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China Money June 2019

China: Growth in new yuan loans and total social financing jumps to three-month high in June

In June, Chinese banks distributed CNY 1.66 trillion (USD 241 billion) in new yuan loans, the highest reading in three months. While the print was above the CNY 1.18 trillion distributed in May, it was below market expectations of CNY 1.70 trillion. In the 12 months up to June, new yuan loans totaled CNY 16.8 trillion (12 months up to May: CNY 17.0 trillion).

Meanwhile, annual growth in M2—the broadest measure of money supply in China—remained at 8.5% in June, matching the result in the previous two months. The reading missed the 8.6% rise that market analysts had expected.

Total social financing (TSF)—a broader measure of credit and liquidity in the economy that includes loans, bonds and other non-traditional instruments—rose from CNY 1.40 trillion in May to CNY 2.26 trillion in June. Market analysts had expected CNY 1.95 trillion.

Against this backdrop, Iris Pang, Greater China economist at ING, comments that:

“Credit growth was exceptionally strong and this worries us. It means the Chinese economy needs a lot of funds to keep infrastructure investment growing at a level that can maintain GDP growth above 6% at a time when manufacturing PMIs and export growth are negative.”

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