DeepDive: Data Dump April 2024

In this Data Dump, we argue that corporate borrowing is not as weak as portrayed by the consensus view if the high base from the last two years is taken into consideration. There are also some mixed signs that consumer sentiment may be improving gradually, although retail sales underwhelmed in March and the housing market continues to be a concern. Employment indicators, however, have yet to convince us that companies are becoming more open to hiring again. Our April Data Dump has more. 

While corporate borrowing is down some 13% year-to-date, this should be interpreted within the context of a high base over the last two years, with borrowing activity jumping in 2022 and 2023 (see chart). The four-year CAGR for new corporate loans stood at 17% at the end of last year relative to a CAGR of 6% from 2016 to 2019. Bank loans to businesses were particularly strong in Q1 last year, when borrowing was driven by frontloading as the economy exited its pandemic restrictions.

The slowdown this year aligns with the PBoC’s communication and guidance from late last year to utilise existing loans more efficiently and smooth out credit growth across the year (i.e. less frontloading) (see DeepDive: Data Dump March 2024). What has been more puzzling, however, is that robust borrowing has coincided with a rapid increase in corporate term deposits, although there are some signs that growth in the latter is slowing (also see DeepDive: Data Dump March 2024 and QuickScan: Taking Stock of Money Supply Developments).