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By Tyler Durden

China’s tremendous credit expansion from the first quarter of 2016 is now ancient history.

After the creation of $1 trillion in aggregate credit, or Total Social Financing, in just the first three months of the year, last month China slammed the brakes on new credit creation, when every aspect of credit growth came solidly below expectations. Then overnight we got the latest, May, data. It confirmed that after the record Q1 credit deluge, the PBOC is now scrambling to slow down the tremendous debt tidal wave. The core component numbers, i.e., Chinese loans, were not bad as new loans of CNY985bn actually printed modestly better than expected:

• New CNY loans: Rmb 985.5 bn in May (RMB loans to the real economy: Rmb
  937 bn) vs. consensus: Rmb 750 bn. In May 2015, new CNY
  loans were Rmb 901bn.
  • Medium and long-term loans to Chinese companies, a leading indicator of fixed asset investment, reversed their decline of CNY43 billion in April to rise by CNY182.5 billion in May.
• Outstanding CNY loan growth: 14.4% yoy in May; April 14.4% yoy (13.2% SA ann mom).

But it was the ongoing dramatic slowdown in the broader, aggregate credit series, the TSF, that confirms how troubled the PBOC is with the recent record credit expansion, and is doing everything in its power to slow it down. Case in point, May Total social financing (TSF, flow) was only Rmb 660bn in May vs. consensus: Rmb 1000 bn, and down from April’s Rmb 751 bn.

Note the dramatic slowdown.

This was the second worst months for total Chinese credit growth going back all the way to mid-2014 when concerns about China’s shadow banking system first emerged.

Here are more details from Goldman on the breakdown:

May money and credit data were mixed. RMB loan data surprised the market on the upside but the broader measures of M2 and TSF data were substantially below expectations. Within the strong loan data, a large portion (Rmb 528 bn) was long-term household loans, which are usually mostly mortgage loans. While there are signs of weaker property sales in recent weeks, loan supply often lags contract sales so May credit data likely partially reflected this earlier strength in property sales. As some investors tend to focus considerable attention on RMB loan growth as a gauge of policy stance, June monetary data may ease their concerns about the potential for overly aggressive tightening following the People’s Daily editorial by an “authoritative person” in early May.

However, RMB loans are no longer the main source of liquidity for the real economy and therefore it is more important to look at the broader measures.

Here, the adjusted TSF growth shows a clear deceleration from the April level. While M2 sequential growth rebounded from the exceptionally low April figure, it is still at the sub-10% level. Both TSF and M2 suggest somewhat tighter liquidity conditions, at least compared with a very loose 1Q. As we noted in previous comments, the government already started to tweak its policy …read more

Source: Something Unexpected Emerges In China’s Latest Money And Credit Data

    

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Posted June 15th, 2016 in Uncategorized.