Remember this chart from Citi’s Matt King?
That right there is your global credit impulse, and as you can see from the preponderance of red (which I assume Citi used in a kind of tongue-in-cheek way), China is almost the sole source of private sector credit creation.
What does that mean? Well, in the simplest possible terms, it means that if the PBoC’s efforts to stealth tighten via OMO hikes (indicative of Beijing’s struggle to rein in speculation and prick dangerous bubbles before they become systemic risks) end up choking off new credit creation in China, look out global economy.
With that in mind, consider the following headlines that got lost in the holiday shuffle on Friday:
“Slowing M2 growth in the first three months shows that monetary policy is prudent and neutral,” China’s central bank told Bloomberg in an e-mailed statement, adding that “slowing M2 growth also shows PBOC has strengthened regulation of financial leveraging.”
So, note the bolded bits in the bullets. They send a mixed message. What it kind of looks like on my end is an increase in shadow banking activity (the TSF beat) offset partially by a slowdown in M2 and new RMB loans occasioned by PBoC tightening.
That assessment seems to be largely in line with what everyone else is saying. Here are some useful points from Bloomberg:
