Chinese lending figures were released over the weekend and at first blush they were pretty solid. Indeed if you read stories on the net and in the press the strength of the data is responsible for almost everything positive in Asian trade today – from the 0.9% rise on the Hang Seng to the fact that Crude is still holding above $100 a barrel.
But Westpac’s Chinese watcher, Phat Dragon, reckons the data is only reasonable from the point of view of the real economy regardless of “the apparently impressive size of these flows, and the margin of outperformance over market forecasts”.
Phat Dragon’s reasoning for this is that, “in a growing economy without an explicit loan quota, it is naive to focus on nominal figures without reference to growth rates. And the growth in new financing is now just 1.4%yr. That is not an amazing number for an economy hoping to expand at 10% nominal, or just below.”