China's Intensifying Credit Slowdown, M2 Falls, TSF Approaching Stall Speed

TSF outstanding increased 10.7 percent in July. The yoy comparisons show a markedly negative trend. A year ago, TSF was up 13.8 percent yoy. The mtm increase in TSF outstanding was 20 percent lower in July of this year versus last. August and September 2018 also saw large increases in TSF, setting up unfavorable comparisons for this year (barring a stimulus or surprise surge in credit). The next two months need to both be ￥2 trillion increases to maintain current growth. The only months above 2T this year, however, were January, March and June. If TSF increases 3 trillion over the next two months, growth in TSF outstanding will slow to 10.1 percent, approaching stall speed for the Chinese economy. Probably need to be closer to 9 percent for fireworks, but the current trend points to an intensifying slowdown.

M2 fell in July. The yoy growth rate slowed to 8.1 percent from 8.5 percent in June. The 3-month annualized increase was only 7.6 percent. Notice on the chart, those big spikes are the end/start of year, the smaller peaks are the mid-year credit burst. You can see the declining trend.

SCMO: China’s bank lending weakened in July, suggesting Beijing’s stimulus efforts not working

Chinese monetary data for July was weak across the board, suggesting that Beijing’s efforts to galvanise new lending are not having the intended effect.

Chinese banks extended 1.06 trillion yuan (US$150.17 billion) in net new loans last month, down from 1.66 trillion yuan (US$235.17 billion) in June, according to the data released by the People’s Bank of China on Monday.

July’s lending was well below the 1.25 trillion added bank credit predicted by a Bloomberg survey of economists, and was the lowest level since April, when banks issued 1.02 trillion yuan in new loans.

The slump raises questions over the need for additional credit easing – when a central bank sets lower interest rates, for example – from the People’s Bank of China (PBOC) to offset the effect of a weakening economy and the impact of the protracted trade war with the United States.