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China: M2 slows to record low; growth in new loans accelerate in January

February 13, 2015

New yuan loans totaled CNY 1.47 trillion (USD 236 billion) in January, which was well above the CNY 697 billion recorded in the previous month. The print overshot the CNY 1.40 trillion market analysts had expected and represented the highest level since June 2009. In the 12 months up to January, new yuan loans totaled CNY 9.9 trillion (December: CNY 9.8 trillion), which represented the highest since November 2009.

Total social financing—a broader measure of liquidity in the economy that includes loans, bonds and other non-traditional instruments—jumped from CNY 1.69 trillion in December to CNY 2.05 trillion in January, which represented a 10-month high. The print matched the result that market analysts had expected. In the 12 months up to January, total social financing rose to its highest level in over two years.

Although the acceleration in credit growth mostly reflects Chinese authorities’ willingness to increase loan extension in order to bolster growth, banks usually front-load their lending quota at the beginning of the year to protect their market share.

Annual M2 growth, the broadest measure of money supply in China, moderated sharply from December’s 12.2% to 10.8% in January. The result came in under the 12.1% increase the market had expected and represented the slowest growth rate on record.

According to analysts, the sharp deceleration in M2 growth is caused in part by capital outflows due to expectations of a weaker CNY. That said, distortions related to the Chinese New Year, which falls in February this year compared to January in 2014, have also played a role in the disappointing M2 performance.

FocusEconomics Consensus Forecast participants expect M2 to expand 12.3% in 2015, which is unchanged over the previous month’s forecast. In 2016, the panel sees M2 growth of 11.7%.


Author: Ricard Torné, Head of Economic Research

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China Money Chart


China Money January 2015

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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