“China’s record funding expansion this year may be overstated in part because of double-counting, say Credit Suisse Group AG and Bank of America Corp. analysts trying to reconcile the data with weaker economic growth.
Some Chinese companies may use loans to buy wealth management products that are recorded a second time in another category, Vincent Chan, a Credit Suisse analyst in Hong Kong, wrote in a June 5 report, citing people he didn’t identify at the central bank and banking regulator. Bank of America estimates that double-counting explains 2.7 percentage points of a 12-point gap between first-quarter growth in outstanding credit and nominal gross domestic product.
The concerns echo doubts about Chinese trade figures that helped trigger an official crackdown on false reporting, resulting in May export growth forecast to be about half of April’s gains in data due tomorrow. While the estimated distortions in the credit numbers are smaller, they may provide one part of the explanation for the inconsistency between growth in financing and an economic slowdown.
“The statistics errors in total social financing this year are larger than normal, and it’s mainly caused by double counting,” Zhu Haibin, chief China economist at JPMorgan Chase & Co., said at a briefing yesterday in Beijing.
The first quarter’s $1 trillion increase in economy-wide financing contrasted with an unexpected growth slowdown, suggesting China was becoming less responsive to credit.
More Noticeable
The gap between lending and growth “has become more noticeable in recent months,” Zhu said. Another issue is that some Chinese companies have to borrow to cover working capital as accounts receivable rise, adding to the gap between credit and economic growth, Zhu said….”
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