China: Soft credit growth – ING

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Iris Pang, economist at ING, points out that China’s broad measure of credit and liquidity, the total outstanding social financing grew to CNY 1.4 trillion from 1.36 trillion in April and was less than ING’s expectation of CNY 1.9 trillion.

Key Quotes

“In May, Chinese banks loaned CNY 1.18 trillion, which was higher than April but still fell short of our expectations of CNY 1.45 trillion. Local government special bonds, which is a funding channel for infrastructure investments, increased by CNY 1.25 trillion. Surprisingly, shadow banking activities shrank.”

“The data implies that investment activity was quite modest in May and most investment growth should come from infrastructure investments.”

“This is in line with our view that the Chinese economy is currently a stimulus-driven economy but regular economic activity has slowed down.”

“To us, this indicates fiscal stimulus could increase and will mainly be through speeding up existing infrastructure investment as planned as well as adding new infrastructure projects if trade and technology wars escalate.”

“We maintain our GDP forecast at 6.3% for 2019.”

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