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Sancho Panza

Markets Hold Breath As China's Shadow Banking Grinds To A Halt

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Telegraph 10/3/14

'A slew of shockingly weak data from China and Japan has led to a sharp sell-off in Asian stock markets and the biggest one-day crash in iron ore prices since the Lehman crisis, calling into question the strength of the global recovery. The Shanghai Composite index of stocks fell below the key level of 2,000 after investors reacted with shock to an 18pc slump in Chinese exports in February and to signs that credit is wilting again. Iron ore fell 8.3pc.

Fresh loans in China’s shadow banking system evaporated to almost nothing from $160bn in January, suggesting the clampdown on the $8 trillion sector is biting hard.

“It seems that rising default risk has started to erode Chinese investors’ confidence,” said Wei Yao, from Societe Generale. “Together with continued regulatory tightening on banks’ off-balance-sheet activity, we are certain this slowing credit trend has further to go and will inflict real pain on the economy.”

Japan’s economy is losing steam as the monetary stimulus from “Abenomics” wears off and the country braces itself for a rise in the consumption tax from 5pc to 8pc. Economic growth slumped from 4pc in early 2013 to 0.7pc in the fourth quarter, while the country racked up a record trade deficit.

The Economy Watchers Survey saw the steepest drop last month since the March 2011 tsunami and is now lower than when Abenomics began. Marcel Thieliant, from Capital Economics, said Japan faces a “sharp slowdown”.

The renewed jitters in China come after the authorities allowed solar company Chaori to default last week, the first ever failure in the country’s domestic bond market. The episode is a litmus test of President Xi Jinping’s new regime of market discipline, though the central bank has been careful to cushion the blow by engineering a fall in interbank interest rates. “Such adjustments are necessary for China in the long run, but are nothing if not risky in the short term,” said Ms Wei.

It is extremely hard to calibrate a soft landing of this kind, and the sheer scale of China’s credit boom now makes it a global headache. China accounts for half of all the $30 trillion increase in world debt over the past five years.

Zhiwei Zhang, from Nomura, said the central bank will be forced to loosen monetary policy this year with repeated cuts in the reserve asset ratio to head off a deeper slowdown.

Nomura said China’s $23bn trade deficit in February masks capital outflows, while data was in any case distorted by the Chinese New Year.

Even so, there are signs that deflationary forces are taking hold in China. Producer prices (PPI) fell by 2pc in February from a year earlier. Haibin Zhu, from JP Morgan, said it is “disturbing” the PPI index has been negative since November, a sign that China is struggling to cope with excess manufacturing plant.

China invested $5 trillion last year, as much as the US and Europe combined. There are already signs that the country is trying to export its over-capacity overseas by pushing down the yuan. If this amounts to a competitive devaluation policy, it risks sending a fresh deflationary impulse across the globe.'

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round and round the (fake) mulberry bush the mulberry bush the mulberry bush

round and round the (fake) mulberry bush we all fall down

There are already signs that the country is trying to export its over-capacity overseas by pushing down the yuan. If this amounts to a competitive devaluation policy, it risks sending a fresh deflationary impulse across the globe.'

protectionism then Japan gets it

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When it all goes down I am going to hold my breath, then let out a large Fart :lol: The clowns were out in force on the Idiot Lantern today, pointing at graphs about how it is all up up and away from now on, the guy reading the bbc Lie Prompter dropped his notes at one point, that is how much they know it is all shite IMO.

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18% decrease in exports. Who replaced them?

I believe they call it 'channel stuffing'!

Most entertaining. We just need a few nukes fired by the USA and I will dash out down to Farm Foods for some cheap Chinese popcorn.

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In yesterday's news they were fretting about the new growth target leading to a new credit binge:

It sort of reminds me of an episode of Battlestar Galactica . or is at least is my concern these mixed messages.

The casino where everyone seems to win and win... all their luck is in. Everyone taken how great life is.... "forget your suspicions have fun."

Then occasional elevators with people retiring for the night are intercepted, by those down in the basement... the aliens paralysing the pleasure-filled people within, to use for food for the aliens' hatchlings.

zqp5.jpg

Edited by Venger

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It sort of reminds me of an episode of Battlestar Galactica . or is at least is my concern these mixed messages.

The casino where everyone seems to win and win... all their luck is in. Everyone taken how great life is.... "forget your suspicions have fun."

Then occasional elevators with people retiring for the night are intercepted, by those down in the basement... the aliens paralysing the pleasure-filled people within, to use for food for the aliens' hatchlings.

zqp5.jpg

i remember that episode it was a 2 or 3 parter? Scared the begezus out of me when i was a kid.

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i remember that episode it was a 2 or 3 parter? Scared the begezus out of me when i was a kid.

Got it on DVD.

Full scale banking crisis in China in the offering? The Chinese commies are going to have to find some sort of war to distract it's populace.

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http://www.bloomberg.com/news/2014-03-11/pboc-s-zhou-sees-deposit-rate-liberalization-within-1-to-2-years.html

China’s central bank Governor Zhou Xiaochuan said deposit rates will be liberalized in one to two years, as the nation expands the role of markets even amid an economic slowdown and risks from a credit boom.

The China Banking Regulatory Commission will allow a trial of five privately-owned banks, Chairman Shang Fulin said at the same press briefing in Beijing today, part of the annual meeting of the National People’s Congress. Recent yuan weakness shows the greater role of market forces, Zhou said.

The depth of any slowdown may test the Communist Party leadership’s commitment to remaking the economy, after manufacturing cooled, exports plunged and credit growth trailed forecasts in February. The nation’s first onshore bond default and the bailout of a high-yield trust product this year have highlighted financial risks that pose a threat to the government’s goal of 7.5 percent expansion.

It's OK the shadow banking system to be replaced by the real one...

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Thank goodness for UK house prices. Thats all I can say.

And the upper echelons of the Chinese Communist Party feel exactly the same way.

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And the upper echelons of the Chinese Communist Party feel exactly the same way.

As do the Russian oligarchs and the French escaping high taxes.... I'm sure the list goes on.

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As do the Russian oligarchs and the French escaping high taxes.... I'm sure the list goes on.

That's kinda the point about London real estate. It keeps on getting exported over and over again without actually moving anywhere.

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