Bank lending rose by RMB 1.28 trillion, well below consensus expectations of RMB 1.56 trillion, while aggregate financing to the real economy (AFRE), which includes loans and bonds, recorded net growth of RMB 1.85 trillion (against expectations of RMB 2.25 trillion). As a result, China’s M2 money supply declined from +9.4% y-o-y in March to +8.1% y-o-y in April. It has returned to pre-Covid levels in 2018/19.
JINYUE DONG & LE XIA (BBVA Research) | The PBoC started to exit the above easing measures in May 2020 when the Covid-19 pandemic got controlled in mainland China. Historically, the exit of easing monetary measures in the post-crisis time has always been a global challenge to central banks. China is not an exception in this respect. In February 2021, the normalization progress in China led to the gyration of the interbank interest rate in February 2021, just before the Chinese Lunar New Year as the investors’ fear of the authorities’ fast tightening climbed to a new high.
Fabrice Jacob (JK Capital Management-La Francaise) | As we are approaching the end of the year, it is time for us to stick our neck out and make some predictions for 2021, especially for our key investment universe that is China, which has been a star performer for the second year in a row (MSCI China gained 20.4% in 2019 and so far this year, as at 11th December 2020, another 23.3%).
In one year, China has used up $ 676 billion of its reserves, which had reached a total of $4 trillion. It could let the remimbi fall and restore monetary autonomy in order to lower rates and boost an economy which is in recession. But this only serves to worsen the volume of debt in dollars, which of course erodes the status it seeks for its currency. The only solution: EU, US help for China.
By Alicia García-Herrero at Bruegel | Sitting on a pile of debt, China’s only way out is to deleverage: more pain now for sustainable growth later. [Figure: China’s augmented fiscal deficit as % of GDP.]
By Wang Liwei at Caixin | Aders Borg from the World Economic Forum discusses structural changes and the global financial framework’s future.
BEIJING | July 10, 2015 | By Alberto Lebrón | Can you imagine a country capable of losing, in just three weeks, nearly five times what Greece owes the Troika? Chinese stock markets have lost ten billion yuan. In euros, that is almost one and a half billion, more than Spain’s entire GDP.
BEIJING | June 2, 2015 | By Xu Gao via Caixin | Unless obstacles blocking the flow of capital to the real economy are cleared, the financial market will continue to be trapped.