China: PBoC is continuing with a massive increase in credit – Rabobank

Michael Every, Head of Financial Markets Research at Rabobank, suggests that the PBoC is continuing with a massive increase in credit that is somehow not a “loose” stance, but which is producing ever-less results.

Key Quotes

“August saw aggregate financing and local government debt issuance of CNY2,309bn, equal to USD346bn, or USD4.1 trillion at an annualised rate. Not bad for a USD10 trillion economy. Yet too much of this is still state pump-priming or flowing to an over-heating housing market, neither of which are sustainable growth sources.

Meanwhile, M1 and M2 growth showed the economy is stuck in a liquidity trap, i.e., outside the state and housing, no-one wants to borrow. (Note China is closed for the mid-autumn holiday today and tomorrow.)”