July credit data showed a deceleration of flow month on month, RMB loans issued dropping to RMB1,020bn from 1,903bn the prior month while total social financing came in at RMB1,690bn (RMB3,432bn prev). Credit flow remains strong compared to last year but with real economic activity picking up clearly the authorities have stepped back from the credit driven boost delivered over the past few months.
Tags: Total Social Financing
While credit extension matched consensus estimates in June the overall picture is still strong. New loans growth is running at +13.2% y/y, well in excess of the current rate of nominal GDP growth, while the total social financing figures hit CNY3.42trn, underpinned by rising local government bond financing, which lurks in the “other” category. Year-to-date total social financing is now at 80% of the full-year 2019 numbers,
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.
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.