China Reports Higher than Expected Credit Growth in 2016, Raising Debt Concerns
China reported extending $1.82 trillion worth of loans in 2016, setting a new record. However, the numbers have also given rise to new debt concerns. The country is looking to fuel its economy by providing more stimulus in the form of credit and debt, without creating an asset bubble.
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Chinese authorities have expressed their intent to curtail debt in the new year. The economic policy will also emphasize reducing the risk of any financial crisis. Chinese debt level in the previous year raised serious questions about its viability.
According to the central bank data released on Thursday, China extended $150 billion worth of net new loans in the month of December. The figure widely exceeded street estimates, which had expected the landing to fall from November's $115.17 billion figure.
Reuters reported that credit extension during the previous year exceeded the levels shown in 2009. In the last year, lending figures were nearly 8 percent higher than the previous all-time high figure of $1.7 trillion loans.
The credit policy is expected to undergo change this year. Julian Evans-Pritchard, China economist at Capital Economics in Singapore, said, "We expect the gradual slowdown in broad credit growth since last summer to continue in the coming months, given few signs that fresh monetary easing is on the cards."
China is also looking to contain its real estate price growth rate. Various local governments have imposed stricter measures to curb excessive property purchases. Household loans made up nearly half of the total loan volume were disbursed in 2016. It is believed that the authorities may compromise on overall economic growth rate to put emphasis on economic stability.