China economy

China Enjoys Rebound In Credit Growth After October Collapse

Fingers crossed.

China’s credit growth rebounded in November, data out Tuesday showed.

That’s good news. You might recall that credit creation cratered in October as seasonal factors conspired with what certainty looked like a continuation of lackluster demand trends to undermine official efforts aimed at stimulating the flagging economy.

Crucially, October’s dive was seen as excessive even taking the seasonal effect into account, so the rebound that apparently played out last month is a welcome development.

Specifically, total financing was 1.75 trillion yuan in November, the PBoC said today. That represents a marked rebound from October’s 619 billion yuan, and is ahead of estimates. Consensus was looking for 1.49 trillion and the range was 900 billion to 1.8 trillion.

New yuan loans beat too, coming in at 1.39 trillion versus an estimated 1.2 trillion. The range there was 700 billion to 1.65 trillion. Shadow banking activity looks to have contracted, as entrusted loans and trust loans fell. Banker’s acceptance bills reversed an October slide and corporate bond issuance rose.

At 8.2%, November M2 growth was a bit underwhelming (consensus was looking for +8.4%) but it’ll work.

“The rebound in November credit growth potentially reflects the loosening intention of the government”, Goldman said Tuesday, adding that policy easing was probably driven by lackluster October activity data (recall that IP, retail sales and fixed investment all missed for October), concerns about “further downward pressures from exports [amid] widespread evidence of front-loading until October” and the weak October credit numbers. “As a result, the central bank provided ample liquidity in the interbank market and likely pushed commercial banks to lend more”, Goldman said.

Ding Shuang, chief economist at Standard Chartered, struck a generally upbeat tone, noting that M2 and total financing growing quicker than nominal GDP is evidence of “counter-cyclical adjustments strengthening [and] starting to support economic growth”.

Fingers crossed. Because, as noted above, October’s activity data was lackluster, and domestic demand is still subdued, although imports finally managed to snap a monthslong contractionary stretch in November.

Auto sales have fallen for 17 months out of 18 and exports disappointed over the weekend, casting doubt on the nascent recovery narrative that’s waxed and waned with the ebb and flow of the trade war.


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