$1,001,000,000,000: China Just Flooded Its Economy With A Record Amount Of New Debt

Tyler Durden's picture

When China reported its economic data dump last night which was modestly better than expected (one has to marvel at China's phenomenal ability to calculate its GDP just two weeks after the quarter ended - not even the Bureau of Economic Analysis is that fast), the investing community could finally exhale: after all, the biggest source of "global" instability for the Fed appears to have been neutralized.

But what was the reason for this seeming halt to China's incipient hard landing? The answer was in the secondary data that was reported alongside the primary economic numbers: the March new loan and Total Social Financing report.

As the PBOC reported last night, Chinese banks made 1.37 trillion yuan ($211.23 billion) in new local-currency loans in March, well above analyst expectations, as the central bank scrambled to keep the economy engorged with new loans "to keep policy accomodative to underpin the slowing economy" as Reuters put it. This was up from February's 726.6 billion yuan but off a record of 2.51 trillion yuan extended in January. Outstanding yuan loans grew 14.7 percent by month-end on an annual basis, versus expectations of 14.5 percent.

But it wasn't the total loan tally that is the key figure tracking China's credit largesse: for that one has to look at the total social financing, which in just the month of March rose to 2.34 trillion yuan, the equivalent of more than a third of a trillion in dollars!

And there is your answer, because if one adds up the Total Social Financing injected in the first quarter, one gets a stunning $1 trillion dollars in new credit, or $1,001,000,000,000 to be precise, shoved down China's economic throat. As shown on the chart below, this was an all time high in dollar terms, and puts to rest any naive suggestion that China may be pursuing "debt reform." Quite the contrary, China has once again resorted to the old "growth" model where GDP is to be saved at any cost, even if it means flooding the economy with record amount of debt.

 

And to put it all together, the PBOC also reported that the broad M2 money supply measure grew 13.4% in March from a year earlier, or precisely double the rate of growth of GDP. This means that it took two dollars in new loans to create one dollar of GDP growth.

 

With China's debt/GDP already estimate at 350%, how much longer can China sustain this stunning debt (and by definition, deposit) growth continue?

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LowerSlowerDelaware_LSD's picture

Buuuuuuuulish..

Pump that bubble harder!...

Haus-Targaryen's picture

I'd love to see the Chinese build a replica of 1933 Berlin.  I imagine it would be beautiful.  Build like shit, but as long as you don't touch it -- beautiful to look at. 

zeropain's picture

my guess is they did build it.

MillionDollarBonus_'s picture

This may seem like a lot, but when you understand the extent of China's deflation problem, you realize that this is just a drop in the ocean. Ordinary people can barely comprehend the economic catastrophe that economic officials are averting by flushing the system with demand. When you have no demand, you have no growth and no employment. You really should get an education in economics before commenting on these issues, as currently most of you don't seem to understand what you're talking about.

WHY OUR ECONOMY NEEDS A WORLD WAR III
gdogus erectus's picture

When you are tied to the dollar, this is what it takes to stay 'balanced'.

Buckaroo Banzai's picture

Andrea True Connection singing the new Chinese Communist Party anthem: https://www.youtube.com/watch?v=RlJGrIyt-X8

Ghost of Porky's picture

Me rikey print arotta dorras!

Buird arotta big buirdings!

Money Counterfeiter's picture

Damn guess the Chicoms like that Venezuelan pussy.  Hyperinflation in 1. 2. 3. ...

Radical Marijuana's picture

WOAR!  WOAR!  WOAR!

MillionDollarBonus seems

to have "fun" like

Stephen Colbert?

XuscitizenSweden's picture

The Chinese know EXACTLY what they are doin'.

Haven't you folks figured out WHY?

I strongly suggest you listen to Bill Holter's most recent interview HERE:

A2A with Bill Holter  

Download Podcast (Right Click + 'Save As')

Wow, this was a great A2A! When you have time, be sure to listen to the entire recording. You won't be disappointed.

