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China Leading Indicator? Stocks, Credit Policy, Rebalancing, Money Supply

Published 08/12/2017, 11:40
Updated 09/07/2023, 11:31
  • Chinese bond yields have reached their highest since October 2014
  • Chinese stocks have corrected despite the US market making new highs
  • The PBoC has introduced targeted lending to SMEs and agricultural borrowers
  • Money supply growth is below target and continues to moderate

Chinese 10yr bond yields have been rising steadily since October 2016. They never reached the low or negative levels of Japan or Germany. 1yr bonds bottomed earlier at 1.76% in June 2015 having tested 1% back in 2009.

The pattern and path of Chinese rates is quite different from that of US Treasuries. Last month rates increased to their highest since 2014 and the Shanghai Composite index finally appears to have taken notice. The divergence, however, between Shanghai stocks and those of the US is worth investigating more closely.

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