After the weekend’s Chinese data indicating both slowing imports and rising inflation, came this on Tuesday:
BEIJING, July 12 (Xinhua) — China’s foreign exchange reserves rose 30.3 percent year-on-year to hit 3.1975 trillion U.S. dollars by the end of June, the People’s Bank of China (PBOC), or the central bank, said Tuesday.
Funds outstanding for foreign exchange in financial institutions increased 277.33 billion yuan (42.83 billion U.S. dollars) over the May to June period to hit 24.67 trillion yuan, said the PBOC in an online statement.
Foreign exchange reserves stood at 3.166 trillion U.S. dollars and 3.1458 trillion U.S. dollars by the end of May and April, respectively, according to the statement.
Meanwhile, lending grew more than expected:
New loans were 633.9 billion yuan ($98 billion), compared with the 622.5 billion yuan median estimate in a Bloomberg News survey of economists. M2, the broadest measure of money supply, rose by a more-than-forecast 15.9 percent, and foreign-exchange reserves climbed to $3.2 trillion.
Bloomberg goes on to say the new data is seen as evidence of a need for further tightening — though this will likely come in the form of capital requirement hikes rather than rate rises, to avoid further pressure on local authorities (despite official assurances that local government debt is managable).
But interestingly, as some analysts have noted, this latest release of PBoC data didn’t include the new “society-wide financing” (SWF) or “total social financing” measure, which was announced in February as a way of giving a (somewhat) more comprehensive view of lending:
As JP Morgan’s Grace Ng and Lu Jiang explained (PDF) in May, focusing on bank loans alone had become too limiting:
According to data compiled by the People’s Bank of China, the total amount of social financing includes, in addition to regular bank loans, other major items such as entrusted loans, trust loans, bankers acceptance bills (these categories generally come under banks’ off-balance sheet operations), net corporate bond financing, and nonfinancial enterprise equity raising, among others (table). The share of total bankloans in the total social financing figure has declined steadily from 92.0% in 2002 to 58.5% last year. The central bank estimates that total social financing data have historically demonstrated a higher correlation with GDP, CPI, and other major economic indicators than have bank loans.
As Reuters noted last week, using the SWF measure, Chinese tightening looks rather less strict than the recent raft of interest rate rises would suggest. The official SWF target is Rmb14,000bn for 2011 compared to Rmb14,300bn for last year. And this measure still has several shortcomings, such as not including “unofficial” or internally-generated lending. Being quarterly was also seen as a drawback.
For now, in any case, we will just have to wonder what the June quarter SWF data would have shown.
Related links:
China’s new, wider financing measure – FT Alphaville
If (when) China slows down – FT Alphaville
China’s stagflation question – FT Alphaville
Introducing Alphachat, the FT Alphaville podcast – FT Alphaville