A key measure of stress in the Chinese banking sector has posted its fifth consecutive quarter of decline, in a sign that Beijing’s ongoing deleveraging campaign is proving effective.
China’s credit-to-gross domestic product “gap” fell to 18.9% in the second quarter of the year from 22.1% in the preceding quarter, according to data released by the Swiss-based Bank of International Settlements on Sunday.
This gap measures the disparity between the credit-to-GDP ratio and its long run trend, providing an indication of total borrowing by households and companies in the private non-financial sector.
China’s credit-to-GDP gap hit a peak of 28.8% in the first quarter of 2016, before embarking upon a continuous decline across the five subsequent quarters.
The reading of 18.9% for the second quarter of 2017 remains just short of the 2013 level of 19%.