China credit

Much of the reaction on Monday to the announcement of China’s financing numbers for January has focused on the sharp month-on-month increase in bank credit. However, a more telling picture can be had from looking at Total Social Financing (TSF) – the widest official measure of financing in the economy – on a year-on-year basis.

By TSF, Chinese financing in January was virtually flat at Rmb2.58tn, up from Rmb2.54tn in January 2013. This 1.6 per cent increase was well below the 9.5 per cent year-on-year increase in TSF last year and the 22.6 per cent expansion in 2012. Continue reading »

Just when world markets need them least, new signs of underlying economic weakness are emerging from China.

Data from China Confidential, an FT research service on China, show that the real estate market – one of the key 2013 engines of Chinese growth – is starting to sputter. Continue reading »

China recently announced political reforms, but what’s worrying markets is rising credit. George Magnus, senior economic adviser to UBS, discusses with John Authers the easing of the one-child policy and encouraging credit even as it needs to be kept in check.

Some more fuel to the China-credit-is-out-of-control fire. Fitch Ratings (which, don’t forget, downgraded China’s debt rating last year) has published a report which argues that “talk of deleveraging, or contracting credit, is misplaced” and warns that “no financial system can sustain rising leverage indefinitely”.

And Fitch has a few scary numbers and charts to show the extent of the problem. Continue reading »

The market for renminbi-denominated credit raised outside China has gone four weeks without a single deal – it’s longest ever barren spell. Tee Chong-hong, head of CNH Capital Markets Products at Standard Chartered tells the FT’s Josh Noble that the market has been hit by speculation about the end of QE in the US and interbank liquidity in China.

From the numbers alone, it’s not immediately clear what’s good or bad about China’s inflation data out on Tuesday.

The year on year June figures show consumer prices are up 2.7 per cent, a rise from 2.1 per cent annual inflation in May. That doesn’t sound too bad, does it? After all, China’s aim is for inflation to be 3.5 per cent 2013. But what is pushing inflation up? Food – particularly pork prices – and property. This isn’t the type of demand that China wants. Continue reading »

China’s markets stabilised on Wednesday, with interest rates easing in the crucial interbank market and stocks slipping slightly in uneventful trading.

But along with the stability, there is gloom. Equity investors are increasingly worried that slower growth and tighter credit is bad news for stocks: they’ve now fallen to their lowest since January 2009 and the depths of the global financial crisis. Continue reading »

The People’s Bank of China on Monday finally went public over the country’s liquidity squeeze.

Its first statement on the cash crunch helped ease the pressures in the money markets and bring down short-term borrowing costs. But it did nothing to reassure investors in the stock market, where the Shanghai Composite plunged 5.3 per cent, taking its losses over the last two weeks to more than 12 per cent.

That seems logical – the authorities don’t want a banking crisis. But they appear to be serious about putting the brakes on credit growth, even at the cost of slowing the economy. Continue reading »

In China, it’s often the case that the numbers themselves are a source of confusion, if not outright disbelief. But sometimes the numbers also speak for themselves. And one in particular is telling: credit intensity.

This measures the amount of credit needed to generate growth, and it has risen rapidly in the past six months to near its highest level. In other words, when it comes to GDP, China is getting less bang from it’s credit buck. Continue reading »

China’s economy has started 2013 with an unexpected slowdown in manufacturing growth and a surprise surge in inflation, according to data published over the weekend.

But the real news in the numbers is the persistent strength of credit-fuelled investment. Despite all the effort put into rebalancing the economy in favour of domestic consumption, it’s still the investment engine that’s driving the economy. Continue reading »

With concerns about the US Federal Reserve possibly cutting its stimulus programme hitting American markets, it was little surprise to see Asian risk assets getting a battering on Thursday.

But the impact was compounded by unexpected moves from the Chinese authorities to curb the property market and reduce to reduce liquidity. As a result the MSCI Asia ex-Japan index slumped by 1.8 per cent, with China leading the way and Shanghai closing down 3 per cent. Continue reading »

China’s banks are about to start installing CCTV cameras in steel traders’ warehouses to make sure those traders are using their bank loans to actually trade steel – such is the erosion of trust in that sector.

Banks realised at the end of last summer that things were not going so well for their exposures to the traders, perhaps because, as it turned out, many smaller and mid-sized operations had been using some of their bank loans for purposes other than buying and stocking steel products. Continue reading »

Will emerging markets ride to the rescue of the developed world? A new report from Ernst & Young suggests they will.

The report, Rapid-Growth Markets Forecast, Summer 2012, says a re-balancing of emerging economies towards domestic consumption, led by China, should reduce their dependence on western export markets while providing a new engine of growth for the world economy – even to the extent of “stabilizing financial markets and economic systems across the world”. Continue reading »

The weakest loan growth figures since 2005 may prompt further easing by China’s central bank, according to analysts, if the country is to avoid a significant slowdown in demand.

Loan and deposit data released over the weekend by the People’s Bank of China showed deposits recovering dramatically in February from the record Rmb800bn withdrawn in January, but also showed loan growth that came in below expectations for the second month in a row. Continue reading »