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The Mother Of All Bubbles: Lending In China Hits New Low In September
Some ominous moves out of the Hang Send and the Shanghai Composite overnight which may have everything to do with the latest piece from Caijing, which notes that according to banking sources September lending by China's four largest banks was the lowest so far this year at a paltry 110 billion yuan (from 166 billion in August), while the Bank of China disbursed a miserly 3 billion down from 72.2 billion in August.
September lending fell as the bank had achieved the goals of expanding its loan portfolio, adjusting lending structure and boosting market share, said the analysts, who declined to be identified ahead of the official release of statistics by the People's Bank of China.
New lending extended by the four biggest banks roughly accounts for half of the total by China's commercial banks.
China Construction Bank (SSE. 601939; HKEX.0939) extended 44 billion yuan worth of new loans in the month, up from the 34.7 billion yuan dealt out in August, bringing the total for the first nine months to 842.7 billion yuan.
Industrial and Commercial Bank of China (SSE.601398; HKEX.0398), the world's largest commercial bank by market value, extended over 30 billion yuan in new loans in September, compared with the 38.1 billion yuan in August. ICBC has set a full-year lending target of 1 trillion yuan, and extended a total of 925.2 billion yuan in the first nine months.
Agricultural Bank of China also lent more than 30 billion yuan in the month, up from 20.8 billion yuan in August. The bank has not set a full-year loan target but said it will determine its lending scale in response to demand and economic conditions. New loans for the first nine months stood at 872.6 billion yuan.
We have discussed previously the goal-seek formula that China employs in order to hit its magical 8% GDP growth target every year, which is driven by feeding capital disbursements without any real regard for whether the excess loan liquidity goes into washing machines or buying Steve Wynn's latest IPO at nosebleed valuations.
Yet the September decline was doubly ominous, as it comes in a time when banks traditionally let the spigot on full blast:
Chinese banks tend to rush lending towards the end of a month or quarter in order to boost performance and expand market share. They lent a record 1.8 trillion yuan at the end of the first quarter, followed by 1.53 trillion at the end of the first half, Caijing reported earlier.
The lending surges, which far exceeded the actual demand for credit, led to the China Banking Regulatory Commission issuing a series of warnings to the banks, the result of which was a decline in new loans in September, the analysts said.
Market operations conducted by the central bank to adjust liquidity, coupled with an investigation into banks' implementation of macro-economic policies by the National Audit Office that began in September, also put pressure on banks to slow new loan approvals, according to the analysts.
New lending is expected to slow steadily in the fourth quarter, they added.
Many have said that the Chinese bubble is deflating. Several headfakes in the CSI, at one point a 20% decline into recession territory, seemed to have given China bears the ammunition they thought they needed. Yet these have all been pretty much just that - transitory headfake movements whose downward pattern has not sustained. And the broken pattern will continue so long as Ben and his covert-ops Chinese counterparts (good luck trying to pass HR 1207 in China) continue flooding markets with increasingly worthless pieces of paper (keep in mind, currency devaluations are relative phenomena).
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Chinese need to buy treasuries again now that the US government has stopped...
Have we arrived at MAD? If China threatens to dump U.S. Treas, Bernanke will threaten to dump U.S. Treas.
Check out this vid
Largest mall in China (twice as big as the mall of America), has twelve tenants
http://www.pbs.org/pov/utopia/
That's good, but this (& the related) may beat it:
http://www.youtube.com/watch?v=ektMQGbW3wk&feature=related
Someone forgot to run a proper catchment analysis for this mall
Great find! One seriously freaky film! But the Chinese are enterprising and gutsy. They'll try anything. Got to admire them for that. In 2 years that mall is full.
If the dollar goes down forever, when will PBOC unlock from it?
Now why would they ever want to do that? Remember PBOC nothing but gains from a weak US dollar policy. Their manufacturing footprint expands whilst the rest of the world's collapses. Our side of the deal is that we simply import their delaftion through labour arbitrage.
The only way I can see China disconnecting from the USD peg is after and only after they have sufficated every export driven (through manufactuing) economy.
or when they simply cant uphold the peg due to not having the yuan (or having way better places to put the yuan to work instead) to sell for the dollar. This might be possible in a deflationary scenario they would face in the event this latest "keeping up with the Obamas" bubble bursting.
Where's Jim O'Neill when you need him?
