China’s Credit Squeeze Deepens as Slump in Government Bond Sales Hits Financing

The article “China’s Credit Slumps as Government Bond Sales Slow” reports that China’s aggregate financing, a measure of credit, decreased by nearly 200 billion yuan in April, marking the first such decrease since comparable data began in 2017. This downturn is attributed to a slowdown in government bond sales and a decrease in financing from shadow banking. Financial institutions offered 731 billion yuan in new loans in April, falling short of a predicted 916 billion yuan, and the year-on-year growth rate of outstanding loans decreased to 9.1%, down from 9.2% in March. The decrease in shadow financing reflects China’s efforts to prevent financial risks, as highlighted by the People’s Bank of China in recent months. However, Bruce Pang, chief economist for Greater China at Jones Lang LaSalle Inc., suggests that the decrease in credit may be tolerated because the government plans to issue ultra-long government bonds soon. The article also mentions a decrease in household medium and long-term loans, indicating weakness in the property market, and a fall in new mid and long-term loans to companies, demonstrating poor investment demand. Overall, the article highlights signs of weaker business activity, with the money supply measure M1 falling by 1.4% in April compared to the same period last year.