PBOC Injects Record Liquidity As China Retail Sales Disappoint, Investment Slows

On the back of mixed PMI and trade data, deeper price deflation, and slightly weaker-than-expected credit data, November activity data painted a mixed picture for the Chinese economy, as a rebound from restrictive Zero-COVID policies continues to be weaker than expected (exacerbated by a deepening property crisis).

Earlier in the month, China’s CPI showed a greater deflation than expected (the largest deflation since the GFC)…

Then, last night saw November’s new RMB loans and TSF data came in below expectations, and the composition of loans data showed soft credit demand…

Bill financing continued to grow faster than corporates’ medium to long term loans. Households’ medium to long term loan growth also slowed in November from October on the back of weak property transactions.

Which brings us to tonight’s macro data smorgesbord of good, bad, and ugly data.

China Nov. Industrial Output Rises 6.6% Y/Y; Est. 5.7% – BEAT

China Nov. Retail Sales Rise 10.1% Y/Y; Est. 12.5% – MISS

China Jan.-Nov. Fixed Investment Rises 2.9% Y/Y; Est. 3% – MISS

China Jan.-Nov. Property Dev. Investment -9.4% Y/Y, Down from -9.3% Y/Y

China’s surveyed jobless rate ticks along at 5.0% (low/strong – the same as in October) while the country refuses to disclose the youth unemployment rate (which had soared to a record over 20% before the data was banned).

As Bloomberg notes, there are a lot of questions about how comprehensive and accurate the jobless data is, with alternative data showing the situation is actually getting worse.

So, industrial output growth was stronger than expected in November, but housing worsened – residential property sales shrank 4.3% for the first 11 months of the year.

Finally, the NBS also released home price data today, which showed no improvement.

Second-hand home prices were down 0.79% in November from October, while new home prices in the top 70 cities were down 0.37% – the sixth straight month of falls.

All of which combined is perhaps why China’s central bank decided to inject the most cash via one-year policy loans on record.

PBOC offered commercial lenders 1.45 trillion yuan ($204 billion) via its medium-term lending facility (that is a net 800 billion yuan more than the expected maturity this month).

“MLF injection is much larger than expected, so it suggests continued easy monetary policy,” said Becky Liu, head of China macro strategy at Standard Chartered.

This likely means China won’t cut the reserve-requirement ratio for banks anytime soon.

China appears to believe discussing the weakness in its economy is a PsyOp as the Ministry of State Security said, in a post this morning on its official WeChat account ahead of the data:

“Clichés intended to undermine China’s economy are essentially aimed at constructing a ‘discourse trap’ and ‘cognitive trap’ about the false narrative that China is in decline, so as to attack and negate the socialist system to contain and suppress China.”

In the post, the ministry also went on to criticize some people “with ulterior motives” for fabricating false narratives such as China is “replacing development with security,” “squeezing out foreign investment” and “suppressing private enterprises,” saying their purpose is to disrupt market expectations and order to block good momentum for China’s economic growth.

You mean like “bidenomics” being awesome except for the collapse in consumer confidence and Biden’s approval rating?