China’s Loan Drop Stokes Fears of ‘Balance Sheet’ Recession
- Key lending gauge contracted for first time since 2005 in July
- Inflation is hovering around zero as consumer confidence sags
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China’s first bank loan contraction in nearly two decades has fanned fears the world’s No. 2 economy is careening toward a “balance sheet recession” as Japan did decades ago.
A plunge in new corporate borrowing combined with households preferring to repay debt saw bank loans shrink last month for the first time since July 2005. That deepened China’s years-long battle with weak credit demand, as a property slump spurs caution on buying homes and expanding investment.