Alright, let’s cut through the noise. Citic Securities just dropped a report, and it’s painting a cautiously optimistic picture of China’s social financing growth. We saw a jump in April, but don’t pop the champagne just yet.
Photo source:www.bloomberg.com
This isn’t some organic surge in demand, folks. It’s largely down to a pathetic base effect – think low government bond issuance and sluggish credit appetite this time last year. Remember the regulatory crackdown on ‘backdoor lending’ boosting credit figures?
Let’s be clear: April is notoriously a slow month for both social financing and credit. We need to see if this momentum holds. And frankly, initial signs aren’t screaming ‘bull market.’
Speaking of sluggish, the lending side is showing cracks. A seasonal dip after the quarterly push, coupled with softening demand for mortgages and those pesky tariffs hitting corporate financing, are weighing things down. The impact of tariffs cannot be ignored.
Now, M1 – a key measure of money supply – is weakening, and below expectations. Consumer and business confidence remains notably tepid, meaning private sector de-leveraging is proving difficult to budge. Policy support is still needed.
Here’s a deeper dive for you:
Social financing (社融) is a broad measure of funds flowing into the real economy, including loans, bonds, and equity financing. It offers a broader picture than just traditional bank lending.
Base effects are crucial. When comparing current data to past data, you must account for unusual circumstances in the previous period. A low base makes current growth look better, even if underlying conditions haven’t drastically improved.
Tariffs directly impact corporate cash flow, particularly for export-oriented businesses, making them more hesitant to take on new debt. This, in turn, suppresses overall financing demand.
Monetary policy (宽货币) refers to actions undertaken by a central bank to manipulate the money supply and credit conditions to stimulate economic activity.
But here’s the kicker: trade tensions are real, but the PBOC is playing ball with looser monetary policy and fiscal stimulus, hinting at a relatively stable second quarter for social financing. I’m still wary, but it’s a glimmer of hope in a murky global landscape.
