While M2 growth bounced back in April back to policymaker targets, its increasingly clear from the social financing data that credit via trust products is drying up rapidly. With bank lending growth also steadily decreasing, slowing credit availability will continue to be a drag on the Chinese economy.
While we have yet to see net outflows from trust products, a slowdown in the rate of growth is still a big problem for property in particular. We should get a closer view of this when the property data is released in the next day or so
The loss of some areas of finance have lead to a revival in other, with corporate bond issuance rising in the last couple of months. This financing doesn't appear to have come cheaply though, with interest rates fairly high, although are lower than end-2013.
M2 money supply growth bounced back up to 13.6% after slipping to 12% last month. This has perhaps helped support the rally in markets in the last 24 hours.
Total social financing is a much broader measure of credit, but this is deteriorating rather than collapsing at this stage. So its not worth getting too carried away with how bad China is right now, but it is certainly weak and facing some headwinds. And that is bearish for many commodities, particularly those with a lot of supply.
