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Authored by Simon White, Bloomberg macro strategist,
Money growth in China is one of the most important numbers in markets right now. A rekindling of stimulus-driven domestic growth is likely to boost global and US inflation, curbing the extent of Federal Reserve policy easing and driving up longer-term Treasury yields. Expanding money supply in China will be a key sign of if and when stimulus is gaining traction.
Follow the money. It’s a cliché, but like all clichés, it survives because at its heart it conveys a truth. The stimulus measures China has announced – with more set to follow – are potentially consequential not just for China but for growth, inflation and monetary policy around the world. But will they work, and if so when? One of the cleanest, clearest ways to see this will be when growth in China’s M1 money starts rising.