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China Record Drop In Credit Growth Puts Momentum At Risk

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http://www.bloomberg.com/news/2013-09-04/china-record-drop-in-credit-growth-puts-momentum-at-risk.html

China’s leaders are extending a clampdown on credit, prompting analysts from JPMorgan Chase & Co. to Societe Generale SA to caution that the economy is vulnerable to weakening after the pickup so far this quarter.

New yuan loans were probably little changed in August, after aggregate financing, the broadest measure of credit, posted a fourth straight drop in July, the longest streak in 11 years of data. Analysts’ median estimates point to the fastest industrial-output gain since December and the slowest producer-price decline in six months.

The moderation in credit after a record first-quarter financing boom stands to cap an economic rebound being driven by a recovery in confidence and Premier Li Keqiang’ssupport measures, such as faster spending on railways. Overcapacity and pressure to clean up debt loom as challenges, according to JPMorgan, which sees growth slowing to 7.2 percent in 2014 from 7.6 percent this year.

When growth only occurs because of credit growth clearly if you stop growing credit GDP is going stall. The answer clearly is unlimited credit growth. Easy.

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When growth only occurs because of credit growth clearly if you stop growing credit GDP is going stall. The answer clearly is unlimited credit growth. Easy.

Purely hypothetically, if you'd overbuilt a few dozen million houses, overbuilt transport links, based most profit on bad loans and basically kept most of the economy growing by extreme credit expansion whilst suppressing wages, then your choice would be between even greater credit expansion or complete implosion.

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