The Weekly Brief
24-06-2024
Thought of the week
China continues to struggle with the property sector downturn. In an attempt to restore confidence and stimulate growth, China has lowered its Reserve Requirement Ratio (RRR) seven times since 2021, and most recently by 50 basis points in February. Historically, these moves have successfully stimulated credit growth by increasing the funds available for banks to lend. However, in the current environment, credit growth remains muted, suggesting that the issue lies more in the demand for credit, rather than its supply. Economic uncertainty, high levels of existing debt, and trouble in the property sector are all contributing to a tepid response. Businesses and consumers remain reluctant to borrow, reflecting the broader concerns about future economic conditions. As a result, despite increased liquidity, the anticipated boost to lending has not materialised.
China’s muted credit growth reflects weak demand
% of nominal GDP (LHS); % (RHS)
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