Economy – shiqiv.com

First quarter China household net additional mortgage lowest in 10 years

For the first quarter of 2026, the net increase in mid-to-long-term household rmb debt is lower than 2015 by ~33%. This is an approx of net new mortgages.

2015 was the year of 棚改货币化 / 去库存

2016 was the year of 房住不炒 (near end of the year)

1q26 – 2026年一季度金融统计数据报告

3月末，本外币贷款余额284.51万亿元，同比增长5.7%。月末人民币贷款余额280.51万亿元，同比增长5.7%。一季度人民币贷款增加8.6万亿元。分部门看，住户贷款增加2967亿元，其中，短期贷款减少1640亿元，中长期贷款增加4607亿元；企（事）业单位贷款增加8.6万亿元，其中，短期贷款增加4.13万亿元，中长期贷款增加5.42万亿元，票据融资减少1.1万亿元；非银行业金融机构贷款减少3680亿元。

1q15 – 2015年一季度金融统计数据报告

3月末，本外币贷款余额91.52万亿元，同比增长13.3%。月末人民币贷款余额85.91万亿元，同比增长14.0%，增速比上月末低0.3个百分点，比去年末高0.3个百分点。一季度人民币贷款增加3.68万亿元，同比多增6018亿元。分部门看，住户贷款增加8892亿元，其中，短期贷款增加2064亿元，中长期贷款增加6828亿元；非金融企业及其他部门贷款增加2.71万亿元，其中，短期贷款增加9543亿元，中长期贷款增加1.48万亿元，票据融资增加1643亿元；非银行业金融机构贷款增加632亿元。3月份人民币贷款增加1.18万亿元,同比少增661亿元。月末外币贷款余额9146亿美元，同比增长4.0%，一季度外币贷款增加341亿美元。

In fact, you need to go back to 2012 to find a lower number.

1q12 – 2012年一季度金融统计数据报告

3月末，本外币贷款余额60.77万亿元，同比增长15.5%。人民币贷款余额57.25万亿元，同比增长15.7%，比上月末高0.5个百分点，比上年末低0.1个百分点。一季度人民币贷款增加2.46万亿元，同比多增2170亿元。分部门看，住户贷款增加4995亿元，其中，短期贷款增加2581亿元，中长期贷款增加2414亿元；非金融企业及其他部门贷款增加1.95万亿元，其中，短期贷款增加1.05万亿元，中长期贷款增加5906亿元，票据融资增加2575亿元。月末外币贷款余额5595亿美元，同比增长17.2%，一季度外币贷款增加211亿美元。

Do you remember the egg prices?

Last year, egg shortages and egg prices were capturing new headlines.

“Can’t find eggs” was a common complaint.

Feb 2025 CNBC – Wholesale egg prices have ‘blown way past’ record highs

Feb 2025 Bloomberg – 56-day streak of higher prices

Wholesale price was $8.07 per dozen – Feb 21, 2025, USDA Egg Market Overview

—-

What about now?

Retail price: $6.23 (Mar 2025) -> $2.35 (Mar 2026) per dozen, down more than 60% from peak in 2025.

Wholesale price: $0.21 per dozen, down 97% from $8.07 in Feb 2025

M1 vs M2 gap in China

Back in 2016 and 2017, M1 growth was meaningfully faster than M2 growth in China, which typically indicates a high willingness to spend or invest in the economy.

That is a bullish sign.

On the contrary, if M1 growth is below M2 growth by a wide margin, it usually indicates people would rather save more than spend or invest.

That negative gap was deepening throughout 2024 till the famous 924 stimulus.

Using revised M1 growth rate, the negative gap was about -5% at the beginning of 2024 and about -10% in Sep 2024.

That negative gap shrunk to about -1% in Sep 2025 and about -3% in Feb 2026.

Actually, looking at M2 growth alone might give you a glimpse of China’s economy pulse and sentiment.

Previous middle-east war length

1991 Gulf War

The actual combat phase of the 1991 Gulf War lasted about 43 days.

