China Broad Credit Grows By Record RMB17.3 Trillion In 2013; FX Reserves Increase By Record $508 Billion

Tyler Durden's picture

So much for China's mission to gradually deleverage in 2013. Despite two near-taper episodes, one in June and one in December, which send short-term lending rates soaring, the PBOC party line has been that the Chinese banking system is slowly but surely issuing less debt as it already has an epic debt overhang, much of which is turning sour at an accelerated pace. One needs to look nowhere else than the country's declining GDP to visualize the declining marginal utility of every dollar in newly credit loans. And yet following last night's release of Chinese lending data we found that in 2013, the broadest measure of Chinese credit issuance, the so-called aggregated financing, just hit a record high of 17.3 trillion. So much for the deleveraging myth.

Of course, what is going on in China is more nuanced. Because while official lending indeed dipped, falling 23% in December to RMB 483 billion from 625 billion in November, it was the non-bank lending channel which made up for the difference. As a result Total Social Financing remained flat in December at RMB 1,230 billion. And it was the TSF aggregate that roared to a new all time high in 2013, which simply means that as the central bank and government pretends to clamp down on official lending channels, surplus credit is being released through unofficial pathways, where it is even more difficult to track and quantify.

Summarizing China's full year credit numbers via BofA: YoY growth of outstanding TSF, bank loans and M2 moderated to 18.8%, 14.1% and 13.6% respectively in December from 19.5%, 14.2% and 14.2% in November. New bank loans rose 8% in 2013 from the previous year to 8.89 trillion yuan, the central bank said.

Broken down by component:

  • New entrusted loans and trusted loans remained quite resilient in December at RMB276bn and RMB110bn respectively compared to RMB270bn and RMB102bn in November.
  • New corporate bond dropped to RMB24bn in December from RMB138bn in November. We note that government and coporates delayed their bond issuance or scaled down the size due to the tightened interbank liquidity and jump in interbank rates.
  • New FX loan rebounded to RMB51bn in December from RMB12bn in November. It is appealing to corporates to borrow FX due to continued RMB appreciation and rising interest rates in China.
  • Non-discounted bankers acceptance (BA) jumped by RMB168bn in December after staying sluggish for 3 months previously. One possible reason is that corporates used BA to avoid the too high short-term rates. We think the monthly numbers are particularly volatile, and there is no need to overlyinterpret it (This is also the reason why we exclude it from calculating our revised TSF growth).

And the punchline: FX reserves rose rose by US$157bn in 4Q to US$3,820bn at end-2013. In comparison, it was up by US$163bn in 3Q and US$54bn in 2Q13. For the full year of 2013, FX reserves jumped a record high of US$508bn, compared to US$130bn in 2012 and US$334bn in 2011. An initial estimate suggests that "unexplained FX inflows" could fall to about US$22bn in 4Q from US$65bn in 3Q.

Just what China will do (is doing) with this record FX hoard, especially since we know it is barely buying US Treasury paper, is anyone's guess.

Finally, where China's (official) credit stock to GDP is projected to grow, here is a chart from Goldman that attempts to forecast just this.

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BaBaBouy's picture

WOW This Is Now Off The CHARTS!!! Must Read...

N.S.A. Devises Radio Pathway Into Computers

WASHINGTON — The National Security Agency has implanted software in nearly 100,000 computers around the world that allows the United States to conduct surveillance on those machines and can also create a digital highway for launching cyberattacks.

While most of the software is inserted by gaining access to computer networks, the N.S.A. has increasingly made use of a secret technology that enables it to enter and alter data in computers even if they are not connected to the Internet, according to N.S.A. documents, computer experts and American officials.

The technology, which the agency has used since at least 2008, relies on a covert channel of radio waves that can be transmitted from tiny circuit boards and USB cards inserted surreptitiously into the computers. In some cases, they are sent to a briefcase-size relay station that intelligence agencies can set up miles away from the target.

(This Is YOUR Tax Dollars AT WORK)...

fijisailor's picture

Too bad for them.  I turn my computer off whenever I feel like it.

LawsofPhysics's picture

Precisely why the Chinese will never have the reserve currency and in fact have been part of the Fed's plans since 1971...

TruthInSunshine's picture

I, for one, welcome our bankrupt Chinese overlords.

zaphod's picture

China's capital investment ratio against GDP has been around 50% for the past decade. I remember seeing a chart of various country's capital investment ratio over time and China is just off the charts. Even Japan in at it's max barely touched 40% and that was for a few years, and then look at what has happened over the past 20 years following this.

Basically China is creating money to build stuff, whether or not they need it. 

When an economy finishes transitioning from developing to developed, that capital investment ratio drops back down to less than 10% (where US and EU are). How many exports will China require to make up for this? 

TruthInSunshine's picture

China's got such major problems (demographics per required # of new job creation; misallocation of capital; massive bad loan spoilation in every province, etc.) that it's staggering, yet the Financial MSM won't dare mention the depth/degree of those problems because the entire sell-side complex is still resting their hat on the meme that China's consumption and rate of economic growth going forward is going to save the world from contraction.

The IMF recently tried to do a slight of hand whereby they're pronouncing the U.S. as "increasingly robust" BS (with the "but there are major risks" caveat), and that this U.S. "strength" may, in what most credible people would acknowledge is a fading-BRIC era, translate into better odds for Chinese economic acceleration now.

Those jokesters.

Groundhog Day's picture

Welcome to the hotel debtophobia.....once you enter you can never leave...

tarsubil's picture

I see buying gold as an economic insurance policy. If you were buying fire insurance cheap, wouldn't you be a little predisposed to light some fires?

LawsofPhysics's picture

of course, but this is precisely what every government on earth is resorting too..

hedge accordingly.

youngman's picture

I have a problem with China statistics....hard to believe if they are right or not

starman's picture

is that good news ot bad? im confused......



SheepDog-One's picture

What the Chinese are doing with all this excess FX is unknown....just a guess but maybe buying up all the gold?

Dr. Engali's picture

What are they buying? Anything tangible they can get their hands on. We get cheap Chinese crap and they buy our cities with the proceeds. Choked to death and conquered on our own worthless fiat. How does it taste mother fuckers?

El Vaquero's picture


How does it taste mother fuckers?

Like Five Spice Donky Meat.

fijisailor's picture

OK so the Chinese are all leveraged up also.  At least they have an AU plan when it all goes to shit.

Rising Sun's picture

who fucking cares???

SDRII's picture

What are they buying?

2 foreign banks get licences to import gold into China


U4 eee aaa's picture

This just shows that once government gets a taste for the sugar it is very hard to stop. Leviathan is the most narcissistic entity on the face of the planet. It knows when the bill comes due to pay, it will be paid with the blood of citizens. Not with the blood of leviathan

Itgoestoeleven's picture

 Serious question: The USD/CNY (6.23 to 6.05) has remained kind of  stable for the past year. What Does that tell us about the dollar?