Seeking Alpha

Chinese financing more than doubles

  • Chinese aggregate financing, the broadest measure of credit, grew to a record 2.58T yuan ($425B) in January from 1.23T yuan in December and topped forecasts of 1.9T yuan.
  • New local-currency lending soared to 1.32T yuan, the highest level since 2010, from 482.5B yuan in December and vs consensus of 1.1T yuan.
  • New trust loans, which are receiving much focus due to the risk of defaults, halved to 106.8B yuan from 210.8B yuan a year earlier.
  • The continued expansion in credit should help the economy keep its momentum, although it contrasts with the People's Bank of China's attempts to rein in the soaring debt and protect the stability of the financial system.
  • "The PBOC is trying to take the punch bowl away but the banks are continuing to lend and keep the party going," says Société Générale's Guy Stear.
  • M2, China's widest measure of money supply, +13.2% on year in January, in line, vs +13.6% in December.
  • The Shanghai Composite +0.9%. (PR)
  • ETFs: FXI, PGJ, GXC, FXP, CYB, YINN, HAO, CNY, KWEB, TAO, ASHR, CHIQ, CHIX, DSUM, YANG, MCHI, CQQQ, PEK, QQQC, XPP, YAO, CHXX, FXCH, CHII, CHXF, YXI, ECNS, CHIE, CHIM, KFYP, FCA, CHLC, TCHI, CHNA
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Comments (14)
  • Mike Holt
    , contributor
    Comments (1627) | Send Message
     
    Per the linked article, "Rampant credit growth in China is seen as one of the main risks facing the world's second biggest economy and one the country's central bank has been trying to contain by keeping short-term interest rates high to discourage lending to speculators or borrowers that are high risk."
    17 Feb 2014, 08:52 AM Reply Like
  • Mike Holt
    , contributor
    Comments (1627) | Send Message
     
    The key now, said economists, was to see how the PBOC reacts to the latest lending data.

     

    Société Générale's Stear added: "There is still a lot at risk in terms of policy. How does the PBOC deal with the fact that bank lending is higher than it wants?"
    "What people should be concerned about is the policy response rather than the cyclical outlook near term," he said.

     

    If its true that the PBOC has accounted for 40% of the growth in the global money supply since 2008, the people that need to be concerned about the PBOC's policy response includes all of us. The question is more intriguing given the recent resignation of Zhu Changhong, who had been the Chief Investment Officer of SAFE, the investment arm of the PBOC responsible for investing the PBOC's foreign currency reserves.
    17 Feb 2014, 09:09 AM Reply Like
  • jakoba
    , contributor
    Comments (345) | Send Message
     
    The Chinese GDP also doubled since 2008 and much of the credit went into infrastructure/investment into the future. It is much more troublesome with a situation like in US where the GDP is hardly growing and much of he credit expansion gets wasted away. It´s not the same to use a trillion to throw a big party than to use the same money for building factories, roads, schools etc.

     

    Also China´s foreign exchange reserves has gone up from about $2 trillion in 2008, to the current $3.82T.

     

    In terms of whether Chinese stock are good investment now, consider that even as the GDP doubled since 2008, the Shanghai composite is at the same level as the bottom in 2009 (and down 65% from the 2007 peak). Price/earnings, price/book and market cap to GDP in China would now be very similar as US in 1982. Over the next 18 years, US GDP tripled but the S&P was up 15 times as price/earnings was up around 5 times (from around 8 to around 40). P/E in china has been contracting for many years now. Eventually it will start to expand again.

     

    http://bit.ly/1dsp1fe
    17 Feb 2014, 12:10 PM Reply Like
  • tullig
    , contributor
    Comments (15) | Send Message
     
    Tie this money expansion with the enormous gold purchases china has been making. Seems they are hedging against the failure to control the inflation they are likely to cause.
    17 Feb 2014, 12:22 PM Reply Like
  • levin70
    , contributor
    Comments (942) | Send Message
     
    The banks are state owned. The idea that they are doing something, anything that is against the wishes of the state, ie which includes the PBOC, is ludicrous.
    17 Feb 2014, 12:44 PM Reply Like
  • King Rat
    , contributor
    Comments (855) | Send Message
     
    Since Lunar New Year was at the end of the month, how much of this was getting ahead of a shortened February?

     

    Though what is funny, as in scary, is that M2 is 13%. GDP+"inflation" is 10%. The math does not compute.
    17 Feb 2014, 01:56 PM Reply Like
  • Moon Kil Woong
    , contributor
    Comments (11527) | Send Message
     
    So China lends too much and the US is in a funk because there is not enough lending. According to many skeptics of China who are often the same ones arguing the US needs to increase lending and debt for an economic recovery it is bad for China to increase its money multiplier through lending but it is not just fine but desired that the US, which is even more heavily leveraged to increase its debt.

     

    One must look at the rationale of such thinking. Not only is it hypocritical, but China is much better able to deal with credit expansion 1) because it can and does internally fund all of it unlike the US 2) It runs a trade surplus and 3) It's currency is undervalued so the credit expansion helps water down its value where the US currency is arguably overvalued based on its economics alone and is only able to sustain its value by being a safe haven when they yank global credit to cause a flight to more global liquid currencies like their own.

     

    It is much better that China is increasing their velocity of money by lending to individuals and companies rather than increasing money supply by having the central bank loan to the government which runs even more debt and the government that directly eats all home mortgages through nationalized companies. You tell me which is more capitalistic and thus more economically sound.
    17 Feb 2014, 02:47 PM Reply Like
  • samuel_liu
    , contributor
    Comments (2798) | Send Message
     
    Cn lends so that Americans can buy the former's wares.

     

    Modernized economy, high-tech empt and a more skilled workforce, as well as a Promissory Note lingering over the US Congress. Sounds pretty good!

     

    Nothing is perfect ...
    18 Feb 2014, 06:42 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (9626) | Send Message
     
    This won't end well.

     

    Buy gold.
    17 Feb 2014, 03:22 PM Reply Like
  • Joenobody09
    , contributor
    Comments (66) | Send Message
     
    How much of these newly printed money will end up building ghost cites in China or be transferred out to oversea banks to buy up real estates the world over ?
    17 Feb 2014, 04:20 PM Reply Like
  • MrVincent
    , contributor
    Comments (257) | Send Message
     
    Following is USA footsteps: Anyone in China who can fog a mirror deserves a car and a house.
    17 Feb 2014, 07:08 PM Reply Like
  • justaminute
    , contributor
    Comments (843) | Send Message
     
    Communism or debt. Pick the preferred master of your servitude.
    17 Feb 2014, 07:20 PM Reply Like
  • Mike Holt
    , contributor
    Comments (1627) | Send Message
     
    The following point raised in this announcement has received very little attention:

     

    "They [economists] added that while the central bank was unlikely to react just yet with a broader increase in interest rates, short-term money market rates were likely to remain high."

     

    All those who have found ways to get money into China to invest in these high-yield money market accounts offering rates of 10% to 20% or higher must be rejoicing. This continued opportunity may help to explain why the January export numbers looked suspiciously high.
    17 Feb 2014, 07:45 PM Reply Like
  • Physical Receipt
    , contributor
    Comments (869) | Send Message
     
    Chinese agragate lending tripled for the month of Dec...all the talk about reeling in their Shadow Banking but reality is it just continues to spiral out of control..words words words for the global media but no reforms...Well obviously the Chinese think they can orchestrate an orderly procession of the upcoming defaults for 2014...we can rest assured they have their best and their brightest working on its containment now..but will they be successful? I am betting not completely...just partially
    18 Feb 2014, 11:45 PM Reply Like
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