We’ve just seen Chinese GDP rise 11.9 per cent in Q1.
And urban house prices increased 11.7 per cent in March.
And retail sales are up 17 per cent.
So here’s another dramatic Chinese statistic to throw into the mix, courtesy of First China Invest:
After the government succeeded in sustaining fixed asset investment, and therefore GDP growth, last year by doubling bank lending, this year it is the turn of the consumer. The one area of new lending which is still seeing significant growth this year is consumer financing, which accounted for 50% of new lending in March. As a result, new consumer lending may overtake new consumer deposits for the first time since 2007.
Which basically means that just as China clamps down on investment-led lending, its plans for consumer credit are taking off. For the first time in three years, Chinese consumers may end up borrowing more than they save.
The trend is pretty apparent in the below chart:
Reasons for the leveraging?
Here’s what First China Invest says:
The main reason for the rise in consumer debt has been mortgages, with new long-term household lending averaging 180bn yuan per month in H2 09. In response to the tightening of lending to the property sector, this levelled off in March at 150bn yuan, however, down from 153bn yuan in February and 343bn yuan in January. By contrast, short-term lending in March 2010 was 121bn yuan, up from the 46bn yuan and 107bn yuan in February and January respectively, and more than double the 50bn yuan average seen in H2 09. As well as encouraging new consumer loans through the banks, this also means a rise in credit card use. . .
If anyone was thinking of starting a Chinese credit card company, and has yet to be scared off by all the talk of Chinese bubbles, now might be the time.
Related links:
China vice president emphasizes consumption – Bloomberg
The China consumption gap – Paul Kedrosky