The world’s second-largest economy continues to recover from the coronavirus pandemic. Interestingly, the People’s Bank of China is ready to increase loans to an already debt-laden system. The country is ready to do whatever it takes to boost its economy.
According to the information provided by the People’s Bank of China, the data for the first three quarters of the year that showed steady loan growth.
People should take into account that total social financing, a broad measure of credit and liquidity in the economy, rose by nearly 3.5 trillion yuan ($522 billion) in September. As a result, the total social financing of 280.07 trillion yuan. Importantly, that was a 13.5% increase from a year ago. Faster than the 12.8% pace recorded at the end of the second quarter. Moreover, this result is 2.8 percentage points higher above the same period in 2019.
The coronavirus hit China early this year, as the country was in the early years of attempting to reduce its dependence on debt for growth. Hopefully, China successfully contained the outbreak.
However, in many countries around the world, the coronavirus pandemic is far from being over. Moreover, countries in Europe and elsewhere are struggling to cope with the second wave of coronavirus infections. Furthermore, it is hard to determine how long it would take to extinguish all hotspots.
Let’s get back to China. Importantly, the total Chinese debt across the household, government, financial, and non-financial corporate sectors rose from over 300% of gross domestic product (GDP) to nearly 318% in the first quarter. This information came from estimates published by the Institute of International Finance in July.
Economy and interesting details
According to official figures, China’s GDP contracted 6.8% in the first three months of the year in the first quarter. However, GDP grew 3.2% in the second quarter. Interestingly, China’s third-quarter GDP is due Monday.
Importantly, other major economies took bold stimulus measures. However, the People’s Bank of China decided not to make similar decisions. The country’s central bank kept the loan prime rate, the key benchmark for lending, unchanged for five months in a row.
Based on the information provided by the central bank, medium, and long-term loans for services businesses excluding the real estate as of the end of September grew 17.3% from a year ago.
As state above, China has the second-largest economy in the world. This fact once more underlines the importance of its economy. Moreover, the country has the potential to support its economy.
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