China Credit Growth Not Stimulative

Chinese credit growth ticked up slightly in May if looking at year-on-year single-month change. May 2018 saw 0.31 percent increase in M2, May 2019 0.34 percent. But the bump didn't offset April's larger drop. If credit stimulus is coming, it will be in June. That month is usually has the second fastest credit growth for the year after January as 2H investment plans get financed. A baseline growth rate would be about 1.6 percent increase in M2, so it will have to be something blowout to change the rolling 3-month trajectory.
Lending is going to increasingly unproductive uses. Caixin: China’s Credit Growth Edges Up in May
In May, banks made 1.18 trillion yuan in net new yuan loans, up from 1.02 trillion yuan in the previous month, according to the data. Of the 1.18 trillion yuan, 56.1%, or 662.5 billion yuan, went to the household sector, up from April’s 51.5%.
Also from Caixin: Sluggish Business Credit Demand Signals Need for Further Easing
With local governments likely to be constrained in their borrowing for the rest of this year, additional monetary easing will be needed to sustain credit growth and shore up economic growth, Palmas said in the note.
Interesting. Earlier today it was More Debt for Infrastructure in China

Local governments are constrained by debt levels and weakening real estate in third- and fourth-tier cities (See: Enshi, Hubei Bans Price Cuts), which hits land finance. Businesses aren't borrowing. Banks can't profitably lend to small business. Stimulus hope is rapidly running out of road.

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