Michael Pettis once described the Chinese authorities’ wrestle with its debt-producing economic model as a pendulum in which panicked measures to slow credit are followed by panicked measures to speed it up again.
That has surely never been more obvious than right now with yesterday’s Chinese data showing a resurgent shadow banking sector accompanying the better growth figures.
The broadest measure of new loans, total social financing, rocketed back from recent falls after the June credit crunch:
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And while bank lending was flat, the percentage driven by shadow banking piled it back on:
No doubt we’ll see some renewed tightening in the months ahead as the Chinese authorities hit the accelerator and brake with equal ferocity.
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