Air war began: January 17, 1991 (Operation Desert Storm started) Ground war began: February 24, 1991 Ceasefire / fighting stopped: February 28, 1991

So there are two common ways to measure it:

Full active fighting period: January 17 to February 28, 1991 = 43 days

Ground combat only: February 24 to February 28, 1991 = about 100 hours / 4 days

2001 Afghanistan War

Start: October 7, 2001

Initial fighting end: Early December 2001 — Kandahar fell / the Taliban regime effectively collapsed, which is the more complete endpoint for the initial regime-toppling campaign.

About 2 month.

2003 Iraq war

Main invasion / conventional fighting phase, it began on March 20, 2003 and was largely completed by May 1, 2003, when the U.S. declared major combat over.

About 42 days.

All these actions are approved by US Congress so that US can use force for over 60 days.

Powell’s lesson on oil supply shock

Fed is hard to react to oil supply shock.

1/ Fed is designed to manage demand. It cannot produce more oil or open shipping lanes. Historically, the Fed “looks through” supply shocks unless they start to bleed into the broader economy (secondary effects / expectation for inflation rises).

2/ Energy shocks often spike and subside relatively quickly. However, Fed policies take months or even years to fully permeate the economy. Fed would be slowing down the economy exactly when it might be trying to recover from the high energy costs.

“By the time the effects of a tightening in monetary policy take effect, the oil price shock is probably long gone, and you’re weighing on the economy at a time when it’s not appropriate.”

88% drop in new household mortgage Jan-Feb 2026 vs 2021

In the first two month of 2026, China households increased mid-to-long-term borrowing by 165.4 bn rmb, vs 1356.1 bn rmb in the first two month of 2021.

That is a decrease of 88%.

Households’ new mid-to-long-term borrowing is mostly associated with mortgages / housing purchases.

Details below.

Feb 2026 – PBOC

前两个月人民币贷款增加5.61万亿元。分部门看，住户贷款减少1942亿元，其中，短期贷款减少3596亿元，中长期贷款增加1654亿元；

Feb 2021 – PBOC

2月份人民币贷款增加1.36万亿元，同比多增4529亿元。分部门看，住户贷款增加1421亿元，其中，短期贷款减少2691亿元，中长期贷款增加4113亿元

Jan 2021 – PBOC

1月份人民币贷款增加3.58万亿元，同比多增2252亿元。分部门看，住户贷款增加1.27万亿元，其中，短期贷款增加3278亿元，中长期贷款增加9448亿元

China long-term real interest rate dips to 0.5% in Feb driven by higher CPI, vs 1.75% in US

China long-term real interest rate dips to 0.5% in Feb vs 1.6% in Jan and avg of 1.7% in 2025, driven by higher CPI.

China long-term real interest rate is calculated by 10-year CGB yield ~1.81% in Feb minus Feb CPI of 1.3%.

Avg. long-term real interest rate of 1.7% in 2025 is calculated by averaging monthly LT real interest rate using the same method.

vs. US 10-Year Real Interest Rate of 1.75% in Feb.

China CPI is the strongest in years

Little inflation is a sign of weak economy, which China has been criticized for past few year.

That has changed.

China’s past 3-month core CPI (excl. food and energy) is the best in years, after February core CPI of 0.7% MoM.

The yoy number of 1.8% in Feb is also the highest in years – even higher than 1H of 2021.

Chinese policymakers kept their annual consumer inflation target steady at “around 2%” for 2026. Although China hasn’t seen 2% CPI for 3 years since Jan 2023, 2026 looks to be closer.

China: dominating renewable additional, but biggest oil net importer

Despite that

1/ Solar is now the dominant form of global capacity additions, comprising 60% of new capacity in 2024

2/ China is a renewable energy juggernaut: it now accounts for 50%-60% of all global new renewable capacity additions.

3/ Most renewable supply chains go through China.

It doesn’t change the fact that China is a big (and biggest) and growing net importer of oil. In 2024, China imported about 11.1 million barrels/day of crude oil.