Courtesy of Mish.
The Chinese service sector expanded last month causing many to believe the worst news regarding China was over. I think it has barely started.
Damping the Pollyanna view comes news China New Yuan Loans, Money Supply Lower Than Expected in October
The value of loans issued by banks in China in October was less than expected, whereas the amount of money in the banking system grew at a slower pace, which suggest the authorities may be reining in liquidity toward the end of the year.
Chinese financial institutions issued a lower-than-expected 505.2 billion yuan ($80.83 billion) worth of new yuan loans in October, data from the central bank showed Monday.
October’s new-loan tally was down from CNY623.2 billion in September and also below the median CNY590 billion of new lending forecast by 11 economists polled earlier by the Dow Jones Newswires.
China’s broadest measure of money supply, M2, was up 14.1% at the end of October compared with a year earlier, lower than the 14.8% rise at the end of September, and below the median 14.5% increase forecast by economists.
Societe Generale economist Yao Wei said October’s total new-loan tally shows that the People’s Bank of China appears to be zeroing in on the CNY8.5 trillion lending target that many analysts and economists believe the central bank has set for the year.
Given the recent signs of stabilizing economic growth, it is unlikely that Beijing will further loosen its monetary policy in the coming months, said HSBC economist Ma Xiaoping.
Lending in a Command Economy vs. Lending in US
I see no reason to change my long-held belief that surprises in China will generally to be to the downside, and probably severely so.
I say that even though there is one huge difference in bank lending between China and the US in terms of the government coaxing banks to lend.
When the Chinese Central Bank suggests banks should lend, they do. In the US money piles up as excess reserves if banks are reluctant to lend (as they are now).
US banks lend, on two conditions, both of which need to be true.
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