During October, the credit impulse in China rolled over and died.
To be sure, the writing was on the wall before the data was released. Early in November, MNI suggested that according to discussions with bank personnel in China, data on lending for October was likely to come in exceptionally weak. As we noted at the time, that would mark a reversal from September when the credit impulse looked particularly strong and the numbers topped estimates handily. “One source familiar with the data said new loans by the Big Four state-owned commercial banks in October plunged to a level that hasn't been seen for many years,” MNI added.
Sure enough, when the numbers came in, new RMB loans to households fell 60% M/M and new loans to corporates declined nearly 40% from September.
To some, this was a shock. After all, multiple rate cuts and round after round of liquidity injections should have given banks plenty of dry powder to lend. But as we discussed at length, liquidity isn’t the issue.