The Real Deal New York

Is this the end of cheap money from China?

Credit in country's economy plunged nearly 20% in Q1
April 16, 2018 09:15AM

Central Bank of the Republic of China and Governor Yi Gang

China’s “cheap money” era may be coming to an end, as the amount of debt available in the country’s economy plunged more than $200 billion – or roughly 20 percent – during the first quarter of the year.

The sudden credit crunch comes as the Chinese government looks to curb high levels of borrowing that have fueled the economy’s growth.

“The fall in the outstanding amount of broad social financing is bigger than expected,” Ding Shuang, chief China economist for Standard Chartered in Hong Kong, told the South China Morning Post.

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“It showed that Beijing is really determined to cut leverage level in the economy … even [though] doing so might decelerate economic growth a bit.”

China’s measure of credit and liquidity in the economy, called social financing, fell $211.85 billion during the first three months of the year compared to the same time in 2017, the People’s Bank of China said on Friday.

The large majority of that financing, roughly 87 percent, came in the form of bank loans. And “shadow bank financing” fell as Beijing continued to clamp down on illicit deals.

China’s pullback on debt has resulted in regulations on some of the country’s most acquisitive companies like HNA Group, leading to a pullback in overseas investment. [SCMP]Rich Bockmann