- China’s latest economic stimulus fails to match the bullish credit impulses of years past.
- The decline in the housing market is hampering China’s ability to provide crucial economic stimulus.
China recently launched sweeping stimulus measures, the largest since the 2008 global financial crisis, to revive the economy and potentially boost markets for risk assets, including Bitcoin. Many experts had hoped that these measures, together with interest rate cuts by the US Federal Reserve, could significantly increase the Bitcoin price in the coming months. However, analysis from BCA Research signals that the current stimulus is falling short of China’s historical performance in creating bullish “credit stimulus.”
The decisive factor: credit impulses
The term “credit stimulus” refers to the volume of new loans issued relative to a country’s gross domestic product. This indicator is a key factor in assessing economic dynamism and has been considered a leading indicator of economic growth worldwide since the 2008 collapse. Historically, revivals of this indicator have often coincided with the bottoms of Bitcoin bear markets, making it an important observation point for crypto analysts.
Quelle: BCA Research
In 2015, China’s credit impulse peaked during a bullish easing cycle and Chinese stock markets and Bitcoin posted significant price gains. At that time, the credit stimulus rose to 15% of GDP, equivalent to 15.5 trillion yuan. This upswing in credit momentum led to Bitcoin rising from about 100 US-Dollar climbed to new highs in the two-year bull market that culminated in December 2017.
Quelle: BCA Research
Current challenges
However, recent 2024 measures have only generated a credit stimulus of less than 5 trillion yuan, far from the 27 trillion yuan that would be needed to reproduce the bullish effects of 2015. This discrepancy in the effectiveness of the stimulus raises concerns, particularly given the structural downward trend that the credit stimulus has experienced since its historic peak.
Another problem is the decline of China’s housing market, which used to be a key driver of the credit stimulus. Without a similarly dynamic alternative that could absorb large amounts of new credit, it is unlikely that China will be able to provide similar economic stimulus as it has in the past.
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