Chinese credit just cratered (members)

A major alarm bell just rang in China with the release of July credit figures. They crashed versus expectations.

New yuan loans were 385.2bn versus 780.0bn expected and and prior was 1080:

l8yfig

Aggregate social financing was 273bn yuan versus 1500.0bn expected and prior was 1970bn implying that shadow banking credit contracted 112bn in the month:

grw

The year on year growth rate for new loans (which is not the same as total lending) crashed:

segrwe

M2 decelerated sharply to 13.5% versus expected 14.4% and prior of 14.7:

uyiyviu

In short, the wheels fell off Chinese credit in July. Markets have taken it their stride but have no idea why. In the context of falling house prices this is very dangerous and could be due to poor demand as much as official tightening. The PBOC isn’t interested in stimulus, either. From Reuters via Forexlive:

  • People’s Bank of China (PBOC)  says credit and social financing growth still reasonable
  • Says no change in direction of monetary policy
  • Expects credit, social financing to keep growing steadily
  • Says will keep monetary policy prudent, with timely fine-tuning
  • Says loan demand isn’t as strong as before due to slowing economy, and property slowdown

Markets should be selling, hard. This virtually guarantees a Q4 slowdown in Chinese growth.

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