Posted on 06/28/2009 4:13:26 PM PDT by bruinbirdman
Fitch Ratings has been warning for some time that China's lenders are wading into dangerous water
China's banks are veering out of control. The half-reformed economy of the People's Republic cannot absorb the $1,000bn (£600bn) blitz of new lending issued since December.
Money is leaking instead into Shanghai's stock casino, or being used to keep bankrupt builders on life support. It is doing very little to help lift the world economy out of slump.
Fitch Ratings has been warning for some time that China's lenders are wading into dangerous waters, but its latest report is even grimmer than bears had suspected.
"With much of the world immersed in crisis, China appears to be one of the few countries where the financial system continues to function largely without a glitch, but Fitch is growing increasingly wary," it said.
"Future losses on stimulus could turn out to be larger than expected, and it is unclear what share the central and/or local governments ultimately will be willing or able to bear."
Note the phrase "able to bear". Fitch's "macro-prudential risk" indicator for China threatens to jump from category 1 (safe) to category 3 (Iceland, et al). This is a surprise to me but Michael Pettis from Beijing University says China's public debt may be as high as 50pc-70pc of GDP when "correctly counted".
The regime is so hellbent on meeting its growth target of 8pc that it has given banks an implicit guarantee for what Fitch calls a "massive lending spree".
Bank exposure to corporate debt has reached $4,200bn. It is rising at a 30pc rate, even as profits contract at a 35pc rate.
Fitch traces the 2009 bubble to the central bank's decision to cut interest on reserves to 0.72pc. Bankers responded to this "margin squeeze" by ramping up the volume of
(Excerpt) Read more at telegraph.co.uk ...
Join the crowd.
The East is waiting on the West to get the economy going. Sigh.
Ping.
The difference is that they have a pile of cash to spend and waste; we don’t. If their stimulus doesn’t work, it won’t bankrupt their nation. We’re already gone...
wow. talk about your “avalanche fittin’ to happen.”
Ah, Ambrose strikes again. Currently on my “preferred financial writers” list.
Sorry China ,, it’s not “no can do” here in the US ... it’s worse than that ,, it’s “lets create non-stop crises to build our power base” time...
OTOH if everyone goes in the toilet could we just have a worldwide “do over” monetarily?
And a pile of bonds, too, which they'll probably have to sell to raise cash...which will spike interest rates, which will --> begin connecting dots here (X).
Thank goodness there's a world central bank in the waiting.
wow. talk about your “avalanche fittin’ to happen.”
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What’s the latest on those earthquake damaged dams? I haven’t heard anything ... I would have expected at least proclamations that “all is well , nothing to see here” but I haven’t heard even those..
A worrisome statistic to be sure, but since a lot of that is probably US corporate debt, then no doubt they are confident of being bailed out, courtesy of the US taxpayer.
If anyone thinks this is far fetched, then remember that's exactly what happened with the AIG credit default swaps. A lot of mostly European banks made whole when AIG was nationalized by the Fed.
yitbos
Governments should STAY OUT OF THE FREE MARKETS! They f*** everything up on a consistent basis.
It’s plain to see the criminal central bankers have an agenda.
So that is where Bambi gets his financial advice! China.
More specifically, "The Little Red Book".
yitbos
you could have ammended the title: “Fitch finds a Glitch.”
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