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Regulatory moves boost loans to China's manufacturing industry

02 Jun '23

1 min read

Pic: Shutterstock/chinahbzyg

Insights

China's manufacturing sector saw a surge in onshore bank loans, reaching 4.7 trillion yuan in 2022, largely due to regulatory measures directing more credit into the sector.
The sector raised 2.7 trillion yuan through equities from 2020-2022, surpassing the previous three years.
Medium to long-term bank credit supported the sector's capex growth.

Newly added onshore bank loans to China’s manufacturing sector hit 2.2 trillion yuan in 2020, exceeding the total amount of the prior five years, and rose further to 2.8 trillion yuan in 2021 and 4.7 trillion yuan in 2022. The surge resulted largely from regulatory moves, funnelling more credit into the sector.

The sector’s equity financing has also been strong, fuelled by technology-intensive sub-sectors such as equipment and devices manufacturing. The sector raised 2.7 trillion yuan via equities from major onshore exchanges in 2020-2022, well above the 1.7 trillion yuan during the prior three years, Fitch Ratings said in a press release.

In comparison, net onshore bond issuance by the manufacturing sector was a negative 93.5 billion yuan in 2020-2022, dampened mainly by declining sub-sectors. That said, issuers from some advanced or consumer staples sub-sectors typically added their bond-market exposure.

The majority of A-share listed manufacturers presented a lower percentage share of short-term debt over the past five years, thanks to stronger medium- to long-term bank credit that also underpinned their capex growth. Waste management and service, benefiting from China’s carbon peak and neutrality targets, recorded the highest median CAGR of capex among sub-sectors, followed by petrochemical and metals.

Fibre2Fashion News Desk (NB)

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