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Elliot Clarke, Research Analyst at Westpac, points out that 2018 has so far shown Chinese authorities’ hold on their economy to full effect as the primary intent of authorities over the past year has been to realign the credit supply process to the ‘quality growth’ agenda.

Key Quotes

“This decision has effectively halted non-bank lending growth, only partly offset by the banks.”

“Banks have also been actively encouraged to tilt their lending towards new growth industries and away from the ‘old guard’.”

“The real economy investment detail implies success on this front, with private investment growing at twice the pace of State-owned Enterprise activity.”

“New credit supply to households and corporates was roughly equal in the June quarter, as was the case over the year prior. Consumer loan demand continues to be supported by housing market strength.”      

“All of the key categories of non-bank lending have declined so far in 2018.”

“While most of the headlines focus on bank and non-bank assets, funding conditions also matter a great deal. For banks, a key reason why bank credit growth has not offset more of the decline in non-bank lending is that banks’ use of interbank funding markets has also been curbed.”

“Softer credit growth has also reduced the availability of deposits to back new loans.”

“Authorities continue to manage the interbank market reactively. Hence a influx of liquidity to spur credit growth and/or push down interest rates it not expected.”