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Pull back in credit - Westpac

Elliot Clarke, Research Analyst at Westpac, notes that the June quarter subsequently saw a pullback in Chinese credit, with corporates again driving the change.

 

Key Quotes

 

“Credit provision in China occurs through both the core and shadow banking systems – the latter is a network of trusts; investment funds; and intermediaries.”

 

“In the March quarter 2017, both the core and shadow banking systems increased their provision of credit to the economy. Most notably, borrowing by corporates jumped ahead, consistent with the usual seasonal pattern in loan demand. Meanwhile, household demand for loans remained strong.”

 

“The June quarter subsequently saw a pull back in credit, with corporates again driving the change. Almost all of the increase in credit in the June quarter came as a result of new bank loans, with only 12% from shadow banking.”

 

“Over the first six months of 2017, new bank loans to the corporate sector were of a similar scale to 2016 and 2015. However, their share of total lending has fallen.”

 

“This is due to greater demand for credit from the household sector, with loans to consumers up 28% from the same period last year and 93% since 2015. This is due to strength in mortgage demand, seen increasingly across all three tiers.”

 

“For the corporate sector, the decline in credit provision by the shadow banking sector in the June quarter looks to have come as a result of a broad-based pull back in all forms of shadow credit except loans made by trusts which have had a strong nine months.”

 

“Equity issuance also held up, but its overall scale and importance is limited compared to bank and shadow credit. Corporate bond issuance fell for a second quarter, but its scale is also quite limited.”

 

“Available only until May, the bank liability data continues to suggest that banks remain reliant on wholesale markets for a portion of their funding. The rise in trust loans and fall in new deposits also suggests consumers may be increasingly willing to take additional risk in pursuit of return.”

 

“On the whole, authorities’ policy stance remains broadly neutral, though the PBOC’s survey does imply conditions have tightened a little since March. Authorities continue to manage wholesale market liquidity such that any spike in short-term yields is not sustained. But they are not looking to push rates down.”

Check the website for more information: https://freshforex.com/analitics/news/all/finnews_1420121.html

 

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