China’s July Leverage Data Comes in Hot, Drawing Rebuke From IMF

It is often difficult to ascertain the actual level of credit and liquidity in China, as the ‘shadow banking’ segment is near $8.5 trillion strong. But China’s Total Social Financing (TSF) data, released Tuesday, attempts to do just that. China’s Leverage data came in hotter than anticipated, a Bernstein report noted. While the number decreased, it was due, in part, to a drop in shadow bank lending. But China’s Leverage reduction last month is not enough to satisfy the International Monetary Fund, which warned China is on a ‘dangerous trajectory,’ as debt is being used to engineer growth to an unhealthy degree, a charge China denies.
China’s Leverage TSF number hotter than anticipated, raising concern at the IMF
Amid deleveraging impacting corporates, state-owned enterprises and individuals, China was anticipated to have seen a July drop in TSF to nearly 1,000 billion yuan. That number came in at 1,220 billion yuan, down 32% on a month over month basis, as Chinese loan data in July is typically weaker than June. The problem for certain analysts is the loan data was 22% above consensus estimates, pointing to a growing leverage problem.

This post was published at FinancialSense on 08/16/2017.