Over the past week, China released a slew of closely-watched statistics including Chinese trade balance figures, inflation numbers and money and credit data. These together with recent comments by Chinese Premier Li Keqiang, have led investors to speculate if there will be more Chinese stimulus. Expectations of further stimulus had led Chinese stocks to recently trade at their highest levels in one and a half years.

Money-supply growth at 5-month low
On Friday, China released M2 figures – the governement’s measure of money supply – that showed an increase of 12.8% compared to the +13.5% in July. This slowdown in money supply comes on the back of July’s plunge in new credit to the lowest level since 2008.
 
In the meanwhile, August’s aggregate financing – a measure of credit that includes bank lending, corporate bond issuance and shadow-banking products like entrusted loans -- also came at 1.135 trillion, compared with 1.584 trillion yuan a year earlier.
 
According to Bloomberg, these reports adds to evidence the economy is losing steam after July’s aggregate financing slumped and recent data showed moderation in manufacturing and a drop in imports.

 
Imports, inflation and manufacturing all lower than expected
Earlier this month, August imports had unexpectedly dropped 2.4% from a year earlier, highlighting subdued domestic demand while PMI manufacturing stats provided by HSBC showed a slowdown in manufacturing expansion. Inflation numbers released on Thursday also eased.

 
Premier Li hinted broad rate/RRR cut unlikely
On 10 September, China’s Premier said in the Summer Davos that China has created 9.7mn urban jobs in the first eight months of this year, already close to the full-year target of 10mn. He reiterated that China was capable of meeting its 7.5% expansion target for the year and that “there’s already a lot of money in the pool, and we can’t rely on monetary stimulus to spur economic growth,” according to a Xinhua News. Three weeks ago on 27 August, the Premier also said that the Chinese government has never eased monetary policy so far in 2014.


How about mini-stimulus?
Nevertheless, some remain optimistic of further mini-stimulus measures amidst the data pointing at a renewed slowdown of growth momentum. Macquarie Equities Research (MER) said in a report released on Friday that given the sluggish domestic demand and low inflation, it is unlikely for the government to tighten policy stance any time soon. So while the weaker-than-expected money and credit figures would have been an excuse for profit-taking in the markets, it is more likely to be a blip than tightening signal.

Source: Macquarie Research - 15 Sep 2014