China | Increase in credit growth will support the recovery
The pickup in credit growth so far this year has been in line with the mandate given during the May National People’s Congress (NPC) meetings and recent policy easing measures.
Bank lending gained speed, and nonbank lending (including “shadow banking”) has turned the corner. However, in a confusing move, the PBoC allowed interbank interest rates to rise since end-May.
In all, our measure of China’s credit impulse (acceleration of credit) saw the fastest increase in May since end-2017, which will support the economic recovery. We don’t expect a surge in credit growth, but we do see it rising to around 13.5% in H2. That would lead to an increase of around 27ppts in China’s overall debt-to-GDP ratio this year.