Over the course of this hour long discussion, Bill offers opinions and insights on a variety of topics including:

  • The recent release of the "Panama Papers" and subsequent truth bombs that may be on the way
  • The impossibility of accurately predicting a dollar price for gold after the expected reset
  • Chinese involvement in physical metal accumulation as well as paper metal manipulation
  • Whether "the rally you don't sell" has begun and silver's potential upside

And MUCH, MUCH more. Again, please be sure to give this a thorough listen.

http://www.tfmetalsreport.com/podcast/7552/a2a-bill-holter

Theonewhoknows's picture

They do the same thing as FED, BOJ and ECB. They got their debt and now they dont want to pay itback because they can't.  = The infaltionary escape from debt will make sure that there will be enough unemployment, maybe even more than enough. But students will be happy (with their debt they will be useful to be a 'dumb crowd' that follows 'omnipotent leaders') while everyone else's savings gonna disappear http://independenttrader.org/war-on-cash-a-piece-of-a-bigger-puzzle.html

 

cheech_wizard's picture

No, the world doesn't need WWIII. But what has become glaringly obvious, is that you need the

"Hot Shot DuraProd Rechargeable Livestock Prod with 42" Flexible Shaft" liberally applied to your fundament.
gcjohns1971's picture

It takes a "special" snowflake to believe that desroying his own capital is unproductive, but destroying someone else's is productive.

Clearly it is the quality, not quantity of education that matters.

tarabel's picture

 

 

I'm not sure I agree with that. Flattening the rest of the world's industrial bases did a lot of good for the US economy post WWII. By 1958, the US led the world in the production of every single manufactured good except for bicycles. Downhill ever since.

On the other hand, destroying the markets as well as the competing suppliers to those markets will not end well.

So it all depends.

tarabel's picture

 

 

Actually, our economy needs a World War 2, not a World War 3.

roddy6667's picture

War only helps your economy if it is fought on somebody else's soil. America got rich rebuilding Europe and Japan's infrastructure. The next big war will be fougnt at least partly in America. Things will go from bad to worse.

bobsmith5's picture

Once again, MDB does not know what he is talking about, and most of you agree.  MDB's comments are so stupid and poorly reasoned that most of you love to hate him, and hate him you do.

I remind you, that that is exactly why he is here and why he posts such nonsense.  He loves to be hated and comes here for your down vote.  Why else would he post such crap diametrically opposed to the philosophy and ideology of this website and most people who visit it? But, there is a good side to this. He does get a lot of you thinking and posting good stuff to his anti-economic understanding diatribe.

The economics of MDB is pure Keynesian with a tad of monetarist school thrown in.  It's all based on the false premise that you can regulate an economy with fiat monetary injections from time to time to prevent the business cycle from occasionally flushing out bad debt, which comes from bad decisions, which is caused by a failure to accurately predict the future economically.  We are at the point where the only thing the central planners can do is print, print, print until they can't print no more.  Print or die, and they will print until the entire monetary systems collapses from hyper-inflation.  Globally, that is exactly where we are headed, so prepare.

PrezTrump's picture

can someone explain how china will fare in the SDR with this sort of debt?

 

Grandad Grumps's picture

"Germania" ... and the US Government has probably already built it under DIA.

KnuckleDragger-X's picture

It's all Marx and Mao approved, so party on China.......

I Want to Believe's picture

I'm sure there is a reasonable explanation to all of this.

venturen's picture

maybe they should blowup a nuclear reactor like Japan as well....all that debt and radiation is doing wonders in Japan

TradingIsLifeBrah's picture

Bullish for NY Real Estate, that debt has to go somewhere and its coming to a housing market near you "All Cash".  Man I wish I was as smart as those Chinese people, somehow they know all the right places to buy to make a quick fortune like the guy from yesterday's story:  "According to a civil lawsuit, Yuan came to Canada in 2007 with permanent resident status and made his money — estimated at up to $50 million — by investing in real estate and Saskatchewan farmland."  :/ Money Laundering 101

venturen's picture

be careful " 

B.C.(Chinese) man allegedly chopped into 100 pieces in his home was murdered for his money and assets: lawyer"
Jethro's picture

Somebody killed a parasite...I'll try really hard to muster some empathy.

tarabel's picture

 

 

It's on sale down at the HRC Campaign Store. Better hurry, though, cause she always sells out quick.

Sages wife's picture

So? You shut up you fucking mouth! Roundeye! Garden gnome? Cheap for you.

Hohum's picture

Pshaw, 10 years ago the USA was already doing that.

Space Animatoltipap's picture

Indeed, it's a funny world. Ready to collapse also. 

