2014-07-15

China TSF Up Big in June

Total social financing was up 40% from May last month, and due to last year's cash crunch, it is up a whopping 90% yoy. Credit is a leading indicator and since this spike came in June, we shouldn't see any GDP effects until Q3, if any.

China’s New Loans, Financing Top Estimates

China’s Local Governments Pile On Stimulus
China’s regional governments are starting to pull out their own stimulus cards to shore up growth as central authorities limit aid for the economy.

Northern Hebei province, whose 4.2 percent first-quarter expansion pace was less than half that of a year earlier, will invest 1.2 trillion yuan ($193 billion) in areas including railways, energy and housing. Heilongjiang province in the northeast, with 2.9 percent growth that was China’s lowest in the first quarter, will spend more than 300 billion yuan over two years in areas including infrastructure and mining.

Here is some discussion from Alliance Bernstein via Macrobusiness: Why has China turned on the credit tap?
As the fear of a more severe economic downturn builds—rightly or wrongly, since we see no major worsening in China’s tight labor market—the easy path for the central government to respond to slower growth without departing from Xi’s high-profile reform program is to ask the central bank to hand out liquidity.

The PBOC has, so far, taken on this task quite discreetly. The easing—in reserve requirements, relending and the loan-todeposit ratio—has been selective and piecemeal in nature, and mostly targets just the rural sector, infrastructure and small firms—the policy target for the current economic development plan anyway. Although it is difficult to accurately gauge the overall scale of the selective easing measures, we suspect that they amounted to less than RMB1 trillion, which accounts for a fraction of China’s aggregate credit outstanding (including shadow credits), estimated at some RMB120 trillion.

It remains to be seen if the jump in June is a trend or a one-month credit surge, but credit is definitely flowing more freely than it was at this time in 2013.

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