With many investors grappling to understand the degree to which China’s economic growth has been fueled by debt, efforts to get a grip on measures of new credit creation have gained fresh urgency. Bloomberg reports that, to date, many have relied on the total social financing (TSF) invented by the Chinese authorities in 2011 as a way of capturing a larger slice of the country’s shadow banking activity, but Goldman analysts led by M.K. Tang cast fresh doubt, in a note published on Wednesday, on the measure’s ability to gauge credit creation. Of particular issue is the rise in opaque loans given noises surrounding China’s circular financing schemes, which involve banks lending to nonbank financial institutions (NBFIs) as opposed to directly to companies.
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