China Money May 2017


China: M2 growth declines to multi-decade low in May

June 14, 2017

Chinese banks extended CNY 1.11 trillion (USD 163 billion) in new yuan loans in May, in line with April’s CNY 1.10 trillion. The print overshot the CNY 900 billion the markets had expected. In the 12 months up to May, new yuan loans totaled CNY 12.9 trillion (April: CNY 12.8 trillion).

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 April’s CNY 1.39 trillion to CNY 1.06 trillion in May. The print was slightly below market analysts’ expectations of CNY 1.19 billion.

Meanwhile, annual growth in M2—the broadest measure of money supply in China—declined from 10.5% in April to 9.6% in May. The reading fell short of the 10.4% that market analysts had expected.

May’s data signals that the new regulation unveiled in late-March to counter shadow banking activity is starting to bear some fruit. However, deleveraging in shadow banking activity is also hurting M2 growth, which hit the lowest rate since the current series began in 1996 in May.

The government set a M2 growth target of 12.0% for this year. FocusEconomics Consensus Forecast participants expect M2 to expand 10.9% in 2017, which is unchanged from the previous month’s forecast. In 2018, the panel sees M2 growth of 10.4%.

Author: Ricard Torné, Lead Economist

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China Money Chart

China Money May 2017 0

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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