1. The credit growth curve continues to bend
The central bank (PBoC) dropped the monthly lending data for July late on Tuesday.
The pace of credit growth continues to level off.
The key number:
Overall credit grew by 12.9% y/y – up one tick from 12.8% growth in June.
As the COVID-19 lockdown lifted in late February, the PBoC juiced credit growth – accelerating it from 10.7% y/y in February to 12.5% in May, for an average increase of 60 basis points per month.
But over the past two months the growth curve started to bend – with the pace of growth increasing just 30 basis points in June, now 10 basis points in July.
The three-month surge in credit growth from March to May helped to jolt the economy back to life. Officials are now happy with the post-pandemic economic trajectory – and if anything, they are worried about overstimulating.
What to watch:
Credit growth may inch up over the next five months, but it will do so only marginally.
Credit growth is likely to end the year at 13.5% y/y or below, as authorities seek to build a steady, sustainable economic recovery into 2021.
For more on the credit outlook, check out today’s China Markets Dispatch
2. Xi Jinping wants you to finish your vegetables
It’s been 12 days since Xi disappeared from public view to (probably) attend the annual Beidaihe meeting (see
August 6 Tip Sheet).
But the chairman of everything wants to remind everyone he’s very much still around.
Yesterday, state media reported Xi’s most recent instructions.
He wants the Chinese people to become card-carrying members of the Clean Plate Club™ (Xinhua):
“Calling the issue of food waste shocking and distressing, Xi highlighted the need to maintain a sense of crisis regarding food security, especially amid the fallout of the COVID-19 epidemic.”
The big guy busted out his trusted policy toolbox:
“Xi stressed enhancing legislation and supervision, taking effective measures, and establishing a long-term mechanism to stop food waste.”
Don’t get us wrong, food waste is a big problem
(World Wildlife Fund):
China wasted 17-18 million tons of food annually between 2013 to 2015, an amount that could feed 30-50 million people per year.
That said, we’re not sure how you can effectively legislate against it.
This is another manifestation of Xi’s particular brand of micromanagement.
Does Xi really see food security as a looming crisis for China?
World Wildlife Fund:中国城市餐饮食物浪费报告
3. NPCSC concludes session
Yesterday, the National People’s Congress Standing Committee (NPCSC) – China’s legislature – finished up its bi-monthly gathering.
They passed five bills, most notably
“A decision allowing the incumbent Hong Kong Legislative Council (LegCo) to continue serving for at least another year after its original term expires next month.”
The decision comes after Hong Kong Chief Executive Carrie Lam announced on July 31 that this year’s LegCo election would be postponed for a year due to the city’s surging COVID-19 outbreak.
The NPCSC stepped in as Lam does not have the authority to extend theLegCo’s four-year term herself.
This caught our eye:
The legislators also discussed draft amendments to the NPC Organic Law and the NPC Rules of Procedure – rules governing the inner workings of the legislator itself.
What to watch:
No details on the drafts were released, but we’ll keep an eye out.
The legislators also did some prep work for the drafting of the 14
Five-Year Plan (FYP).
They listened to a briefing by the NPCSC general office, comprising 22 special in-depth reports on several issues.
The Party will approve an outline of the 14
FYP this fall. That outline will be the skeleton of the full 14
FYP document to be approved in March 2021.
4. Beijing promises not to fire at US
So…you may have noticed that Sino-US tensions are heating up.
Top officials in Beijing are worried about further escalation.
The latest evidence (SCMP):
“China has told its service personnel ‘not to fire the first shot’ as Beijing looks to de-escalate tensions with the United States in the South China Sea, sources familiar with the situation told the
South China Morning Post.”
“The sources said Beijing had ordered pilots and naval officers to exercise restraint in the increasingly frequent stand-offs with US planes and warships.”
In recent weeks, the US has taken a more assertive posture in the South China Sea and increased its operations there.
Beijing has told DC that it does not want war:
“One source close to the military also said Beijing had communicated through ‘various channels’ to the US that it had told its military ‘never to fire first’ in a goodwill gesture to keep the situation under control.”
The fact that we are even discussing how to avoid a “hot” conflict is a worrying sign.
Beijing may want to dial down tensions – but the Trump administration does not.
5. National heroes
This morning, the National Health Commission (NHC) dropped the latest COVID-19 numbers.
On Tuesday, China reported 25 newly confirmed cases – down from 44 on Monday (NHC):
16 of these were imported from abroad – down from 31 on Monday.
The other nine were all domestically transmitted in Urumqi, Xinjiang – down from 13 on Monday.
In addition, on Tuesday
China reported 20 new asymptomatic cases – 12 of which were imported from abroad.
Authorities have also undertaken something of a public relations blitz.
While fighting COVID-19, authorities have put an emphasis on highlighting the “positive energy” stories that have emerged from the all-of-society struggle against the virus.
Yesterday, Xi Jinping kept the good vibes going by signing a presidential order granting the nation’s top civilian honors to prominent figures leading China’s fight against COVID-19.
Respiratory disease expert Zhong Nanshan received the Medal of the Republic.
Three other physicians who have worked on a COVID-19 vaccine were acclaimed as “People’s Heroes.”
Honoring these four sends a message that China has won the fight against the virus.