Global Economic Intersection
Advertisement
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitIQ
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitIQ
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
Global Economic Intersection
No Result
View All Result

China: A Lending Giant Without Money?

admin by admin
October 4, 2012
in Uncategorized
0
0
SHARES
7
VIEWS
Share on FacebookShare on Twitter

Written by Gavin Kakol, GEI Associate

Our greatest foreign creditor, China, is continuing to show signs of an economic slowdown.  Not only has manufacturing been contracting, but the Renminbi has become a scarce commodity among the private sector.  The newly developing liquidity crisis is leaving China’s banks strapped for cash.  Meanwhile, factories and incomplete projects are seeking short term loans just to survive.  In an export driven economy such as China’s, a lack of immediate cash flows is ruinous; however, debtors have not been repaying with an equal sense of urgency.

Current projects are struggling to finish, and when funding is available, perhaps the central government is the driving force behind the loans they do receive, which are increasingly short term.  Data from Bernstein Research Group in Hong Kong shows us that short term loans have been on the rise since mid-2010 while long term loans have steadily declined as a share of the market.


Click on above image to view full size.

According to Paul Davis of the financial times:

The received wisdom is that banks do not want to lend in the current environment, but they are clearly coming under pressure from companies, perhaps with high inventories or part-finished projects, that are crying out for short-term money to keep operations ticking over.

However, Patrick Chavonec, an Associate Professor Tsinghua University’s School of Economics and Management, notes that the central government may actually be pressuring Chinese banks to lend, even if the recipients were on prior months’ “do not lend lists”.

So why is one of the World’s largest creditors so low on cash?

Many of China’s foreign loans have yet to be repaid, perhaps some never will be.  The China Banking Regulatory Commission claims its nonperforming debt ratio is 0.9 percent.  Yet the commission itself has been expressing some doubts over the figure.  In June the commission released the following statement:

We are already aware of an obvious increase in overdue loans and ‘special-mention’ loans. Further statistics and analysis are necessary for us to discover the cause of the inconsistency and how much hidden risk there is.

The Fitch Rating Agency notes the 0.9 percent figure to be” vastly understated”.  Using an eighteen month stress test, Moody’s has determined that Chinese banks will be able to handle non-performing loans as long as the economy’s GDP growth remains near 7 percent.  If growth were to slip below five percent the banking system could be facing a non-performing ratio of nearly 20 percent.

The South China Post newspaper has recently discussed how overseas loan repayment delays have increased from sixty to ninety days.  The additional time lapse starves overseas suppliers of the necessary cash flow to continue paying their raw material producers.  Basically, stretched debt repayments have a trickle-down effect throughout the entire Chinese economy.

In a market dominated by exports, any cash delays are tough to endure.  Furthering the problem, the world economy has reduced its purchase of Chinese exports.  According to an independent study  discussed in Bloomberg, China’s manufacturing has declined for eleven straight months; contract purchases have declined five straight months and “orders received“ have fallen to the lowest levels in nearly four years.  Gei News has reported on the eleven consecutive months that the HSNC Flash PMI Index has been below 50, the value that marks the boundary between expansion and contraction.

To induce more liquidity into China’s economy, the People’s Bank of China has cut reserve requirements twice this year- they now stand at 20 percent.  For months now, the central bank has been injecting billions of Yuan into its money market using reverse repurchase agreements; the most recent round came September 25 when a record breaking 290 Billion Yuan ($46 billion) were introduced.

These liquidity injections have effectively lowered the interest rate, cutting the yield on treasury bonds.  The yield on the 2.95 percent 2017 government bond dropped five basis points to its now standing 3.23 percent yield.

The drop in bond yields has increased the demand for stocks.  Chinese markets responded accordingly late in the previous week of trading as stocks rallied for two days of strong gains.  The Shanghai and Shenzhen indexes finished Friday off up 1.45 and 2.27 percent respectively.  The strongest stock advances came in the banking and metal sectors.

Chinese stock exchanges have been on holiday the past week.  Meanwhile, China’s 25 Index Fund (FXI) has been trading around $34. The index is a compilation of China’s 25 largest most liquid companies available to international investors.

Just as in the U.S. experience, it appears that China also can see asset appreciation when actions are taken to improve liquidity in the real economy.

