Could a tightening of China’s lending spigots put an end to the global reflation trade in global stock markets this year as the world economy recovers from the coronavirus pandemic?
In the past few months, investors have fretted that China’s efforts to iron out excesses and stabilize its financial system could hamstring the world recovery. Growth of outstanding total social financing , a broad measure of credit in the economy, slowed to 12.3% in March from 13.3% in February. “China’s credit impulse started backing off earlier in 2020, and the rest of the big economies have now joined. This would normally be a worrying sign, but we don’t think it is now,” said Tamara Basic Vasiljev, a senior economist at Oxford Economics.
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