Courtesy of Mish.
China Rebalancing in Reverse
In an effort to meet an absurd growth target of 6.5%, credit growth in China exploded to an all-time high, nearly half a trillion in US dollar terms in a single month!
The Financial Times reports China Bank Lending Hits Record in January.
China’s banks granted loans at the fastest pace on record in January, a sign that the government is loosening monetary policy more aggressively in an attempt to bolster the slowing economy.
New local currency bank loans to the real economy set a monthly record at Rmb2.54tn ($390bn). Credit from all sources, including bonds and off-balance-sheet lending, reached Rmb3.22tn, also a monthly record, with corporate bond issuance at an all-time high.
“Judging from recent speeches by top leaders and January’s credit growth, this year policymakers seem to be determined to make the economy grow above their bottom line of 6.5 per cent,” Larry Hu, China economist at Macquarie Securities, wrote on Tuesday.
Renminbi depreciation may also have boosted demand for loans. In the years when the renminbi was viewed as a one-way bet to appreciate, companies were eager to borrow in dollars, since the debt burden was expected to be lighter in renminbi terms when the loan came due.
Now, the opposite dynamic is at play, and many Chinese companies are borrowing in renminbi to replace foreign currency debt.
China Total Lending
To be fair some of that jump is seasonal. Lending typically jumps around the Chinese new year.
Still, this increase in lending dwarfs any previous records, especially yuan-based bank loans.
Bad Loans Highest in Decade
