China Money


Credit indicators deteriorate in February

Credit conditions deteriorated in February, suggesting that authorities may be trying to slow down lending growth amid renewed inflationary pressures. New yuan loans totalled CNY 620 billion (USD 100 billion) in February, nearly halving the CNY 1.1 trillion seen in the previous month. Moreover, the reading undershot market expectations that had loans totalling CNY 750 billion. In the 12 months up to February, new yuan loans totalled CNY 8.4 trillion (January: CNY 8.5 trillion).

In addition, total social financing - a broader measure of liquidity in the economy that includes loans, bonds and other non-traditional instruments - fell from CNY 2.5 trillion in January to CNY 1.1 trillion in February. Meanwhile, the People's Bank of China (PBOC) continued to conduct its twice-a-week reverse repurchasing operations to manage liquidity conditions in the money market. Particularly, in the third week of February, the PBOC drained a record CNY 910 billion after the Lunar New Year holiday.

Finally, M2 - the broadest measure of money supply in China - rose 15.2% year-on-year in February (January: +15.9% yoy). Despite the deceleration, the print exceeded market expectations that had M2 expanding 14.0%.

The government targets an M2 growth of 13% for this year. FocusEconomics Consensus Forecast participants expect M2 will expand 13.8% in 2013, which is unchanged over the previous month's forecast. In 2014, the panel sees M2 growth at 13.1%.

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China Money Chart

China Money February 2013

Note: New yuan loans in CNY billion and year-on-year variation of M2.
Source: People's Bank of China (PBOC) and FocusEconomics calculations.

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