China’s credit surge may struggle to fuel growth
What the chart shows
The chart tracks China’s credit impulse (a measure of new credit as a share of GDP) offset by three months to align with the Li Keqiang Index, which measures total bank loans, electricity consumption and rail cargo volume. This reflects the strong five-year rolling correlation between the two measures.
The chart tracks China’s credit impulse—changes in new credit as a share of GDP—advanced by three months relative to the Li Keqiang Index, an economic indicator that includes bank loans, electricity consumption, and rail cargo. It highlights the strong five-year rolling correlation between these two variables.
Behind the data
China has rolled out fiscal measures, including bond issuances worth 6 trillion yuan ($850 billion), following earlier monetary steps. This move is expected to inject liquidity into the economy, possibly pushing the credit impulse into positive territory and spurring economic activity. However, with economists voicing doubts about the country meeting its 5% GDP growth target as we enter Q4 2024, the effectiveness of these measures remains in question.