Given all the finger pointing at the US over monetary printing and the debasement of the US dollar, inquiring minds just might be asking "What is China doing?"



That's a good question, so let's look at monetary numbers translated from Chinese.



Chinese Money Supply in 100 Million Yuan







click on any chart for sharper image



Link For Chinese Money Supply



Balance Sheet Of Depository Corporations - Assets







Balance Sheet Of Depository Corporations - Liabilities







Link For Chinese Balance Sheet of Other Depository Corporations



The Chinese central banks' printing and respective Chinese bank lending make us look like amateurs. Chinese central bank assets and the money supply are up 25-26% annualized YTD. But this growth rate of money supply and bank lending is what is required to make up for the 8-10% net contraction in output from the collapse in exports and export-related production.



Meanwhile, back in the US, total bank credit is contracting while M2 is up 5% annualized YTD.



Total Bank Credit - Annualized Rate of Change







M2 - Annualized Rate of Change







M2 is actually down since May-August due to the decline in the rate of growth of bank lending over the summer.



If the May-June rate of deceleration were to persist, M2 could conceivably start start contracting by year end or early '10.



How Will China Handle The Yuan?



To understand what is happening, please consider How Will China Handle The Yuan?



In spite of record worldwide stimulus, a global recession is everywhere you look except perhaps in China. The reason is simple. When the Chinese government "suggests" banks should lend, banks lend. This is how command economies "work", using the word "work" loosely. Yes, the US has massive problems, but let's have an honest assessment of problems elsewhere.



Bottom line, China is busy ramping up production for consumers that don't exist: Not here, not in the EU, and not in China (not yet). This love affair with China, a country that will not float its currency or offer freedom of speech, and hides bank solvency issues even more so than the US, is way overdone.



Remind me to reconsider decoupling when China allows freedom of speech and floats the RMB instead of pegging it.

Don't Mistake Printing For A Sustainable Recovery