Chinese credit unrecovers

The Chinese unrecovery is going swimmingly. Credit unrecovered late last week. Pantheon:

Credit is flowing, but where is it going?

  • Chinese M2 growth rose to 11.1% y/y in May, from 10.5% in April.  Consensus was 10.3%.
  • Chinese M1 growth slowed to 4.6% y/y in May, from 5.1% in April.  Consensus was 4.9%.
  • Chinese M0 growth jumped to 13.5% y/y in May, from 11.4% in April.  Consensus was 10.0%.
  • Aggregate social financing rose to RMB 2,790B in May, from RMB 910B in April.  Consensus was RMB 2030B

New yuan loans rose to RMB 1890B in May, from RMB 645B in April.  Consensus was RMB 1,223B.
PBoC efforts to boost credit provision are evidently having some effect, aided by the gradual reopening of China’s economy. But stripped of base effects and seasonality, there is less of a change from April than the y/y numbers suggest.  M2 growth rose to 1.1% m/m, seasonally adjusted, from 1.0% in April, M1 growth slowed to 0.4% m/m, from 0.5%, and M0 growth was unchanged at 1.7% m/m.  In general, a widening gap between M2 and M1 growth suggests risk aversion, as time deposits swell, but demand deposits lag, indicating firms and households are sitting on new funds rather than readying to deploy them. Early deposits data suggest an increase in government balances – thanks to bond issuance – underpinned money supply growth, with corporate deposits unchanged month-on-month.

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The economic and property unrecovery is on track too as COVID stalks all:

And lockdowns resume:

China is starting to re-impose Covid-19 restrictions just weeks after major easing in key cities, raising concern the country may once again employ strict lockdowns to control its outbreak.

Beijing reported 51 new local cases for Sunday, after having single digit cases on most days last week. The city’s local government said an outbreak linked to a popular bar is proving more difficult to control than previous clusters, in a weekend that saw mass testing and rising infections both in the capital and Shanghai. A total of 37 cases were reported for Shanghai, with five new cases detected in the community.

Authorities delayed the reopening for most schools in Beijing that was planned for Monday, while most districts in Shanghai suspended dine-in services at restaurants. China reported 143 cases nationwide for Sunday as the number of new infections crept up. Daily cases fell below 100 last month for the first time since early March after strict curbs.

Property isn’t even unrecovering:

The wider economy is unrecovering:

The only bright spot is bridges to nowhere:

Looks a lot like Japanification to me. Once we get past our little inflation problem in the west, China is going to export another tsunami of deflation.

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