FACTBOX-What is China's Total Social Financing indicator?

November 13, 2012|Reuters

SHANGHAI, Nov 13 (Reuters) - China's "total social
financing" (TSF), a liquidity measurement tool invented by
Beijing in 2011, has come to prominence as a better indicator of
monetary policy than traditional measures of money supply.

It was created to help Chinese leaders keep tabs on
fundraising as the financial system diversified away from
state-controlled policy lending.


The TSF is an economic barometer that sums up total
fundraising by Chinese non-state entities, including
individuals and non-financial corporates.

The TSF measures money offered by domestic suppliers, mainly
by financial institutions, but also by Chinese households and
non-financial entities.

As such, it offers a view of both borrowers and lenders.

It excludes proceeds from government bonds, which are used
for government spending and deficit coverage, as well as all
foreign-related items, such as foreign direct investment (FDI)
and overseas debt.

"The TSF is a money-added concept, indicating total funds
the real economy obtained from the financial system over a
certain period of time," the central bank's definition says.


The TSF is divided into yuan loans from banks, foreign
currency loans, trust loans, bank acceptance bills, corporate
bonds and non-financial institutions' equity sales.

The People's Bank of China (PBOC) requires banks to offer
yuan loans using official interest rates, although this year it
granted banks leeway to offer slightly divergent rates.

The central bank does not directly intervene in setting
interest rates for other types of products in the TSF.
However, the government can influence rates indirectly through
state-owned banks, which play a major role as buyers of other
forms of debt and equity.

The central bank can also use open market operation tools
such as reverse bond repurchase agreements to guide the market's
interest rate expectations.

(Reporting by Lu Jianxin and Pete Sweeney; Editing by John