Credit Growth to Help Maintain Momentum of Economy Amid Challenges
New credit record in China for January helped the economy maintain the momentum and at the same time highlighted the challenges for city officials in trying to limit the risks of financial turbulence coming from bad loans and financial defaults. Aggregated financing which is the broadest measure of credit is at 2.5 trillion yuan, while the new local currency lending is at 1.32 trillion yuan the highest since 2010.
Further data added to better the forecasted trade numbers has suggested that China limited the scale of slowdown from last year’s 7.7 percent expansion in its gross domestic product. During the same time these figures contrasted with the central bank’s call for lenders to control surging loans and highlight diminishing economic returns from credit growth in mid January. This indicated that the firming up of the central bank monetary stance will be gradual and a balance exercise and not an aggressive one. Financial authorities wanted to slow down the pace of credit growth and plans to contain financial risks and at the same time they also want to ensure that there will be sufficient credit to come online and continue supporting economic growth.
Banks will still extend lots of credit and will cool down any fears that the country is slowing dramatically since liquidity is plentiful and can support any growth. Furthermore the jump in loan contrasts with the central bank January warning on bank credit will increase rapidly.