China hard landing risk recedes as real money picks up
Simon Ward
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The previous post expressed the hope that a pick-up in emerging E7 real money supply growth would help to compensate for a likely US slowdown, thereby sustaining an expansionary global monetary backdrop. Chinese monetary data for December offer support for this scenario.
Posts here last year drew attention a sharp slowdown in Chinese real money and loan growth, suggesting an increasing risk of a “hard landing”. Policy-makers, however, appear to have averted the danger by easing off on the brakes last autumn, with a consequent revival in nominal monetary trends magnified in real terms by falling inflation.
Six-month real M2 growth in December was the highest since March 2010 (based on seasonally adjusted numbers calculated within Datastream). Real M1 expansion – emphasised by the forecasting approach employed here – has risen by less but, in China’s case, seems to lag real M2, suggesting further improvement in early 2012.
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