Chinese Credit Growth Still Slowing

iFeng: 中国11月M2货币供应同比增长8.2% 新增人民币贷款1.39万亿元

At the end of November, the broad money (M2) balance was 196.14 trillion yuan, an increase of 8.2% year-on-year, and the growth rate was 0.2 percentage points lower than the end of last month and 0.2 percentage points higher than the same period of the previous year. The narrow currency (M1) balance was 56.25 trillion yuan, a year-on-year increase. The growth rate was 3.5%, and the growth rates were 0.2 and 2 percentage points higher than those at the end of last month and the same period of the previous year. The balance of currency in circulation (M0) was 7.4 trillion yuan, an increase of 4.8% year-on-year. Net cash invested in the month was 57.8 billion yuan.

21st Century: 企业贷款规模大幅增长 社融大增下M2增速仍回落

On December 10, the social financing scale data released by the People's Bank of China showed that after the trough in October, the social financing scale and credit placement in November both improved significantly, and the overall scale was higher than market expectations.

The data shows that the cumulative increase in the scale of social financing in November 2019 was 1.75 trillion yuan, 150.5 billion yuan more than the same period of the previous year, and a significant increase of 1.13 trillion yuan from October; the RMB loans increased by 1.39 trillion yuan in November. , A year-on-year increase of 138.7 billion yuan, a month-on-month increase of 728.7 billion yuan.

In terms of structure, the reason why the scale of credit injection in November exceeded market expectations was mainly due to the increase in corporate loans. Data show that in November, non-financial corporate and government group loans (referred to as "corporate loans") rebounded significantly, from 126.2 billion yuan in October to 679.4 billion yuan in November.

"Overall, both credit and social financing have been heavy this month. On the one hand, it is related to the low level of credit and social financing last month. Wen Bin, chief researcher of Minsheng Bank, said.

iFeng: 11月新增信贷、社融双双超预期，释放什么信号？

Regarding the fall in M2 data, Wen Bin pointed out to the International Financial News reporter that from the perspective of the increase of RMB 1.39 trillion in RMB loans in November compared with the previous month and the same period last year, an increase of RMB 7287 and 140 billion, in principle, credit derivatives The enhancement of capacity should promote the growth of M2, but it is lower than expected from last month, indicating that the currency tightening was caused by other reasons.

"On the one hand, fiscal deposits decreased by 245.1 billion yuan in November, but decreased by 419.2 billion yuan compared with the same period last year; on the other hand, foreign exchange reserves in November decreased by 9.6 billion US dollars. It is expected that foreign exchange contributions will also fall and currency investment will be weakened." Wen Bin explained that although the currency growth slowed in November, credit and social financing still exceeded expectations and played a supporting role in the real economy.

The Bank's Financial Research Center stated that M1 was hovering at a low level and rebounded slightly, and the central bank's liquidity control remained mainly stable. In November, M1 rebounded 0.2 percentage points from last month, reaching 3.5%. However, historically, the growth rate of M1 is still hovering at a low level, which largely reflects the need to strengthen the strength of monetary policy on the credit side, and the vitality of corporate operations needs to be improved. The growth rate of M2 was basically stable, falling by 0.2 percentage points. The reasons may be various factors, including the deceleration of bond issuance at the end of the year, and the expenditure intensity at the end of the fiscal year was less than expected. In general, the general stability of broad-based liquidity has laid the foundation for policy development early next year.

"Short-term liquidity will have seasonal support, and there will be incremental releases across the years. According to the current pace of financing needs, it is unlikely that the central bank will quickly increase liquidity to push up M2. And CPI breaks up again, even if monetary policy requires The pace of development will be slower. "The Bank's Financial Research Center predicts that the 1 trillion local special debt plan issued earlier in the year will actually be issued in December. Under the pressure of subscription agencies' payment, the central bank may use quantitative tools in advance. , Such as the accuracy reduction.

China has no answers for its slowing growth:

It is reported that 2020 is the year when a well-off society will be fully established and the “Thirteenth Five-Year Plan” will be completed. Some people in the industry said that, from the recent meeting of the Political Bureau of the Central Committee of the People ’s Republic of China, the growth of economic policy next year is still the most important issue. In order to ensure stable economic growth, macroeconomic policies will increase countercyclical adjustment. Stable infrastructure will be an important starting point for achieving steady growth.

iFeng: 11月金融数据全面回暖，下阶段货币政策如何发力

As the CPI announced on the same day rose by 4.5% year-on-year and reached a new high of nearly 8 years, Wen Bin, chief researcher at China Minsheng Bank, believes that monetary policy operations may be restrained to some extent. A few days ago, the central bank stated that it must adhere to the goal of currency stability, and it is expected that the possibility of further interest rate cuts will decrease. The primary goal of monetary policy will be marginal conversion based on economic growth and inflation.

Bank of Communications chief economist Lian Ping believes that even if the monetary policy needs to be vigorous, the pace will be slower. "Of course, the 1 trillion local special debt plan issued earlier in the year was actually issued in December. Under the pressure of subscription agencies, the central bank has the possibility of using quantitative tools in advance, such as lowering standards."

One stat worth considering should anyone think a rebound similar to 2012 and 2016 is in the cards: if M2 keeps growing at 8 percent and forex reserves hold steady, by this time next year reserve coverage of M2 will fall below 10 percent with USDCNY below 6.90. Factor in falling reserves or faster credit growth, the picture worsens much more quickly. Reserves can rise, but then expect more trade tension.

Reserves don't matter until they matter. They don't matter as much with strict capital controls. CPI is running at 5 percent though, thanks to pork inflation. Injecting credit into a high CPI environment risks sparking sustained inflation. Chinese do not have to take money out of China to flee the yuan, they can buy property, equities, and precious metals among other options.