Chinese authorities are facing an uphill battle convincing companies and households to boost borrowing as long as COVID-19 outbreaks and lockdowns continue to crush confidence.
After loan growth weakened in April to the worst level in almost five years, several indicators suggest the data for May won’t be much better. Housing sales have continued to slump, indicating a lack of appetite for mortgages and subdued credit demand among real estate firms. Struggling to find enough clients, banks have been swapping bills with each other just so they can meet regulatory requirements for corporate lending.
The reluctance to borrow stems in large part from uncertainty over China’s COVID-19 curbs, and whether future outbreaks could lead to repeated lockdowns like the one that crippled activity in Shanghai for weeks. Businesses have had to halt production and cut jobs, revenue has slumped and profits have plunged. Many companies are putting expansion plans on hold.