China: Credit and money data worsen in October
In October, Chinese banks distributed CNY 697 billion (USD 100 billion) in new yuan loans, well below the CNY 1.38 trillion distributed in September and market expectations of CNY 862 billion. In the 12 months up to October, new yuan loans totaled CNY 15.5 trillion (12 months up to September: CNY 15.5 trillion).
Meanwhile, annual growth in M2—the broadest measure of money supply in China—fell from 8.3% in September to 8.0% in October. The reading contrasted market expectations of a rise to 8.4%.
Total social financing (TSF)—a broader measure of credit and liquidity in the economy that includes loans, bonds and other non-traditional instruments—fell from CNY 2.21 trillion in September to CNY 729 billion in October.
Analysts at Nomura comment that:
“Data surprised on the downside, mainly due to the ripple effects of the initially over-zealous deleveraging programme and despite the 100bp reserve requirement ratio (RRR) cut that became effective 15 October. […] We continue to believe that the ongoing policy easing measures are insufficient to shore up the economy and financial markets, and that the economy will get worse before getting better, but that said, expect more in the coming quarters.”