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Iris Pang, economist at ING, notes that China’s M2 – a widely used gauge of credit expansion, increased to 8.4% year on year in September from 8.2% a month ago.

Key Quotes

“Renminbi loans grew by CNY 13.9 trillion in the third quarter, which is equivalent to around 14.5% of nominal GDP for the four quarters from 3Q18 to 2Q19.”

“Of all the items, the most eye-catching is the CNY 2 trillion increase in local government special bonds in the third quarter used to finance infrastructure projects. The quota for these bonds was only CNY 2 trillion, with this entire amount used in 3Q alone.”

“The substantial increase in local government bonds suggests that the economy has relied on infrastructure investments to support GDP growth.”