Why do I need to borrow if I can issue an IPO or a bond or use any other financial tool and find 5x subscription?
Who would pay for money when all you could want can be had for free?
Is that banks refuse to lend or that no has use for it?
Essential viewing for all those who believe China will carry the west through this crisis. Superb independent documentary. (Only 12mins)
http://www.pbs.org/pov/utopia/
Synopsis
Is nothing American sacred anymore? The largest mall in the world turns out not to be the famous Mall of America in Bloomington, Minn. It’s the South China Mall outside of Guangzhou, China. Outdoing the techniques of American consumerism, South China Mall is Disneyland, Las Vegas and Mall of America rolled into one. There are carnival rides, mini-parks, canals and lakes amid classic Western-style buildings with space for hundreds of shops.
But along with the glitz and glory of middle-class shopping, the mall’s Chinese developers seem to have imported something else — a cautionary tale of capitalist hubris. Alex Hu, a local Guangzhou boy who made it big in international business, wanted South China Mall to be a hometown monument to his success — even though Guangzhou has no major airports or highways nearby. And four years after its construction, the mall sits virtually empty of both shops and shoppers. But the Chinese have imported yet another concept familiar to Americans — South China Mall is considered too big to fail. So, employees line up for flag-raising ceremonies and pep talks about “brand building” before going off to maintain the deserted concourses meticulously. If China is the future of the world economy, Utopia, Part 3: The World’s Largest Shopping Mall just may be a startling peek at what’s to come.
If China banks cut back on lending, the US de facto CB (GS) will fill the slack.
http://www.boston.com/business/articles/2009/09/23/goldman_sachs_invests_334_mln_in_chinas_geely/
This is tax payers money used to crush our own manufacturing industry. Detroit is all but dead. NY will soon be regarded the "was" banking center of the world.
Just like the UK which is already there, we are well on our way along our devolution into nothing more than a financial center that manufactures nothing and makes its living by shuffling fiat currencies around.
Good luck with that.
The sheer size of the Chinese population ensures that however much money they print, it will not be "too much" because dirt poor rural Chinese will be willing to work for a buck or two(depreciated Yuan) and accumulate these Yuans in their drawers at home.
Real living standards for these poor Chinese will still "see progress" if there is any urban job paying debased Yuans.
By the way, I think you mean "Hang Sen[g]" and Shanghai in the first line.
The Japanese, on the other hand, are screwed because their population has fully developed(by OECD standards) and any more additional money printed will result in the increase of monetary base per Japanese. If banks lend these base money out in any meaningful way, there would have been hyperinflation long time ago.
Excuse this question from a humble retiree just trying - a la Indiana Jones in the Lost Ark movie - to stay ahead of the rolling boulder of portfolio investment ruin. Don't Chinese authorities have a built in conflict of interest regarding the forex value of the USD and economic growth? On the one hand, at least in the short term, it is in their interest to link directly to the USD to piggy-back on its devaluation in value relative to other currencies. You can't ask for more if you have a mercantilist economy dependent on maintaining exports. On the other hand (no I'm not an economist), they have $2 trillion in reserves whose real value declines as the USD declines. Frankly, given the structure of their economy, their public hand-wringing must be aimed at ensuring that the decline is controlled, rather than being upset that it is happening. In other words, macro-economic well-being trumps concerns over what is, after all, a huge stockpile of reserves no matter what the fate of the USD. Anyone?
Here's the way I see it. It's a win-win for China. As you mentioned they benefit from the Yuan exchange rate against most currencies but also benefit from the yield hike of a declining T-bill or T-bond. Sure the value of their USD reserves decrease in respect to other currencies (not Yuan of course) but i doubt China is in any serious hurry to unload them.....just bluffing i hear which is why I strongly believe the weak dollar policy is a collaboration between US and China.
Smart man. You can't beat the macro economics, ever...
Frankly, despite the inevitable short-term pain if China's bubble is deflating a bit, this gives me more confidence in their longer-term economic prospects. Blowing up a giant bubble over decades has a proven bad result and I'm not sure the Chinese really need to result to this with no alternatives.
Cheng Siwei, former Vice-Chairman Standing Committee, now head of green energy program: "Credit in China is too loose. We have a bubble in the housing market and in stocks so we have to be very careful, because this could fall down."
Could this lending deflation be allowed to happen, as part of being 'very careful'?
most of the China stimulus washing machines went to people in rural China who have neither running water nor electricity