"If everyone in society is trying to get into the financing business, we may have entered a phase where a fever has started to affect our ability to think," warns one analyst of the bubble-fervor in China... but President Xi Jinping dashed the hopes of stimulus-hunters everywhere (once again) last night amid a slowdown that analysts forecast will lead to the weakest expansion since 1990. As Bloomberg reports [4], Xi said there will be no major stimulus and commented that "[Chinese] must boost [their] confidence, adapt to the new normal condition based on the characteristics of China’s economic growth in the current phase and stay cool-minded." In other words, keep calm and carry on (oh and don't lever any more carry trades please!).
China’s growth fundamentals haven’t changed and the country is still in a “significant period of strategic opportunity,” Xi said, according to a Xinhua News Agency report on the central government website on May 10. At the same time, the government must prevent risks and take “timely countermeasures to reduce potential negative effects,” he said.
“We must boost our confidence, adapt to the new normal condition based on the characteristics of China’s economic growth in the current phase and stay cool-minded,” he said.
But it is clear that those hoping for a financial-crisis-style massive stimulus will be left wanting...
“Xi’s comment showed that the Chinese government is reluctant to roll out large stimulus now,” said Xu Gao, chief economist with Everbright Securities Co. in Beijing
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“Xi is in line with what the Chinese government has been saying in the last couple of months, that a stimulus-driven rebound won’t be sustainable,” Everbright’s Xu said. “On the other hand, there are few details from Xi about what the ‘new normal’ is.”
Premier Li said in April the government won’t adopt “short-term and strong stimulus policies in response to temporary fluctuations in the economy.”
But remains strident in his efforts to control the shadow-banking system...
Shadow finance creates a “gambling” mindset, with funds channeled into short-term investments where returns are more lucrative, Liu said at a conference in Beijing on May 10.
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“If everyone in society is trying to get into the financing business, we may have entered a phase where a fever has started to affect our ability to think,” Liu said, “We must make up our minds to rectify interbank operations and all kinds of wealth management products.”
Two words - "priced in"?