Chinese monetary trends remain weak, indicating that the authorities need to loosen policy soon if the economy is to avoid a bumpy landing.
Real M1 was unchanged in the six months to September – unusual for an economy with a high trend growth rate. A similar stagnation in 2008 preceded a contraction in industrial output.
Real M2 looks a little better, with six-month growth recovering from a low in July, though still weak by historical standards.
The authorities are hanging tough because of sticky inflation, with consumer prices rising 6.1% in the year to September. The increase, however, slowed to 4.3% annualised in the latest three months, adjusted for seasonal factors.