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11 Mar 2013
Forex Flash: Chinese data suggest loose policy in Feb - Nomura
Nomura economist Zhiwei Zhang comments that Total social financing (TSF) dropped to RMB1.07trn in February from RMB 2.54trn in January.
Excluding the volatile short term bill financing, TSF was RMB74bn per working day in February, lower than its historical high of RMB89bn in January, but stronger than the RMB61bn in Q4 2012. He adds that in particular, trust loans on a working-day adjusted basis were actually higher in February than in January. M2 growth slowed to 15.2% y-o-y from 15.9% in January but remains much higher than the December 2012 figure of 13.8%.
Zhang continues to explain that is we take the TSF and M2 growth data as evidence that monetary policy remained loose in February. However, he writes, “But despite the loose monetary policy, growth momentum slowed in January and February. We believe a large part of the new credit supply may have been used to repay expiring debt and did not go into the real economy. Future policy is now very uncertain, as growth momentum weakened in January and February. We expect the government to keep the current loose policy stance unchanged in March, but inflation will likely rise above 3.5% by June and force the government to tighten. We continue to forecast 2013 GDP at 7.7% (Consensus 8.1%) due to rising inflation and policy tightening in H2.”
Excluding the volatile short term bill financing, TSF was RMB74bn per working day in February, lower than its historical high of RMB89bn in January, but stronger than the RMB61bn in Q4 2012. He adds that in particular, trust loans on a working-day adjusted basis were actually higher in February than in January. M2 growth slowed to 15.2% y-o-y from 15.9% in January but remains much higher than the December 2012 figure of 13.8%.
Zhang continues to explain that is we take the TSF and M2 growth data as evidence that monetary policy remained loose in February. However, he writes, “But despite the loose monetary policy, growth momentum slowed in January and February. We believe a large part of the new credit supply may have been used to repay expiring debt and did not go into the real economy. Future policy is now very uncertain, as growth momentum weakened in January and February. We expect the government to keep the current loose policy stance unchanged in March, but inflation will likely rise above 3.5% by June and force the government to tighten. We continue to forecast 2013 GDP at 7.7% (Consensus 8.1%) due to rising inflation and policy tightening in H2.”