Some good comments via Warren Mosler citing the unusually large declines in Chinese lending and the high probability of a weak second half economic performance:
“Looks like China is still in ‘inflation fighting’ mode as state lending over there is functionally like federal deficit spending here.As previously discussed, while China may successfully engineer a soft landing in their fight against inflation,I’ve never seen anything but hard landings elsewhere when fighting inflation. And with China a ‘first half/second half’ story, a weak first half generally means an even weaker second half. “
China says January lending down 28% from year ago
Feb 12 (The Botswana Gazette) – Chinese bank lending fell 28 percent in January from a year earlier, official data showed, suggesting Beijing is reluctant to open the credit valves too quickly for fear of reigniting inflation.
State-owned lenders issued 738.1 billion yuan ($117.26 billion) in new loans in January, down 288.2 billion yuan from the same month last year and well short of analyst forecasts for one trillion yuan, the central bank said Friday.
Banks handed out 640.5 billion yuan in loans in December.
Chinese banks typically ramp up lending at the beginning of the year to avoid losing quotas issued by regulators and the effects of changes in monetary policy. Analysts said the weaker-than-expected data partly reflected the earlier than usual Chinese Lunar New Year holiday, which fell in January, and the government’s still tight restrictions on credit.
Mark Williams, an economist at Capital Economics in London, said it was the lowest December to January increase since 2007.
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Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.