Chinese total social finance, the broadest measure of credit growth, was stronger YoY, although there was a significant divergence in how new financing was issued this month.
Bank lending was noticeably stronger in May, after being flat YoY for the last 3 months. This is a sign that the easier monetary policy is now starting to make an impact.
Trust loans, on the other hand, were weak, particularly compared to this time last year. This is flow data, so the fall in the YoY growth rates means that the growth in total trust loans outstanding is grinding to a halt. It would not be surprising if this started to turn negative i.e. outflows from the trust sector.
These types of products have been most prominent in funding property related projects.
Corporate bond issuance has been stronger, although interest rates on these bonds are still high. Perhaps the pick up here is more out of desperation given the clamp down on other cheaper sources of credit.
Composition matters when it comes total sources of credit, as some of the downside risks in some sectors is more acute than in others.
While stronger bank lending and corporate bond issuance staves off the risk of a general credit crunch, it probably doesn't save the housing sector given weaker fundamentals and deteriorating access to funding.
This still remains the key risk to growth in the coming quarters. So far the fall-out hasn't been so bad, with steel consumption in particular still relatively strong. But it seems unlikely that this will remain the case given the likely trajectory of home building activity over the next 6 months.
