Chinese credit data released today shows that total lending has roared back, with the broadest measure of new loans, total social financing, surging in January (see next chart).
As shown above, most of the increase in lending was driven by bank loans, which caused the share of total financing from shadow banks to fall:
Meanwhile, Chinese consumer prices remained at their lowest level in seven months, coming in at an annualised rate of 2.5 per cent in January – slightly above consensus (2.4%). January’s inflation was driven by fresh fruit, vegetable and dairy products, whereas pork prices unexpectedly fell.
The Producer Price Index – a gauge of wholesale inflation – returned to negative territory in January, suggesting overcapacity concerns have once again come to the fore. The below table, which comes from Michael McDonough via Twitter, also shows that weakness was broad-based:
The strong growth in lending probably means that the PBOC will maintain a tightening bias, despite the weak inflation print.
