The May data for China showed a further slowing in the growth of credit. To be clear, total credit is still increasing, but the issue is that it is increasing at a slower pace. Now there are basically 2 reasons people worry about China: 1. because debt levels are “too high”, and 2. because debt growth becomes too slow and therefore activity levels slow down. Today’s chart will give both of those groups something to worry about! It shows the monthly growth in “total social finance” (a broad measure of credit growth), standardized against GDP, and the key point is that the pace of TSF growth is slowing down. I’ve also noticed a broader tightening of financial conditions e.g. slower money supply growth, changes in the currency, real interest rates, property prices, etc. My base case is that the Chinese economy sees slower growth this year, but aside from the negative impact this will have on commodities/EM at the margin, I’m not particularly concerned about major downside risk in China at this time.
Follow us on:
Support 100% ad-free Biiwii.com by making a donation of your choice!
Or better yet, subscribe to NFTRH Premium for an in-depth weekly market report, interim updates and NFTRH+ chart and trade ideas to get even more bang for your buck. You can also keep up to date with plenty of actionable public content at NFTRH.com by using the email form on the right sidebar. Or follow via Twitter @BiiwiiNFTRH, StockTwits or RSS. Also check out the quality market writers at Biiwii.com.