References:

  • (How bad is China’s Cash Crunch, Paul Davis, Financial Times, 31 August 2012)
  • (Banks NPL Figures Don’t Add Up, Wang Xiaotian, China Daily, 5 June 2012)
  • (China is Running out of Money, Gordan Chang, Forbes, 12 August 2012)
  • (China Manufacturing Slowdown Persists Before Handover, Xin Zhou, Bloomberg News, 30 September)
  • (China’s Stock Rises as Cash Crunch Eases, Xinhua, 28 September 2012)
  • (China’s Central Bank Injects Record Funds to Ease Cash Crunch, Judy Chen, Bloomberg News, 25 September 2012)
  • (iShares FTSE China 25 Index Fund, Yahoo Finance, 4 October 2012)
  • Articles about China (GEI News)

 

 

Previous Post

September 2012 FOMC Meeting Minutes – The Story of QE3

Next Post

Insurers, Some States and Co-op Plans Moving Forward with Obamacare

Related Posts

Weaker Dollar Keeps Bitcoin Above $30K As Analysts Target 60% BTC Dominance
Economics

Weaker Dollar Keeps Bitcoin Above $30K As Analysts Target 60% BTC Dominance

by John Wanguba
May 20, 2022
Ethereum Developers Tip The Merge Might Happen In August ‘If All Goes As Planned’
Business

Ethereum Developers Tip The Merge Might Happen In August ‘If All Goes As Planned’

by John Wanguba
May 20, 2022
Commonwealth Bank Puts Crypto Trading Test On Ice As Regulators Hesitate
Business

Commonwealth Bank Puts Crypto Trading Test On Ice As Regulators Hesitate

by John Wanguba
May 20, 2022
Musk Hints He Could Reprice Twitter Deal As He Looks At Fake Accounts
Business

Musk Hints He Could Reprice Twitter Deal As He Looks At Fake Accounts

by John Wanguba
May 18, 2022
Madonna Joins Hands With Digital Artist “Beeple” To Launch New NFTs
Business

Madonna Joins Hands With Digital Artist “Beeple” To Launch New NFTs

by John Wanguba
May 18, 2022
Next Post

Insurers, Some States and Co-op Plans Moving Forward with Obamacare

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Browse by Category

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Browse by Tags

adoption altcoins banking Binance Bitcoin Bitcoin adoption Bitcoin market Bitcoin mining blockchain BTC business Coinbase crypto crypto adoption cryptocurrency crypto exchange crypto market crypto regulation decentralized finance DeFi digital assets Elon Musk ETH Ethereum Ethereum blockchain finance funding government investment market analysis Metaverse mining NFT NFT marketplace NFTs nonfungible tokens nonfungible tokens (NFTs) price analysis regulation Russia social media technology Tesla the US Twitter

Archives

  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • August 2010
  • August 2009

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized
Global Economic Intersection

After nearly 11 years of 24/7/365 operation, Global Economic Intersection co-founders Steven Hansen and John Lounsbury are retiring. The new owner, a global media company in London, is in the process of completing the set-up of Global Economic Intersection files in their system and publishing platform. The official website ownership transfer took place on 24 August.

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Recent Posts

  • Weaker Dollar Keeps Bitcoin Above $30K As Analysts Target 60% BTC Dominance
  • Ethereum Developers Tip The Merge Might Happen In August ‘If All Goes As Planned’
  • Commonwealth Bank Puts Crypto Trading Test On Ice As Regulators Hesitate

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

No Result
View All Result
  • Home
  • Contact Us
  • Bitcoin Robot
    • Bitcoin Profit
    • Bitcoin Code
    • Quantum AI
    • eKrona Cryptocurrency
    • Bitcoin Up
    • Bitcoin Prime
    • Yuan Pay Group
    • Immediate Profit
    • BitIQ
    • Bitcoin Loophole
    • Crypto Boom
    • Bitcoin Era
    • Bitcoin Treasure
    • Bitcoin Lucro
    • Bitcoin System
    • Oil Profit
    • The News Spy
    • British Bitcoin Profit
    • Bitcoin Trader
  • Bitcoin Reddit

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

en English
ar Arabicbg Bulgarianda Danishnl Dutchen Englishfi Finnishfr Frenchde Germanel Greekit Italianja Japaneselv Latvianno Norwegianpl Polishpt Portuguesero Romanianes Spanishsv Swedish