China is beginning to reap more rewards from its credit, reversing a trend over the past two years and signaling that its “credit cycle has peaked.”
- New credit required for each dollar of economic output fell to US$0.28 in 2017, from US$0.30 the year before
- Inefficient capital allocation has started to “bottom”: JPMorgan
- “In sectors from steel to coal mining, we’ve seen industry profits rebound but very little new investment… That’s probably the most important thing to explain the stabilization of credit allocation efficiency”: JPMorgan chief China economist Zhu Haibin
- “It is an important turning point… The global recovery since last year and a booming services industry is providing the room to control debt without triggering a major economic correction”: Robin Xing, Morgan Stanley Asia’s chief economist
- China’s “credit cycle has peaked”: Nomura
Analysts see the tailwind from a boost in exports in 2017 will continue to give room for China’s authorities to follow through on their de-risking initiatives and pollution curbs, while still maintaining growth.