China Money Supply: October 2010

To see the latest data please see the label Chinese Money Supply

 

I was going to stop publishing these, but after looking at the blogger statistics, I noticed they were the most popular recurring item in terms of pageviews, so I decided to update them again. As always, the data is released in an unpredictable schedule--often late--so I can't predict when the next update will be.

You might notice that I changed the scale of the nominal graph to a log scale. It made sense. The only reason I hadn't done it before was because the formatting was poor, but I finally gave in and decided function was more important than form in this case.

China Money Supply: September 2010

To see the latest data please see the label Chinese Money Supply

 

So here's a collection of updated charts with the latest money supply numbers from the People's Bank of China and the National Bureau of Statistics of China. Velocity of Money, YoY growth after the jump.

Please note that, purportedly because of demand for physical currency, there is a significant distortion around the Chinese New Year.

Nominal money supply numbers as reported by the People's Bank of China

China Money Supply: August 2010

To see the latest data please see the label Chinese Money Supply

 

So here's a collection of updated charts with the latest money supply numbers from the People's Bank of China and the National Bureau of Statistics of China. Velocity of Money, YoY growth and some new GDP ones after the jump.

Please note that, purportedly because of demand for physical currency, there is a significant distortion around the Chinese New Year.

 

Nominal money supply numbers as reported by the People's Bank of China.

Indexed growth of the money supply compared to growth in GDP (2005=100)

Chinese Money Supply: June 2010 Reserves keep trending down, loans increase

To see the latest data please see the label Chinese Money Supply

This is the latest money supply data from the People's Bank of China and China's National Bureau of Statistics. The English language version hasn't been updated in quite some time, but the Chinese-language version is regularly updated, although it seems like not in a normal schedule. As I've mentioned before, one of the requirements for a Chinese property bubble would be a large and rapid expansion of credit.

Please note that, purportedly because of demand for physical cash money, there is a significant distortion around the Chinese New Year.

As you can see in the first graph, the reserve rate keeps dropping, indicating an increase in loans, but the second graph shows us that, even if growth is still positive, it is at least no longer accelerating. This is what Pettis described as Beijing's stop-and-go measures in May of this year.

Chinese money-supply April update

To see the latest data please see the label Chinese Money Supply 

The Chinese money-supply data for April has been released. While it shows no further increases in the rate of growth, with YoY growth levels steady from March, it still shows significant expansion. The M1 measure showed a 31% YoY growth, a decline from its record-setting 39% in January, but still quite elevated; M2 growth dropped by 1% MoM to 21%, down 9% from its October record of 30%; M0 continued its increase at 16%; and the Money Multiplier increased 0.03 points to 5.9, an all-time high. The increasing MM is indicative of a continuing increase in lending, even as reserve-requirements increase (more below) and corroborates the "property bubble" story, but can not be considered evidence. What is clear from this is that there is still increasing demand for loans. While the numbers are nothing radically different from what we've seen in the last couple of months, the M0 growth is quite elevated and indicative of loose monetary policy, a little surprising considering the tightening--via reserve requirement increases--in January and February. It'll be interesting to see the May and June numbers considering the additional increase in reserve-requirements in May, as the numbers do indicate a heated economy.

Please note that, purportedly because of demand for physical cash money, there is a significant distortion around the Chinese New Year.

Chinese money-supply growth slows, reserves inch lower

To see the latest data please see the label Chinese Money Supply
 
Hot on the heels of my complaint about the People's Bank of China not publishing money-supply statistics, the numbers have been published to their Chinese-language website, although still no 2010 data in the English-language version. It's becoming clear that there is evidence of overheating, although--as the second graph suggests--the government's efforts in slowing down growth have worked. In particular, the changes seen between Q1-2009 and Q2-2009 are indicative of overheating. Particularly notable, the M1 changes seen in the last 3 quarters signal the credit-expansion I was referring to last time I wrote about China.

The fact that M1 is still growing at an accelerating pace is worrysome. Just today, Bloomberg reported increasing inflation, hot on the heels of monetary tightening over the past couple of months. While this might sound counter-intuitive, it is well-covered by "Charles" on M Pettis' website. Part of his point being that when people are working towards a target sum by a certain date, lowering the discount rate will only serve to increase the savings rate as people have to make up lost interest income, or that when people have most of their savings in bank deposits instead of other assets, a decrease in the discount rate will have a negative wealth effect. That neat little digression aside, the point I am trying to make here is that these cultural differences in saving and spending behavior coupled with fears about declining purchasing-power of money could lead to an increasing demand for hard-assets, leading to additional upward pressure on prices.

For now, though,  I still think the Chinese "real-estate bubble" is a little too hyped up. Their banking rules require lower LTVs and their bank reserve-requirements are higher, making a US-style housing implosion unlikely. Asset prices may drop or stagnate, but I doubt a full-on implosion leading to a banking crisis is possible without the fuel provided by zero-downs, neg-ams etc. What I would love to see is some data as to what % of bank assets real-estate backed loans compromise and their average LTV. If one is to find evidence of a bubble or lack there-of, it'd be there.

Chinese Money Supply: Record Low Reserves (17%)

To see the latest data please see the label Chinese Money Supply

Note that the numbers available from the PBC only go from Jan2004-Dec 2009. As soon as the 2010 numbers are available I'll post an update. Also, if you are perplexed by that spike in reserves, there is a very simple explanation: Chinese New Year.

Traditionally, Red envelopes or red packets ... are passed out during the Chinese New Year's celebrations, from married couples or the elderly to unmarried juniors ... Red packets almost always contain money, usually varying from a couple of dollars to several hundred.

Wikipedia: Chinese New Year

Chinese Money Supply

When China announced on January 12, 2010 that they were going to raise reserve requirements by 50 basis points everyone broke out in a panic about it. People speculated there would be crashes, that that there was a crazy China bubble or that the Chinese banks were driving asset-price bubbles through insane leverage. While the Chines Money Supply has indeed been growing faster than before as of late, that makes sense. Last year assets were depressed, leaving room for upside, and credit was hard to get. The Chinese central bank dropped reserve requirements by 50 basis points, which encouraged lending. As things settled down people resumed lending and borrowing. Nothing really crazy is going on. If you are part of the Minsky club, like I am, you consider a significant credit boom an essential part of a bubble. So, let's see if there really is some crazy Chinese bubble or if the Central Bank was just returning things to normal.
Please also note how high their reserves are. American banks keep only 10% of reserves on their transaction deposits (checking accounts). Savings accounts, and CDs are time deposits and have no mandated reserve requirement. Do your homework people. It's not that hard.
Sources:
People's Bank of China
Reserve Requirements (NY Fed)