Unbelievable Chinese credit growth
According to this article in Bloomberg, China’s aggregate credit grew by 2.54 Trillion Yuan in March.
Surely this is wrong. This means that in a 51.9 Trillion Yuan economy, they borrowed 4.8% of their GDP in one month!!!
Australia’s credit growth is maxing out after our property bubble of the last 15 years. Our credit growth is closer to 4% per year. China’s is around 4% per month!!!
Those that are betting on China to keep expanding their credit at this rate for their investments to work out are in my opinion not being overly rational.
There are many out there that believe China can stimulate the economy if it begins a downturn. 4% per month credit growth is one of the biggest stimulus packages the world has ever seen. How can they stimulate more from here?
At Valor, we look to remove the irrational movements in markets such as these from our clients portfolios. At some stage in the next few years, China will be growing their credit at a much slower rate and those that have portfolios dependent on this continued unsustainable growth are likely to have less than acceptable returns on their investments.