China needs to act on $45 trillion of credit, says analyst

HONG KONG (Aug 3): China has made progress in slowing leverage in the economy, but still needs to do more with the total amount of financing expected to rise 13% this year, according to Autonomous Research analyst Charlene Chu.

Total outstanding credit is expected to grow to 223 trillion yuan ($45.1 trillion) by December from 196.8 trillion yuan at the end of 2016, analysis by Chu shows. The estimated increase will be lower than last year’s 19% gain as the government’s campaign against leverage starts to bite, she said.

Her estimates are far higher than the latest official figure of 167 trillion yuan in June, which she says doesn’t accurately represent the true state of financing as it doesn’t include items like local government bond issuance and some forms of off-balance sheet lending. As she did in a May interview with Bloomberg, Chu acknowledged the government’s efforts to rein in financing, but she said more needs to be done.

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