China's total social financing at 207% of GDP in H1

PBoC said yesterday that outstanding total social financing (TSF), a measure of overall credit in the economy, rose to CNY131.6tn (USD 22.2tn) at June-2015, up 11.9% y/y. This works out to around 207% of GDP from 205% in Q1 and 203% in Q2 2014. At the end of 2008, TSF stood at 125.4% of GDP, implying a near 82%-point of GDP increase over this period. 

This highlights the extent of the 2008 fiscal stimulus and the subsequent lending to offset the global financial crisis. It helped China to avert the global slowdown but at the same time, it now has to contend with i) over-capacity; ii) economic slowdown as the stimulus dissipates; and iii) an expected rise in non-performing loans. 

Commerzbank expects the TSF to rise in coming months, but at a controlled pace, as part of the government's efforts to channel funds to the infrastructure projects to support growth. The bank says, USD-CNY is likely continue to hold steady around 6.2095.