Chinese Lending Starts the New Year 55% Ahead of Expectations

There is no rational explanation for this meteoric increase in lending, other than it being another cock-eyed scheme by the PBOC to try to jumpstart a very flaccid economy.

China’s broadest measure of new credit surged to a record on a seasonal lending binge and as companies paid back foreign currency loans.

Aggregate financing rose to 3.42 trillion yuan ($525 billion) in January, according to a report from the People’s Bank of China on Tuesday, compared with the median forecast of 2.2 trillion yuan in a Bloomberg survey. New yuan loans jumped to 2.51 trillion yuan, compared with the median estimate of 1.9 trillion yuan.

The strong figures were helped by banks front loading their 2016 lending targets and as companies switched foreign currency loans into yuan ones. To be decided is whether the acceleration in lending will translate into a sustained pick up in economic growth.

“We expect the new loans for the real economy to pick up,” Morgan Stanley analysts Sun Junwei and Zhang Yin wrote in a note before the data release.

M2 money supply growth was 14 percent from a year earlier, compared to the median estimate for 13.5 percent.

Let’s see if it works.  What’s a little more debt for the most indebted nation in the world? The Shanghai composite is higher by 2.3% at the moment. Dow futures are up by 265.