Recently, China has experienced much financial risk in the form of defaults and bad loans. But record new credit in January will hopefully help the economy maintain its momentum. According to Bloomberg, aggregate financing, the broadest measure of credit, was 2.58 trillion yuan ($425 billion USD) and new local-currency lending was 1.32 trillion yuan – the highest since 2010.
This data suggests that China may have succeeded in minimizing an economic slowdown, contrary to many expert’s speculation. But at the same time, these figures contrast with the central bank’s call in mid-January for lenders to control surging loans. “These numbers show that the firming up of the central bank’s monetary stance is going to be a gradual, balanced exercise, not an aggressive one,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Plc in Hong Kong. “The authorities want to slow down the pace of credit growth and contain financial risks but they also want to ensure that sufficient credit growth continues to come online to support economic growth.”
The benchmark Shanghai Composite Index (SHCOMP) has risen 0.9 percent further extending gains after the biggest weekly increase since September 2013. Whether the increased lending will help China escape its economic slowing or exacerbate the problem remains to be seen.