China’s recovery tide lifts all credit boats

China’s rebound from its pandemic trough has been one of sharpest globally, with Q1 growth of 18.3%. Sustained growth is seen with nominal GDP in the last four quarters being 8.7% higher than the preceding four. Trade has supported the recovery, with exports up 43.8% on a year-to-date y/y basis. Domestic activity has been equally strong, with retail sales rising 32.0% in the Jan-Apr period from a year ago. In line with the broad recovery, capital inflows to
China have surged. Foreign portfolio inflows hit a record of USD111bn in Q4 2020, while FDI inflows have also jumped to a multi-year high of
USD93bn in Q1 this year.

Such robust growth in turn meant that industrial enterprises’ profits and local
governments’ revenues have also soared. China’s growth tide has significantly lifted the credit profiles of non-financial enterprises and SOEs, across all regions of China.