China Money December 2018


China: Policy easing shores up credit data in December

January 15, 2019

In December, Chinese banks distributed CNY 1.08 trillion (USD 160 billion) in new yuan loans. Although the print was below the CNY 1.25 trillion distributed in November, it was well above market expectations of CNY 825 billion. In the 12 months up to December, new yuan loans totaled CNY 16.2 trillion (12 months up to November: CNY 15.7 trillion).

Meanwhile, annual growth in M2—the broadest measure of money supply in China—rose from November’s 8.0% to 8.1% in December. The reading matched market expectations of an 8.1% increase.

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 1.52 trillion in October to CNY 1.59 trillion in December.

In an attempt to support economic growth, on 4 January, the People’s Bank of China cut the amount of cash that banks have to hold as reserves for the fifth time in a year.

Analysts at CICC add that:

“As we have highlighted in recent research, the necessary policy “dosage” to backstop sliding growth will increase with pressures from rising deflation and external demand risks kicks in. We will closely observe January credit, TSF and money supply data to gauge the effectiveness of the newly released policies.”

FocusEconomics Consensus Forecast participants expect M2 to expand 8.6% in 2019, which is up 0.1 percentage points from last month’s forecast. In 2020, the panel sees M2 growth of 8.5%.


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China Money Chart

China Money December 2018 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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