Back in June 2017, we wrote that if one had to follow just one macro indicator that impacts virtually every aspect of the global economy, that would be the Chinese credit impulse. Not surprisingly, the article was titled "Why The (Collapsing) Credit Impulse Is All That Matters." Then, a few years later just in case there was any confusion, we again wrote "Why The Collapsing Chinese Credit Impulse Is All That Matters."
The reason for this is simple: with western central banks woefully unable to spark benign inflation both domestically or globally, China has emerged - starting around the time of the global financial crisis - as the only source of global economic and reflationary momentum, which in turn depends on China's ability and willingness provide yet another stimulus to its domestic economy. It does so by injecting trillions of new credit into its financial system, as the following chart of Total Social Financing over time clearly shows.