ML-Implode News - Goldman Finds That China's Debt Is Far Greater Than Anyone Thought

Goldman circumvents data complications by instead focusing on the "money" concept, a mirror image to credit on FIs' funding side. The idea is that money is created largely only when credit is extended--hence an effective gauge of "money" can give a good sense of the size of credit. We construct our own money flow measure, specifically following and quantifying the money flow from households/corporates.
Goldman finds something stunning: true credit creation in China was vastly greater than even the comprehensive Total Social Financing series. To wit: "a substantial amount of money was created last year, evidencing a very large supply of credit, to the tune of RMB 25tn (36% of 2015 GDP). This is about RMB 6tn (or 9pp of GDP) higher than implied by TSF data (even after adjusting for municipal bond swaps). Divergence from TSF has been particularly notable since Q2 last year after a major dovish shift in policy stance."
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As Goldman concludes, its finding suggests that the Chinese economy's reliance on credit has deepened significantly, and adds that "our projection of China's debt/GDP ratio for coming years has turned more unfavorable as a result."

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Goldman Finds That China's Debt Is Far Greater Than Anyone Thought