Savvy's picture

"In a shocking move likely to crush the US economy overnight, China is refusing to make its new gold-backed Yuan, convertible from or to US Dollars.  The new Yuan will be introduced next Tuesday, April 19.

https://www.superstation95.com/index.php/world/1152

I seriously doubt overnight if at all, but still going to piss off a few people :popcorn:

Volkodav's picture

that site is not credible

kamikun's picture

Geez... don't you get it? Debts... monetary inflation... p to e ratios... none of it matters. Wev've entered a new age of fiscal belief.

hooligan2009's picture

remember, ,china is a one party communist state. all its provincial debt, corporate debt and personal debt is issued, controlled and monitored by the politburo.

all prices china from steel to food are centrally controlled and planned. china's fall back position is to use the PLA to return chinese people to the role of land serfs.

there is no such thing as chapter 11, enforcement of default, or recovery of losses via a western style debt recovery (via the sell off of valuable assets).

that US companies choose to support communism in this way is very very strange and can only be greed and an overwhelming willingess to destroy US manufacturing and avoid paying taxes.

china is about to learn about the diminishing return from its exponential growth in debt, in much the same way that the west has learned that printing money is as worthless as 1's and 0's in creating value. 1's and 0's can only record value, not create it

europe and japan should be lessons for china - communism and socialism both fail, it is only the rate of demise mitigated a little by exploitation of natural resources that can slow their demise.

roddy6667's picture

I can tell from the narrow view of your article that you have never been to China. You should go there to learn how wrong you are. But you won't.

hooligan2009's picture

not all of it.i doubt you have either, its a big country - i take it from your commie red tinted glasses that you believe in communism - . i have .just been to HK (plus Koewloon) Macao, Tianjing and Chongqing - and seeing as these cities number in the tens of millions and report direct to beijing, i donyt  claim to have seen more tnan 1% of them either, much as you haven't - un;ess you are a time traveller with access to speed of light transport - grow up for god's sake.

Uranium Mountain's picture

When China, Japan and every other Nation with nuclear reactors go broke, how will they maintain them?  With over 400 nuclear reactors in the world,  how many more Fukushima's will we be living in?  

ysg's picture

Look no further but to Ukraine ...

katchum's picture

You said it yourself. Higher debt to GDP is a leading indicator for more defaults in the future.

ysg's picture

We had exactly the same scenario in my home country Bulgaria during the beginning end of the 80s and the beginning of the 90's, but probably the scale was over 1000 smaller ... Anyway the scenario was the same ... The communists took the loans from abroad ... they moved the money to offshore compnaies and private accounts ... they kept on keeping on with their propaganda untill after the great inflation ( some 1500% per year ) hit with the according depretiation against the dollar and the D-mark showed that the King is naked ... And oh the bad loans ?! The just bankrupted the whole domestic banking system - e.g. all the bulgarian capitals were gone ... and the banks which came later on were totally financed with foreign capitals and operated by foreign rules , which sarcastically was later on of course much better for the economy ... We do still have those monster buildings left from the overinvestments during the communism ... Nowadsays they blow them up in the latest Hollywood action movies ... because ... of course they are cheap ... 
The problem with China is the scale ... which will be devastating for the whole global economy and yes even US.  

bentaxle's picture

Was gold or silver of any use whatsoever, even if you had any?

hooligan2009's picture

i would think/guess, that second hand cars ,tv's and fridges (plus access to gas and food of course)  wouldhave been the way to go, stock up on those as fast as possible

in venezueals its tiolet pater

you have to get the basic stuff and forget about stuff you cant either eat or use to get food/barter for food.

forget precious metals and social networking via an i-phone

bentaxle's picture

Definitely. Lighters, fuel and candles good barter material, long shelf life. Alcohol, cigs. But most of all survival skills.

Byte Me's picture

BOOM Economy, obviously.

Don Sunset's picture

Back in the 30's at least TRUST meant something.  There is NO TRUST today and that will lead to failure and reset (with cleansing of the rot).  No one knows who to trust except for folks in their immediate circle.  Community is mostly dead.  The reset phase is going to a mess.........not pretty.  If you think you might be wearing a bullseye, you probably are.

jerry_theking_lawler's picture

I agree...but the problem with today is that there are millions upon millions of people being born into THIS system that the system you speak of that is coming will not support. This is what is hardest to understand...there will be lots and lots of death in this world and people are not going to like it. What freedoms will they give away to try and stop it??