The latest data on China’s total social financing (TSF) points to easing growth as the economy recovers from the impacts of the COVID-19 pandemic and the bond market is rocked by a slew of state-owned enterprise (SOE) defaults.
China’s outstanding TSF grew by 13.6% YoY in the month of November according to data released by the Chinese central bank on Wednesday, marking the first decline in growth in a year.
TSF refers to the aggregate volume of funds provided by China’s domestic financial system to the private sector of the real economy within a given timeframe.
TSF was 2.13 trillion yuan for the month of November, for an expansion of 140.6 billion yuan compared to the same period last year, driven mainly by renminbi lending and government bonds.
Renminbi loans made to the real economy increased by 1.53 trillion yuan, for a YoY expansion of 167.6 billion yuan, while net government bond financing was 400 billion yuan, for a YoY expansion of 228.4 billion yuan, and net enterprise bond financing was 86.2 billion yuan, for a YoY expansion of 246.8 billion yuan.
Zhou Guannan (周冠南), chief fixed-income analyst at Huachuang Securities, said to Cailian that there had been a marked slowdown in the issuance of bonds in November due the shock of recent default incidents, bringing down growth in outstanding TSF by 0.1 percentage points to 13.6%.
Given that December would see the issuance of 200 billion yuan in special bonds to supplement the capital of small and medium-sized banks however, Zhou foresees a recovery in the outstanding TSF growth rate this month.
Wang Qing (王青), chief macro-analyst at Golden Credit Rating International, said that easing growth in outstanding TSF marked the first decline since the current mound of monetary expansion, and indicates that loose credit had entered an “outgoing tide phase.”
“Overall, financial data for November shows the impacts of the ‘outgoing tide phase’ of the current round of loose credit, and we forecast that this trend will continue in December.”
As of the end of November the broad M2 money supply balance was 217.2 trillion yuan, for YoY growth of 10.7%, and accelerations of 0.2 percentage points and 2.5 percentage points compared to the end of the previous month and the same period last year respectively.
The narrow M1 money supply balance was 61.86 trillion yuan, for YoY growth of 10%, and acceleration of 0.9 percentage points compared to the end of the previous month and 6.5 percentage points compared to the same period last year.
