How Chinese Companies Borrow Without Banks
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China’s new credit surged the most since June as companies increased borrowing in the corporate bond market. Aggregate financing rose to 1.82 trillion yuan ($276 billion) in December, according to a report from the People’s Bank of China. That compares with the median forecast of 1.15 trillion yuan in a Bloomberg survey.
The data shows companies are turning to alternative sources for credit given banks’ reluctance to lend. It also adds to signs the economy is stabilizing, not slumping as its falling currency and plunging stock market seem to suggest. The First Word Asia team spoke with Mikio Kumada, Executive Director/Global Strategist, LGT Capital Partners.
Questions & Answers
Q.What was the total aggregate financing in China during December?
What was the total aggregate financing in China during December?
Aggregate financing in China reached 1.82 trillion yuan ($276 billion) in December. This figure represents the most significant surge in new credit since June, according to the People’s Bank of China.
Q.How did the December financing figures compare to market expectations?
How did the December financing figures compare to market expectations?
The December financing figure of 1.82 trillion yuan significantly exceeded market expectations. A Bloomberg survey had predicted a median forecast of 1.15 trillion yuan for the same period.
Q.Why are Chinese companies looking for alternative sources of credit?
Why are Chinese companies looking for alternative sources of credit?
Chinese companies are increasingly seeking alternative credit sources because banks are reluctant to lend. This shift is leading them to borrow more in the corporate bond market instead of traditional bank loans.
Q.What does the rise in corporate borrowing suggest about the Chinese economy?
What does the rise in corporate borrowing suggest about the Chinese economy?
The increase in corporate borrowing suggests the Chinese economy is stabilising. This trend contradicts indications of a slumping economy, which might be inferred from the falling currency and plunging stock market.
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