China’s cash crunch may reduce credit grow by 750bn yuan

China’s credit squeeze could reduce credit growth this year by 750bn yuan ($122bn), an amount equivalent to the size of Vietnam’s economy, according to Bloomberg News survey.

The estimate is the median forecast of 15 analysts who last week projected cuts of between 20bn yuan to 3trn yuan, Bloomberg News reported.

However, it found that despite projected falls, the majority of respondents said they approve of how the government is dealing with the credit crunch.

June’s credit data is due this week and is expected to give investors an idea as to how much the cash squeeze is affecting the world’s second-biggest economy.

Royal Bank of Scotland Group in Hong Kong chief China economist Louis Kuijs told Bloomberg News: “The liquidity crunch has increased downside risks. As long as policy makers cushion the impact through fiscal and exchange-rate measures, the damage to the economy could be quite modest.”