Bloomberg News

Fitch Says China 2012 Financing May Drop First Time Since Crisis

June 04, 2012

Fitch Says China 2012 Financing May Drop First Time Since Crisis

The world’s second-biggest economy is decelerating as Europe’s debt crisis crimps demand and government restrictions on the property market ripple out to other industries. Photographer: Nelson Ching/Bloomberg

New financing in China’s economy may decline this year for the first time since 2008 as demand for bank loans weakens and overseas lenders hold back on fears of a “hard landing,” Fitch Ratings said.

Adjusted total societal financing may reach 16.5 trillion yuan ($2.6 trillion) to 17 trillion yuan in 2012, down from 17.5 trillion yuan the year before, the ratings company said in an e- mailed statement today. Offshore credit has been “particularly sluggish,” Fitch said, adding that “absent stimulus, credit growth could be even lower.”

The world’s second-biggest economy is decelerating as Europe’s debt crisis crimps demand and government restrictions on the property market ripple out to other industries. JPMorgan Chase & Co. on June 1 cut its full-year economic growth forecast for China for the second time in four weeks to 7.7 percent, down from 9.2 percent in 2011.

The central bank last month pledged to “properly adjust the money and credit supplies, keep a reasonable scale of total social financing and optimize the credit structure to better serve the real economy.”

Fitch estimates that each yuan in new financing will yield only 0.39 yuan in new gross domestic product in 2012, compared with a return of 0.73 yuan before the crisis.

To contact Bloomberg News staff for this story: Jun Luo in Shanghai at jluo6@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net


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