China Credit Raises Red Flag on Growth

China’s broadest measure of new credit trailed analyst estimates in August, adding to the government’s challenge to meet its economic-growth target amid a slumping property market and a pullback in manufacturing.

Aggregate financing was 957.4 billion yuan ($156 billion), the People’s Bank of China said today in Beijing, compared with the 1.135 trillion yuan median estimate of economists surveyed by Bloomberg. New local-currency loans were 702.5 billion yuan, and M2 (CNMS2YOY) money supply grew 12.8 percent from a year earlier.

Today’s report adds to evidence the economy is losing steam after July aggregate financing slumped and recent data showed moderation in manufacturing and a drop in imports. Premier Li Keqiang this month said some volatility in growth is inevitable and the government will stick with targeted policies.

“Banks are reluctant to lend because there aren’t enough good projects,” said Dong Tao, chief regional economist for Asia excluding Japan at Credit Suisse Group AG in Hong Kong. “That’s a real headache. Besides political pressure to lend, you have to give the banks a sweeter deal. In the next couple of months, a cut in the reserve-requirement ratio or the loan-deposit ratio is quite likely.”

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza