Daily Management Review

UBS: China will increase debt in 2019 to support the economy


02/18/2019


UBS Group AG predicts a rise in debt in China in 2019, which is designed to mitigate a slowdown in economic growth, reports Bloomberg.



Public Domain Pictures
Public Domain Pictures
The ratio of the country's total debt to GDP will rise again this year, after it remained unchanged in 2017 and decreased in 2018, wrote Head of Chinese economic research at UBS in Hong Kong.

Growth in aggregate financing (the broadest official credit growth rate) will accelerate to almost 12% this year from 9.8% in 2018, Van expects. The analyst estimates that nominal GDP this year will slow from 9.7% to about 8%, while inflation will be moderate. In this scenario, the debt ratio grows.

Although the increase in debt, "is likely to be a positive factor for short-term growth and the stock market, it can increase investor concerns about China's medium-term goal of restraining debt and financial sector risks," she notes.

Chinese banks issued a record amount of new loans in January.

According to the People's Bank of China, the volume of new bank lending in China in national currency amounted to 3.23 trillion yuan ($ 477 billion) last month.

The total amount of financing (including bank loans, off-balance loans, placement of shares and bonds) in China last month increased to a record 4.64 trillion yuan ($ 685.18 billion).

China’s GDP growth last year slowed to 6.6% and has been minimal since 1990.

In an effort to support the economy, Chinese authorities are making efforts to ensure adequate funding for the private sector, especially small firms facing liquidity problems.

source: bloomberg.com






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