"If China’s economy is showing signs of life, it is no doubt due largely to the banks pushing money out the door in the form of new loans to just about everyone."
Any idea what China's total debt to GDP ratio is? By total, I mean government/public, corporate, as well as consumer, all together.
However, that figure almost certainly understates the government debt picture, given the widespread use of local government financing vehicles, which blur the distinction between government debt, private debt, and government-backed private debt (LGFV debts are not "officially" backed, but their creditworthiness is predicated on local governments backstopping the debt in a pinch).
But when loan growth jumps by several hundred percent, as it did in China in January, that's hardly a recipe for either prudent loan management, prudent risk management, or sound, stable, economic growth.
Feb 13, 2023·edited Feb 13, 2023Liked by Peter Nayland Kust
Good overview of the situation. The surge in the money supply is a big tipoff as to the scenario we can expect for the next few months. In standard Keynesian fashion the PBoC is clearly trying to jump-start economic activity by means of the printing press. This may work for some of the bigger businesses (e.g. the over-leveraged real estate developers), but they are not the real drivers of economic growth. After three years of enforced abstinence, most people are certainly eager to get back to work, but it will the micro-damage inflicted on SMEs will not be so easy to repair. A LOT of businesses went bankrupt and many of these will never resume business.
There's been a lot of forecasting about the magnitude and import of China's reopening. However, the longer it is until we see increases in things like commodity prices and oil prices, the less likely it is that the impact of the reopening will be as significant as forecast.
With China I make no predictions on the reopening. I'm just focusing on signs that it is actually happening.
"If China’s economy is showing signs of life, it is no doubt due largely to the banks pushing money out the door in the form of new loans to just about everyone."
Any idea what China's total debt to GDP ratio is? By total, I mean government/public, corporate, as well as consumer, all together.
With a lot of especially local government financing off the books, there's a certain amount of ambiguity in the total debt/GDP figure.
However, the known debt as of last summer reached 295% of GDP.
https://archive.ph/YTPEp
With China's recent push for new loan growth, that percentage is almost certainly higher now.
The majority of that known debt is in the private sector, as the official government debt to GDP ratio is down around 76-77%.
https://tradingeconomics.com/china/government-debt-to-gdp
However, that figure almost certainly understates the government debt picture, given the widespread use of local government financing vehicles, which blur the distinction between government debt, private debt, and government-backed private debt (LGFV debts are not "officially" backed, but their creditworthiness is predicated on local governments backstopping the debt in a pinch).
But when loan growth jumps by several hundred percent, as it did in China in January, that's hardly a recipe for either prudent loan management, prudent risk management, or sound, stable, economic growth.
https://tradingeconomics.com/china/banks-balance-sheet
Good overview of the situation. The surge in the money supply is a big tipoff as to the scenario we can expect for the next few months. In standard Keynesian fashion the PBoC is clearly trying to jump-start economic activity by means of the printing press. This may work for some of the bigger businesses (e.g. the over-leveraged real estate developers), but they are not the real drivers of economic growth. After three years of enforced abstinence, most people are certainly eager to get back to work, but it will the micro-damage inflicted on SMEs will not be so easy to repair. A LOT of businesses went bankrupt and many of these will never resume business.
There's been a lot of forecasting about the magnitude and import of China's reopening. However, the longer it is until we see increases in things like commodity prices and oil prices, the less likely it is that the impact of the reopening will be as significant as forecast.
With China I make no predictions on the reopening. I'm just focusing on signs that it is actually happening.