China’s credit impulse signals caution for risk assets, but bitcoin holds steady
China’s credit impulse turns negative
China’s credit impulse, an economic measure tracking the change in new credit relative to the country’s GDP, is now declining. This indicator, which has historically influenced global manufacturing, commodity prices, and risk assets like stocks, is signaling potential weakness for global growth.
Despite this warning sign, bitcoin has so far shown resilience, recently rising 25% in August and approaching $80,000.
What the credit impulse means
The credit impulse, created by economist Michael Biggs, measures whether new borrowing in an economy is speeding up or slowing down compared to GDP. A rising credit impulse typically supports spending and economic growth, while a falling one suggests the opposite.
According to Societe Generale, this indicator correlates with global manufacturing trends and often leads U.S. stock market returns by about 12 months. A decline can also negatively affect commodity prices, given China’s role as a major consumer and global manufacturer.
Bitcoin’s reaction remains uncertain
Historically, bitcoin’s major price lows have aligned with upturns in China’s credit impulse. However, the current decline in the indicator has not yet significantly impacted bitcoin, which has seen strong inflows into U.S.-listed spot ETFs and a broader upward trend in lagging assets.
Two possible outcomes are emerging. Bitcoin may continue to rise, potentially decoupling from China’s credit conditions due to a shift toward U.S. institutional trading. Alternatively, if U.S. stocks decline as Societe Generale strategist Albert Edwards warns, risk aversion could spill over into bitcoin regardless of its buyer base.
Key points
- China’s credit impulse is falling, signaling potential global economic weakness.
- The indicator has historically influenced global manufacturing, commodities, and risk assets.
- Bitcoin has remained strong despite the warning, rising 25% in August.
- Societe Generale warns that ignoring China’s monetary tightening could be a major investment mistake.
What is still unclear
It remains uncertain whether bitcoin will continue to resist the pressure from China’s declining credit impulse or if a broader market downturn will eventually affect its price.
Why this matters
A sustained decline in China’s credit impulse could weigh on global economic growth, corporate earnings, and risk assets, including stocks and potentially bitcoin. However, bitcoin’s recent resilience suggests its market dynamics may be shifting.
