According to one monetary theory, in a world in which China is the dominant creator of debt – which it has been since the financial crisis – it is also China that is the marginal creator of the global inflationary impulse. In which case, the latest Chinese new loan data helps explain the recent inflationary burst which judging my the recent market volatility has freaked out US traders, because according to the PBOC, in January China created a record CNY2900 billion in new loans ($458.3 billion), a striking rebound from the CNY2030 billion a year ago, and almost 1 trillion yuan above the CNY2000 expected.

According to Reuters, the credit boom has been fueled “by strong economic growth, a robust property market and a crackdown on riskier shadow lending, which has forced banks to shift some loans back onto their balance sheets.” But mostly it has been forced by an implicit demand on Beijing to keep the global reflationary impulse strong at a time when the Fed is shrinking its balance sheet – a highly deflationary, if only for circulating monetary aggregates, exercise.

A more detailed breakdown of the loan data showed sharp pickups in demand for credit from both households and companies, a harbinger of strong consumption and investment, if both funded on credit. Corporate loans surged to 1.78 trillion yuan from 243.2 billion yuan in December, while household loans rose to 901.6 billion yuan in January from 329.4 billion yuan in December.

Outstanding yuan loans grew 13.2% in January from a year earlier, also faster than an expected 12.5% rise and compared with an increase of 12.7% in December.

A breakdown by borrowers suggests that corporates and households have levered up, with their new credit making up 66%/29% of the new system credit (44%/23% in Dec 2017); government borrowing narrowed to 2% of new credit, due mainly to zero local government bond issuance in the month (same in Jan 2017). For corporate loans, medium-to-long-term loans increased by Rmb1.33trn, lower than the Rmb1.58trn in Jan’17, reflecting impact from tightening infrastructure projects.