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Shadow finance slows in January

The sum of total social financing (TSF) – the widest official measure of financing in the economy – and our estimation of underground lending reached Rmb2,308bn ($369bn) in January, up 18% MoM but down 19% YoY. This was predominantly due to a slowdown in shadow financing, offsetting a rebound in formal loan growth, although comparisons are complicated by recent changes to loan and deposit classifications by China’s central bank. Informal lending activity moderated ahead of the Chinese New Year holiday.

16 February 2015

Consumer inflation hits five-year low

Economists debate what the consumer price index’s fall to a five-year low says about the Chinese economy, and what it means for policy going forward.

12 February 2015

Chengtou bond slowdown reflects reform progress

A marked slowdown in bond issuance by local government financing vehicles since 3Q14 highlights a concerted attempt by policymakers to push through more fundamental financing reforms. However, progress is likely to be gradual.

12 February 2015

No need to panic

Recent moves suggest that policymakers now have the space and confidence to launch broader-based easing measures if deemed necessary. But stabilisation, not stimulus, remains their guiding principle.

12 February 2015

Selected financial charts

A selection of key financial data over the past fortnight.

12 February 2015

RRR cut signals further support

The 50bp cut to the reserve requirement ratio is a further sign of Beijing’s shift to a more supportive policy stance. We believe this is aimed at halting the recent downward slide in economic activity, but we do not see any evidence yet of an intention to stimulate a sharp rebound in growth.

04 February 2015

Regulators clamp down on margin-trading violations

Commentators discuss the impact on A-share markets of the recent clampdown on margin lending at three of China's largest securities firms.

29 January 2015

Shadow financing lifts credit growth

Credit growth rebounded in December, with the sum of total social financing (TSF) – the widest official measure of financing in the economy – and our estimate of underground lending hitting Rmb1.95tn ($320bn), up 43% MoM and 25% YoY. This was due to a sharp increase in shadow financing at year end, offsetting a sequential decline in bank lending. The December credit increase was not sufficient to prevent full-year credit growth falling YoY to Rmb19.2tn, down from Rmb20.2tn in 2013.

15 January 2015

Setting the stage for trust defaults

Regulatory efforts over the past 18 months have reduced bank and local government exposure to trusts, while establishing an enhanced resolution framework. This should finally set the stage for full trust defaults to occur, perhaps starting in 3Q15.

15 January 2015

China’s infrastructure financing puzzle

Beijing has signalled its intention to maintain infrastructure investment at elevated levels this year, but achieving this amid a slowdown in traditional sources of funding will require a reconfiguration of the infrastructure financing landscape.

15 January 2015
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