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.