China's Extra Money Is Not Reaching the Real Economy

Money supply growth slows to 7.7% as credit transmission fails, forcing investors to price in prolonged stagnation.

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Key Points

M2 growth slowed to 7.7%, missing the 7.9% consensus.
Investors sold yuan assets, betting on further rate cuts.
The credit transmission mechanism is broken, with banks hoarding cash and borrowers staying away.

What To Watch

Signs of fiscal stimulus, such as government bond issuance.
Further weakness in real estate sales and household borrowing.
The next PBOC rate cut decision.

Market Analysis

How the tape may move from the last update’s mark — not from the open, and not the session % already printed.

The slowdown in M2 growth confirms a liquidity trap, forcing investors to price in prolonged monetary easing and weak economic growth.

Expected Move From Here -2.5% to +1.0% From last update, not from the open

Certainty 65%

Why

The failure of recent rate cuts to stimulate lending suggests that further easing is needed. If fiscal stimulus is announced, the thesis could be wrong.