Thursday, February 12, 2009

Number Of The Day "Credit Explosion In China"

This almost surreal number is signalling a real panic among the leaders...This time i hope that the sky high published number is as credible as other statistics ( see China´s National Bureau Of Statistics Is Funny..... ) .And if you read the update at the end of the post there is a good chance that at least some of the increase isn´t "real" .....If you want more excellent insight on China the blog China Financial Markets from Prof. Michael Pettis is a must read!

Diese unheimliche Zahl signalisiert ne echte Panik der chinesischen Führung....Muß zugeben das ich beim Ausmaß dieser Steigerungsraten diesesmal sogar hoffe das die Zahlen so wenig glaubwürdig sind wie ansonsten auch ( siehe China´s National Bureau Of Statistics Is Funny..... ). Und wenn man sich das Update am Ende des Postings durchliest sieht es in der Tat so aus als wenn zumindest ein Teil des aberwitzigen Zuwachses nicht "real" ist...... Wenn Ihr mehr Information aus erster Hand betreffend China haben wollt empfehle ich dringend China Financial Markets von Prof. Michael Pettis !

Will China have to choose between social stability and long-term growth?

Reuters has just announced that net new lending may have actually been and even more surprising RMB 1.6 trillion – twice the previous monthly record and an amazing one-third of credit growth in all of 2008. We will know by February 15 at the latest, when the PBoC publishes lending data, but if this is true (and the report was seen as highly credible by one of my friends at Reuters / SEE UPDATE) it will probably goose the stock market up further while making people like me more worried then ever. Since for me much of the Chinese growth explosion of the past several years was caused by a badly allocated credit boom, the idea that the solution to a slowdown is to jack up the credit boom even further is very worrying. It is a little like the idea that the best way for the US to adjust to the decline in its debt-fueled household consumption binge is to replace it with a debt-fueled government consumption binge

I wonder what percentage of the loans will default........ This credit explosion also might shed some light on the recent events we have seen in the Baltic Dry Index ( see Baltic Dry, Winning Streaks, and China via Bespoke )

Möchte nicht wissen welcher Prozentsatz dieser Ausleihungen in 24 Monaten als notleidend deklariert werden muß......Diese Kreditexplosion läßt zudem die letzte erfreuliche Entwicklung im Baltic Dry Index ( siehe Baltic Dry, Winning Streaks, and China via Bespoke ) zumindest in einem etwas anderem Licht erscheinen.....


Looks like his Reuters source was spot on....

Sieht so aus als wenn seine Reutersquelle zeimlich zuverlässig ist .....

China money and credit growth rises sharply / Reuters

BEIJING, Feb 12 (Reuters) - New lending surged at a record pace in January and money growth also perked up as Chinese banks heeded the government's call to extend more credit to support the economy.

Banks extended a whopping 1.62 trillion yuan ($237 billion) in new loans in January, almost a third as much as they lent in all of 2008, the People's Bank of China said.

The surge provided evidence that state-owned banks are doing Beijing's bidding and providing financing for the 4 trillion yuan stimulus package announced on Nov. 9. The central government will fund only 30 percent of the plan itself.

Nearly 40 percent of January's new loans were in the form of discounted bill financing, which firms use for short-term cash needs. Some also reinvest the money, which can be borrowed for just 1.5 percent, in higher-yielding certificates of deposit.

..... economists said January's lending was probably inflated by banks bringing some off-balance sheet loans onto their books since the central bank scrapped quotas late last year in a bid to help the economy.

Here are more details from Prof. Pettis

....there is clearly an increase in lending games aimed at making policymakers happy by showing fat loan books. One of my students just visited me today with an example that involved his father. I don’t want to get into too much detail, for obvious reasons, but the net effect of the transaction involving his father was that an entity was created to borrow money from a bank, the proceeds of which were deposited in a CD, which was then assigned in ownership to the real borrowing entity, which then used the CD as collateral for the “real” loan. Aside from the complications used probably to get around credit restrictions, one single loan was recorded as two loans plus a CD deposit. Apparently the lending bank knew about all the intermediate steps. Surprise, surprise! It turns out that if your career prospects depend on increasing the total amount of loans outstanding, with less focus on the quality or structure of the loans, in fact it isn’t hard to show very nice, fat loan book.

As for the sudden surge in lending, this looks to me to be an accounting exercise, clearing or otherwise funding non-bank debts piled up by SOEs. Many large SOEs (not central ones, regional/local ones, though the central ones win no prize themselves) are behind on paying wages, suppliers etc, and the stimulus provided by this lending surge is really just to ease the log-jam of triangular debts. This implies that there will not be much “bang” for all of this lending

Would be great if only a small fraction of the loans would make sense like financing the Chinalco / Rio Tinto & Russia, China sign $25 billion energy deal deals..... ( well, read the 2nd update and it seems clear that this isn´t the case..... )

Wäre wünschenswert wenn zumindest ein Bruchteil der vergebenen Kredite soviel Sinn machen würden wie die Finanzierung des Chinalco / Rio Tinto & Russia, China sign $25 billion energy deal Deals..... ( verweise auf das 2. Update und es ich nicht wirklich überraschend festzustellen das die sinnvolle Verwendung wie nicht anders zu erwarten mit der Lupe gesucht werden muß .....)

2nd Update :

So Much For Stimulus: Chinese Loans Diverted to Stocks, Feeding Rally Naked Capitalism

Chinese companies may be using record bank lending to invest in stocks, fueling a rally that’s made the benchmark Shanghai Composite Index the world’s best performer this year, according to Shenyin & Wanguo Securities Co.

As much as 660 billion yuan ($97 billion) may have been converted by companies into term deposits or used to buy equities, Li Huiyong, Shanghai-based analyst at Shenyin Wanguo, said in a phone interview today, citing money supply figures.

China’s banks lent a record 1.62 trillion yuan in January as part of a government drive to stimulate the world’s third- largest economy, while M2, the broadest measure of money supply, climbed 18.8 percent from a year earlier.

The Shanghai Composite has surged 29 percent since the start of 2009, compared with a 10 percent decline in the MSCI World Index.

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Blogger jmf said...

China on the brink
Asia Times

2:12 AM  
Anonymous Anonymous said...

uh... 10x for thoughts :)

3:29 PM  

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