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China credit impulse slides, while bitcoin holds up in August

CoinDesk cites Societe Generale research linking the index to S&P 500 returns, noting the Bloomberg China Credit Impulse reading fell to 20.8 points since 2008.

Reported · Written up by our desk · Market Structure

China's credit impulse, an indicator used to gauge whether new borrowing is accelerating or slowing relative to the size of the economy, is falling and flashing a warning for risk assets, according to CoinDesk. The outlet describes the metric, created by economist Michael Biggs in 2008, as a measure of fresh credit flows versus GDP rather than total debt outstanding.

CoinDesk reports that the decline in the credit impulse is associated with weaker global manufacturing and commodity cycles, given China's role as a major commodity consumer. It also notes research by Societe Generale that the index correlates with global manufacturing cycles and has historically led S&P 500 returns by about 12 months.

Bitcoin has, so far, shown resilience even as the indicator deteriorates, the article says. CoinDesk points out that major bitcoin bottoms have historically coincided with renewed upswings in the credit impulse.

The piece adds that Societe Generale strategist Albert Edwards warned that ignoring China's monetary tightening could be costly for risk assets if credit creation relative to GDP signals an impending global slowdown. CoinDesk also says the Bloomberg China Credit Impulse index reading was 20.8 points recently, the lowest since 2008, while bitcoin rose 25% in August and topped $80,000 amid strong inflows into U.S.-listed spot ETFs.

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