Courtesy of Also Sprach Analyst.
The People’s Bank of China recently published the latest monetary statistics for June 2012.
M2 money supply increased by 13.64% yoy in June, higher than the expected 13.5% yoy growth. M1 money supply increased by 4.68% yoy, higher than the expected 4.0% yoy growth. Currency in circulation increased by 10.81%, again higher than the expected 10.6% yoy growth.
Net New loans for June amounted to RMB919.8 billion, better than expected RMB880 billion, and rose from RMB793.2billion for May. Loans to non-financial institution continued to rise in June to RMB644 billion, although the composition of new loans is again dominated by short-term loans and bills.
On the deposit side, total deposits increased by RMB2.864 trillion, up from a net increase of RMB1.222 trillion in May. The increase is driven by a RMB1.48 trillion net increase in household deposits.
This is a decent set of numbers as money supply growth has bottomed on increased lending as the government attempts to reflate the economy despite relatively weak demand for credit in the private sector. At least in the short term, we believe this could reinforce the consensus that the Chinese economy could have bottomed out in the second quarter, although I remain skeptical.
One reason why is the composition of new loans which remains historically atypical:
Demand for medium- to long-term loans continues to be sluggish, and that could be interpreted as the lack of interest from companies to invest.