L’argent, le moteur des marchés
Chinese money update: losing momentum
17 juin 2025 par Simon Ward
Chinese monetary trends suggest a continuation of lacklustre economic growth with negligible inflation.
Six-month momentum of narrow and broad money picked up strongly during H2 2024, raising hopes of a reflationary scenario. Growth rates, however, have fallen back since Q1, to around the middle of ranges in recent years – see chart 1.
Chart 1
May activity numbers confirm an economic slowdown, with six-month growth of industrial output and fixed asset investment falling again, and home sales contracting at a faster pace. Retail sales were boosted by subsidy programmes and promotions, with payback likely – chart 2.
Chart 2
House prices haven’t stabilised. The three-month change in new house prices has stalled below zero, with that for existing homes becoming more negative – chart 3.
Chart 3
Monetary developments don’t yet warrant pessimism. Six-month broad money momentum remains respectable, at 4.0% – 8.2% annualised – in May. This could be consistent with nominal GDP growth of c.6.5% pa, based on a long-run trend rise of 1.75% pa in the money to GDP ratio.
Narrow money momentum has weakened more sharply but the sectoral breakdown is reassuring, showing stable growth of household and enterprise money, with the aggregate slowdown due to a fall in demand deposits of government-related bodies – chart 4.
Chart 4
This fall is unlikely to be a leading indicator of reduced spending by these bodies, particularly as their overall deposit growth – i.e. including time as well demand deposits – has remained stable.
The money numbers, moreover, exclude fiscal (i.e. central government) deposits, six-month growth of which has picked up since Q1. Demand deposits of government-related bodies could recover as funds are transferred to finance spending projects.
