China Money May 2018


China: Credit conditions worsen in May

June 12, 2018

Chinese banks distributed CNY 1.15 trillion (USD 180 billion) in new yuan loans in May, down from the CNY 1.18 trillion (USD 185 billion) distributed in April and below expectations of CNY 1.20 trillion. In the 12 months up to May, new yuan loans totaled CNY 14.3 trillion (12 months up to April: CNY 14.2 trillion).

Total social financing (TSF)—a broader measure of credit and liquidity in the economy that includes loans, bonds and other non-traditional instruments—shrank notably from CNY 1.56 trillion in April to CNY 761 billion in May, the lowest figure since July 2016.

Meanwhile, annual growth in M2—the broadest measure of money supply in China—was stable at April’s 8.3%. The reading came in below the 8.5% that market analysts had expected.

May’s data indicates the People’s Bank of China’s deleveraging campaign has largely been effective in reducing the shadow banking sector. However, the Bank will likely continue to moderate its measures to reduce risks in the financial sector and instead gradually support credit growth in order to boost economic activity amid ongoing trade disputes with the United States.

FocusEconomics Consensus Forecast participants expect M2 to expand 8.9% in 2018, which is down 0.1 percentage points from last month’s forecast. In 2019, the panel sees M2 growth of 8.8%.


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China Money Chart

China Money May 2018

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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