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China Overshoots 2010 Lending And Money Supply Targets

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http://www.bbc.co.uk/news/business-12158869

China failed to remain within its bank loan and money growth targets during 2010, the central bank has said.

Chinese banks issued 7.95 trillion yuan ($1.2tn; £0.77tn) in new local-currency loans last year, more than the 7.5tn yuan the government wanted for 2010.

And the money supply grew by 19.7% last year, ahead of official targets of 17%.

Also a $199bn increase in foreign exchange reserves in the fourth quarter pushed China's pot of foreign currency, the world's biggest, to $2.85tn.

Credit growth

China has vowed to tighten monetary policy and cut back on lending to its citizens as it aims to make tackling inflation a priority in 2011.

In November, inflation hit 5.1%, the highest rate in two years.

In December, the central bank put up interest rates for the second time in less than three months.

And at the end of last year it raised the amount of money that lenders must keep in reserve.

Chinese banks issued 481bn yuan in new loans in December, down from 564bn yuan in November and the lowest amount in a year.

"The data showed strong credit and money supply growth, which indicates that credit tightening by the regulators is not sufficient yet," said Hu Yuexiao, economist with Shanghai Securities.

If China keeps printing at the same rate the money supply will double in about 4-5 years even if the 17% rate is hit each year.

Still I'm sure it's no bubble. The foriegn reserves could prove to be worthless paper, plus they might need them to bailout local govts and state enterprizes.

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If China keeps printing at the same rate the money supply will double in about 4-5 years even if the 17% rate is hit each year.

Still I'm sure it's no bubble. The foriegn reserves could prove to be worthless paper, plus they might need them to bailout local govts and state enterprizes.

It's a new paradigm. Property prices in China seem to have reached a permanently high plateau.

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Michael Pettis wrote about this a month ago - interesting analyst who recognises the scary stuff but doesn't panic. As of last week, his blog is reduced to skeleton posts for business reasons.

Looks like a case of "calm down, dear!":

Fourth, although GDP growth rates next year will be very high to see off the current leadership, I am pretty sure that by the end of the year there will be much more concern about the rebalancing process and what that will mean for growth rates. In order to get those high growth rates, I don’t think we need to take the 2011 lending quota too seriously. Whatever it is, it will be breached.

http://mpettis.com/2010/12/chinese-growth-in-2011/

This is the bit that interests me:

I am not sure why Chinese holdings of USG bonds suggest that a Chinese slowdown will hurt US companies, but I have already explained why I do not think a sharp slowdown in Chinese growth is necessarily bad for the world. It will be very bad for commodity exporters – or at least non-food commodity exporters, since I think the demand for food from China will continue strong – but the overall effect on the rest of the world depends on the evolution of China’s trade balance. A contraction in the surplus creates net demand for the world, and so might even be marginally positive.

This marginally positive outcome won’t be evenly distributed, of course. Non-food commodity exporters will be badly hurt, while commodity importers and manufacturers will benefit.

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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