Chinese credit crashes, commodities to follow

Chinese credit tightening has turned into a crash. Paradoxically, it’s a controlled descent but the pace of it is akin to a crisis. Total social financing in May came in at 1.92tr yuan with bank lending making 1.47tr of that:

The non-bank share is still falling away after its brief COVID flourish:

May loan flow was again down over one third:

The rolling annual mountain has turned into the Matterhorn:

Broad credit growth is tumbling at the fastest pace since post-GFC:

The media is focused on bank loans that are stable:

But the real action is elsewhere. On the current trend, total social financing (which includes shadow banking and bonds) will be down roughly 7tr yuan in 2021 versus 2020. I have annualised this Daily Shot chart forward from May:

That’s USD1.1tr (AUD1.43) less commodity-centric credit this year in the only place that matters to commodities.

Two final charts to cut the mustard. The China credit impulse is now falling at a breathtaking pace:

What happens next writes itself. Adieu commodities:

And goodbye inflation:

As the entire global inventory supercycle normalises.

Houses and Holes
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