China | What does China-US interest rate reversion mean for China’s credit market?

Summary

The historically large China-US rate reversion triggered corporations to finance their businesses in RMB due to its lower funding costs compared to USD, which had been the historical norm for corporate financing.

Key points

• Key points:
• The diverging monetary policy between China and the US in the post-pandemic time has led to historically large China-US rate reversion.
• The recent China-US rate reversion urged the change of funding currency to RMB in corporate financing business from USD.
• There has been a notable decline in total USD loans, encompassing both conventional loans and syndicated loans.
• Chinese corporates have shifted their focus towards financing their business in RMB, as the funding costs of RMB have now become lower than those of USD, not only in bank borrowing but also in bond financing.
• We also analyze whether the China-US rate reversion will persist, and if not, when it will normalize. And we believe due to the unsynchronized monetary policy, the reversion back will happen probably in mid-2026.

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