Chinese credit expansion continues at pace, total social financing hitting CHY3.19trn in May up from CNY1.71trn a year earlier. The jump has been predominately driven by the ‘other’ section which is largely local government bond financing, which suggests the authorities have reverted to traditional investment driven support to support the Covid-economy.
Tags: Money Supply
There is little sign of a slowdown in credit growth in China as the authorities continue to try and drive cash into the disrupted economy. Total social financing came in at a robust CNY3.09trn while overall new loan growth hit CNY1.701trn. This marks a significant pick up in credit creation, with household debt up nearly 2% pts of GDP since the end of last year while NFC bank debt has jumped from 95% to 102% of GDP.
Chinese January credit data came in quite a bit stronger than expected, amid firm new loan growth and local government spending, which contributed to significantly a higher overall total social financing number (CNY5.7trn vs. the CNY4.3trn consensus). Chinese New Year fell earlier this year, but it’s not clear if that accounts for the strong outcome.
China December money supply ticked up, reflecting easier financial conditions. We also saw solid growth in total social financing, which came in ahead of expectations. The authorities have been keen to avoid an overt debt splurge, trying to generate more targeted easing, particularly focusing on transmission to SMEs in the private sector. These numbers suggest this has been a partial success...
Quite a slowdown in credit growth during October, certainly compared to the rate we saw last year. While the trend for shadow sector deleveraging continues there was also quite a sharp slowing of bank loans. Corporate bond issuance remained muted while there was a pronounced deceleration in the ‘other’ category, which now encompasses local government bond issuance.
Eurozone saw a renewed uptick in money supply growth in August, but it was driven by a further increase in M1 rather than broader money. Credit growth seems to be on a firmer footing, with strength being driven by France and Germany while in Italy and Spain we’re still seeing deleveraging, notably on the corporate side. And deposits still growing faster, suggesting some caution. Quite positive from the ECB’s perspective, particularly with the latest easing package yet to factor.
Stronger than expected rise in credit during June with the culprit appearing to be an increase in local government bond issuance, reflecting official efforts to support the domestic economy. Loan growth continues to run well ahead of nominal GDP. And with no underlying pick up in money supply growth the velocity measures also remain weak.
Money supply continues to tick up again, but overall there is not much to suggest we’re in any marked re-acceleration phase, which is equally evident in the persistently weak money multipliers. Credit data surprised on the downside thanks to some moderation in consumer demand for money. Non-financial side looks stronger.
Eurozone putting together some better credit figures in April (once adjusting for sales and securitisations) amid strong growth in non-financial corporate borrowing in Germany and consistently strong credit demand (at both a corporate and consumer level) in France. This growth has more than offset ongoing weakness in Italy, where NFC lending continues to contract rapidly.
Money supply growth has picked up again but it’s being driven by a rise in M1, specifically overnight money. Velocity continues to fall. Credit growth meanwhile remains in the doldrums.