China Faces Bigger-Than-Expected Slowdown, Autonomous Warns

(Bloomberg) -- China is staring at a bigger-than-expected slowdown next year as credit shrinks, said an analyst who made her name warning about the dangers of the nation’s credit binge.

Total credit in the country, including lending to companies, has “absolutely collapsed” in 2018, according to Charlene Chu, a senior partner at Autonomous Research in Hong Kong. The estimate is a calculation by Chu, who adjusts official figures with elements she didn’t share.

“Even though we have been technically in an easing mode since July, we have not seen this transmitting,” Chu said in an interview with Bloomberg TV on Tuesday, referring to authorities’ cash injections into the economy. “We are not seeing any pickup in credit based on our measure and that’s not boding well for next year.”

The signs add to a “negative mix” for China, she said, in the face of an escalating trade war with the U.S. Chu sees China’s growth in gross domestic product slowing to the upper 5 percent range -- compared with 6.2 percent predicted for 2019 in a Bloomberg survey of economists -- but said officials won’t print a number below 6 percent.

Chu’s remarks are in contrast to official data, which showed signs of improvement. Aggregate financing stood at 1.52 trillion yuan ($220 billion) in November, the People’s Bank of China said last week, higher than an estimated 1.35 trillion yuan in a Bloomberg survey and 728.8 billion yuan the prior month.

By Chu’s estimate, China is closing the year with 18 trillion yuan in new credit, including offshore. This is 40 percent below last year’s flow, she said in an email.

The government’s efforts to infuse cash and stoke demand aren’t gaining traction because they come on the heels of an intensive campaign to reduce risky financing, Chu said. It takes about four quarters for the slowdown in credit to reflect on earnings, she added.

“Our credit measure did not really start to fall off until the fourth quarter, particularly December of last year,” Chu said. “It’s really right around now that it should start biting.”

©2018 Bloomberg L.P.