China’s Credit Demand Sluggish as Economic Sentiment Sours, Expert Says
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China’s money supply has been ample amid policymakers’ expansionary stance, but demand for credit has lagged, a sign that market sentiment on the country’s economic outlook has soured, according to a researcher at a state-backed think tank.
The money supply has become less liquid, as households and businesses have been more reluctant to borrow, said Li Yang, chairman of the National Institution for Finance and Development (NIFD), at the 2024 Tsinghua PBCSF Global Finance Forum in Hangzhou on Monday.

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- China’s money supply is ample, but credit demand is low, indicating a decline in market confidence.
- The M1-to-M2 ratio has been decreasing since mid-2020, showing a preference for fixed deposits over liquid assets.
- The macro leverage ratio climbed to 294.8% by March, driven by slow nominal GDP growth outpacing debt increases.
- Mid-2020:
- The ratio of M1 to M2 has been trending downward, indicating households and businesses prefer time deposits over liquid funds.
- 2022 and 2023:
- The increase in nonfinancial enterprises’ leverage ratio was primarily because the increase in their debt outpaced overall economic growth.
- 2023:
- A slight rise in the household leverage ratio occurred due to slow growth in disposable income.
- 2023:
- Year-on-year growth in the amount of corporate bonds issued was only 0.3%.
- By the end of 2023:
- China's macro leverage ratio was reported at 288.0%.
- First quarter of 2024:
- Year-on-year growth in the amount of corporate bonds issued inched up to 1.3%.
- First three months of 2024:
- Businesses’ outstanding demand deposits dropped 4.1% year-on-year, while time and other deposits rose by 3.4%.
- March 2024:
- China’s macro leverage ratio climbed to 294.8%, a 6.8 percentage point increase from the end of 2023.
- Monday, May 27, 2024:
- Li Yang spoke at the 2024 Tsinghua PBCSF Global Finance Forum in Hangzhou, discussing reluctance to borrow by households and businesses.
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