A gauge of mainland Chinese shares traded in Hong Kong has opened 1.4 per cent higher, following some data released over the weekend that signalled the Beijing government will keep allowing credit to flow freely, FastFT reports.
Traders placed their orders early for shares in the Hang Seng China Enterprises Index following the news that Chinese consumer prices rose 2.3 per cent in July, year-on-year.
That was the same pace of inflation as in June, and came even after a surge in lending over the summer.
Because the abundance of credit in the system has not caused the prices of basic household goods to climb, economists reckon that relatively low inflation will keep Chinese policy makers relaxed about banks growing their loan books.
HSBC economist Qu Hongbin wrote: “As headline CPI is still much lower than the official target of 3.5 per cent, this should allow the PBoC to maintain a relatively accommodative stance and targeted easing measures in 2H.”
While analysts say rising credit will exacerbate China’s reliance on debt and fixed asset investment for growth, markets tend to react positively to signs the lending spigot will stay open.
