China’s First Half ‘Credit Deluge’ Is At Risk In The Second Half Of 2016

China’s 1H16 Efforts to Limit Runaway Growth in Home Prices Reflect Failed Tightening Policies (Not Stimulus). A likely acceleration of these efforts in 2H16 (due to record home prices in Aug.), coupled w/ a probable slowdown in bank asset growth (discussed below), we believe, will undermine the key pillars supporting China’s economic ‘rebound’ in 2H16 & rekindle volatility in risky asset classes. That is, while Aug. data was better than expected, perhaps most noteworthy were China’s property prices, which rose for new residential homes m/m, on avg., in 64/70 cities in Aug., the most ever when taking the avg. of all 70 cities. Of course, w/ China’s credit growth up strongly in Aug., we find evidence that some in gov’t continue to support cheap credit to mfr. growth (i.e., total social financing [‘TSF’] was 35.4% y/y, local gov’t debt issues YTD total CNY 4.8tn, vs. CNY 3.8tn in ’15, & the PBOC’s medium-term lending facilities [‘MLFs’] YTD total CNY 3.0tn, vs. just CNY 0.4tn in ’15).

This post was published at Zero Hedge on Sep 20, 2016.