China’s Total Social Financing hugely disappointed in February, as January’s surge was not followed as if renewed economic enthusiasm. The net flow was RMB 780 billion compared to the record RMB 3.42 trillion the month before. This latest update was instead among the lowest monthly totals since 2010. New loans added up to just RMB 727 billion after increasing RMB 2.51 trillion in January.

As noted last month, context matters. The fact that loan growth and financing flows surged may seem like a positive indication in a vacuum, but such ceteris paribus doesn’t exist outside the classroom. However, given the deep and continuing financial trauma, including the desperation by which the PBOC attempted to manage it all, the possibility was more than trivial that the jump in financing and loan growth was a negative signal about internal banking perceptions. I wrote then:

For Chinese banks, it might be that they realize what the huge surge in liquidity in January actually means – it must be withdrawn at some point in the future (“when” depends on its exact form). Perhaps, then, Chinese banks are especially active ahead of time in anticipation of funding being less than suggested (in the mainstream) in the near future?

The statistics for February seem to indicate that interpretation, though one month is not confirmation. From the perspective of recent years, there was much too much excitement a month ago. Even including January’s huge jump, TSF flow on a longer basis remains subdued. The annual flow through February 2016 was slightly less than that of the twelve months ended February 2015.

From that view, China would likely need far more than just restoring 2014 levels of financing to actually manage better (artificial) economic growth. And that only happens if loans and TSF flow improves to something more like the mainstream interpretations of January’s numbers rather than the potential pessimistic confirmation of February. That would suggest, if I am right about banks being leery of liquidity, immense pressure on the PBOC to maintain it through what will likely be one big whiplash once January’s interventions start coming due.