July by the Institute of International Finance. The trade group expected that ratio to reach 335% of GDP in the following months.China is in a “special situation” and a “phased increase” in debt should be allowed to support the economy, Ruan said Wednesday. She added that following economic growth in the second quarter, GDP should rise further in the third quarter, thereby creating conditions for a reasonable amount of debt.

Official figures showed China’s gross domestic product contracted 6.8% in the first three months of the year at the height of its coronavirus outbreak, before growing 3.2% in the second quarter.

“Elevated credit growth in September suggests market concerns about a People’s Bank of China (PBOC) tightening are overdone,” Nomura’s Chief China Economist Ting Lu and a team said in a note Wednesday. “The rise in bond yields in the past few months reflects high funding demand instead of a PBOC tightening, and infrastructure spending will likely push up headline GDP growth further.”

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By wisepowder
Added Oct 17

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