The May data for China showed a further slowing in the growth of credit. To be clear, total credit is still increasing, but the issue is that it is increasing at a slower pace. Now there are basically 2 reasons people worry about China: 1. because debt levels are “too high”, and 2. because debt growth becomes too slow and therefore activity levels slow down. Today’s chart will give both of those groups something to worry about! It shows the monthly growth in “total social finance” (a broad measure of credit growth), standardized against GDP, and the key point is that the pace of TSF growth is slowing down. I’ve also noticed a broader tightening of financial conditions e.g. slower money supply growth, changes in the currency, real interest rates, property prices, etc. My base case is that the Chinese economy sees slower growth this year, but aside from the negative impact this will have on commodities/EM at the margin, I’m not particularly concerned about major downside risk in China at this time.