The Chinese thermometer turns red. The credit impulse, this leading indicator that macro managers have been examining since the 2008 crisis to gauge the risk appetite of the markets, has turned downward. In previous cycles, the same signal preceded major reversals in risky assets by six to nine months. This time, Bitcoin shrugs. Reprieve or lasting disconnection: the answer lies less in the historical correlation than in the identity of the marginal buyer of BTC, who no longer has much to do with that of 2017 or 2021.
Key Points
China's credit momentum, derived from total social financing published by the People's Bank of China, measures the acceleration of credit, not its level
This indicator preceded the major movements in risky assets by two to three quarters in 2009, 2016, 2018 and 2021.
Bitcoin responds less since China banned crypto trading and its miners in 2021
The marginal buyer of BTC is now American and institutional: spot ETFs, corporate treasuries and dollar liquidity
The credit impulse, this indicator that Beijing does not publish
No Chinese administration broadcasts a “credit impulse”. The indicator is reconstructed by economists from total social financing (TSF), the aggregate that the People's Bank of China puts online each month.
The TSF adds up everything that supplies the real economy with new money: bank loans, corporate bonds, local government issues, financing from the shadow banking sector. The outstanding amount today exceeds 400,000 billion yuan, or nearly 60,000 billion dollars.
The impulse measures something else: the variation over twelve months in the flow of new credit, compared to GDP. The nuance is crucial. A negative impulse does not mean that China stops lending, but that it lends less quickly than a year earlier. It's a derivative, not a level. And the markets, which live on variations much more than on stocks, react precisely to this boost or brake.
Fifteen years of too regular coincidences
The indicator’s track record is indeed humbling. The 4,000 billion yuan stimulus plan launched at the end of 2008 had propelled the momentum to new heights, and commodities like emerging stocks followed suit.
Rebelote in 2012, then in 2015 and 2016, when Beijing reopened the floodgates to cushion the devaluation of the yuan and the collapse of its stock markets. Bitcoin, then below $500, begins the ride that will take it towards $20,000.
The film also played in reverse. The 2018 deleveraging campaign, directed against shadow finance, compressed the momentum at the precise moment when the crypto market abandoned more than 80% of its capitalization.
Same sequence in 2021: Chinese credit slows down in the spring, crypto winter sets in the following year. Between the signal and the impact, the lag is generally around two to three quarters. Which makes some specialists say that Bitcoin is “the best barometer of global liquidity”!
There is nothing mystical about the transmission channel. Chinese credit irrigates raw materials, inflates exporters' surpluses, weighs on the dollar and frees up margin for assets located at the end of the risk curve. Bitcoin occupies this end.
The marginal buyer of BTC has changed his passport
However, the 2017 mechanics seized up somewhere between Beijing and Chicago. China banned crypto trading in 2021 and expelled its miners the same year, erasing the direct channel that linked Chinese savings to order books.
The marginal flow now comes from elsewhere: American spot Bitcoin ETFs and their hundred billion dollars in assets, corporate treasuries led by Strategy and its more than 840,000 BTC, allocations from pension funds and wealth managers.
These buyers do not react to the tap of Chinese credit. They respond to mandates, investment committees and liquidity in dollars: size of the Fed's balance sheet, level of the US Treasury current account, and now stablecoins, whose issuers recycle hundreds of billions in Treasury bills.
BTC’s correlation with the global money supply, however, remains strong. Its sensitivity to the Chinese component alone, much less.
