One of the key drivers of the ongoing divergence between emerging and developed growth is the disparity in monetary policy. In the developed world, central bankers, led by the Fed and ECB, have opened up the taps and pumped an extraordinary amount of money into the real and financial economy. The PBOC, on the other hand, has focused more on China’s debt problems and provided limited stimulus. As the chart shows, there is a massive difference in the rate of money growth between the US and China. The chart also shows that shadow banking, which has helped support Chinese growth in the past, continues to shrink as policymakers reign in credit creation.
Source: Unigestion, Bloomberg, as of 2 June 2021
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