The official data hasn’t been released yet, but Goldman Sachs’ China economics team expects that January loan growth ‘slowed’ to 29.3% year over year, hitting 1.35 trillion yuan.
Note the ‘channel checks’ below… which always seem like dressed up words for leaks, research espionage, and rumour:
Yu [email protected]: Our channel checks with commercial banks suggest many banks stopped lending in the last days of the month and some short-term loans were not renewed, especially discount bills. Although this is not quite as high as the Rmb1.6 trillion previously reported by mainland media (China Economic Information Daily), it still would be the 4th highest reading in history (only January, March and June 2009 saw higher readings). Yoy growth of CNY loans is expected to fall to 29.3% in January from 31.7% in December. A standard seasonal adjustment would suggest sequential growth is little changed at 18.1% mum s.a. ann., compared with 17.5% mum s.a. ann. in December.
Goldman remains of the view that such growth is ‘excessive’ but is optimistic that government tightening efforts will ultimately succeed.
Yet one wonders, if China economists rely on connections for advance data (we’re making an assumption which we believe is likely, top U.S. analysts probably have their fair share as well), are they even able to come out and say government policy is doomed to failure? Or do they have to be more nuanced and coded in their language?
Goldman: [Emphasis added] We believe the credit expansion in January is excessive in light of the strength in the real economy and the rise in other non-loan financings such as IPOs and the issuance of various bonds. The good news is the government has started to take tougher measures to control lending, including requesting commercial banks to report lending on a daily basis and strictly controlling the size of total lending. Although these measures are slightly late in our view, as long as they can maintain a tight control, the risks of serious overheating are limited. On the other hand, we are less worried about an over-tightening which would lead to a hard landing of the economy, not least because the government is very concerned about that type of risk and therefore, the risks seem to be more on the side of insufficient tightening.
So there is still too much credit growth, tightening efforts have come too late, the government needs to tighten more, and the risk of a disastrous Chinese lending binge remains.
(Via Goldman Sachs, China Views, Yu Song, 3 February 2010)