China Economy Forum

[Splurgenxs]

Mainland faces rising pile of bad loans

BEIJING -- Chinese banks are seeing a rising pile of bad loans, the latest scare from the world's No. 2 economy, which is reeling from a shrinking manufacturing sector, collapsing exports and sliding corporate profits.

Smaller commercial banks are starting to report spikes of as much as 82 percent in their overdue loans in the first six months of this year, as cash-strapped companies delay repayments.

Last week, seven out of the 16 listed big banks said their nonperforming loans' ratios had risen in the same period.

“Experience has taught us that a bad loan crisis usually comes three years after a period of abnormal credit surge,” Wei Guoxiong, head of chief risk management at ICBC, one of China's big four banks, said yesterday. He was referring to increased lending in response to the global financial crisis in 2009. “There will be a notable rise in bad loans in the banking sector this year.”

The bad loans signal the trouble that lurks beneath what appeared to be otherwise benign first-half results of Chinese lenders, which the central government is relying on to extend credit needed to kick-start new stimulus projects and private investment.

But Beijing looks increasingly constrained in how it can ease policy to fight the worst slowdown in three years.

It cannot aggressively boost growth as it needs to avoid the asset bubbles and over-capacity problems spawned by the lending spree during the 2009 crisis.

The effects of that credit binge are now overshadowing the state-owned giants as they grapple with political pressure to lend more, even at higher risk.

State media like Xinhua have sought to calm concerns by reporting that the ratio of nonperforming loans to total loans for banking sector in the first half of this year is largely below 1 percent, low by international standards.

But the deepening slowdown in the manufacturing sector may mean that more overdue loans and defaults will surface in the next few months.

“The deterioration trend is just beginning,” warned Hu Bin, senior analyst at international ratings agency Moody's.

The quality of banks' loan assets is worsening amid slowing domestic and overseas demand that have affected the manufacturing sector, small and medium-sized enterprises (SMEs) and exporters in coastal areas. And “we also see persistent credit tightening in the real estate sector and a slowdown of land-sale revenue for local governments as factors that will further erode banks' asset quality.”

Indeed, local governments are seen as a risk area. While they are expected to finance the bulk of new investment projects to boost growth, they are struggling with debt from the previous round of stimulus.

Local governments' financing vehicles owe China's big four state banks outstanding debts of 2.6 trillion yuan (S$511 billion) at the end of June, the official Economic Information Daily said yesterday. This is a jump of 500 billion yuan from last year end.

Meanwhile, banks with exposure to SMEs in entrepreneurial hubs like Wenzhou, a city in eastern China, face growing risks.

More than 10 percent of members of the Wenzhou SME association have gone belly-up, while another 20 percent are struggling, according to association chairman Zhou Dewen.
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[ajtr]

Weak China trade data raises Beijing spending stakes

BEIJING: Weak Chinese trade data on Monday underlined the likelihood of more Beijing-backed spending to deal with the damage done to the domestic economy by firms cutting production, inventories and imports in the face of anaemic global demand.

Imports fell 2.6 percent on the year in August, confounding expectations of a 3.5 percent rise. Exports grew 2.7 percent, below forecasts for a 3 percent rise in a Reuters poll.

Such weak data is grim news in a country where exports generate 25 percent of gross domestic product, support an estimated 200 million jobs and where analysts already expect the economy to have its weakest year of expansion since 1999.

“The import surprise on the downside is very unusual. It is an alarming sign for the government and they probably saw it coming,” Zhang Zhiwei, chief China economist at Nomura in Hong Kong, told Reuters.

“We’ve now pretty much got the full batch of August data and it’s clear that the slowdown pressure is growing and that the government is feeling the need to act. I think there will be further easing in the months ahead.”

Some economists fear the outlook is so poor that China may miss its official 7.5 percent growth target for 2012 without a fresh round of swift policy stimulus on top of the monetary and fiscal easing undertaken since last year and the $150 billion-worth of infrastructure projects announced last week.

The numbers - despite a bounce in the trade surplus in August to $26.7 billion - will solidify market expectations for further stimulus and monetary easing to support growth as China heads towards a once-a-decade leadership change later this year. The trade data was some of the worst since the depths of the global financial crisis and underline President Hu Jintao’s weekend warning to leaders of Asia-Pacific economies of the “grave challenges” facing global growth.

Analysts said it was unusual for Hu to make such remarks about the economy at an international gathering and could signal a new level of concern emerging in China that is potentially a worry for the wider Asia region.

“The rest of Asia had been hoping China would come up with some sort of support, stimulus, in terms of consumption but this is not happening,” said Daiwa economist Kevin Lai.

Jobs key to stimulus: China’s last officially declared stimulus package was the 4 trillion yuan ($635 billion) spending plan unveiled in 2008, when global trade ground to a halt and at least 20 million Chinese workers lost their jobs in a matter of months as financial turmoil swept around the world.

Job losses on that scale have so far been avoided, but it remains a major risk factor for Beijing ahead of a transition of power at the top of the Communist Party that is supposed to take place against a backdrop of prosperity and social stability.

That is one key reason why analysts and investors believe the government will act decisively if data deteriorates further, but the inflationary and speculative overhang caused by the last stimulus effort are what has so far held further moves in check.

“August numbers suggest some weakness in the domestic economy, which will spur further expectations for stimulus and monetary easing. I continue to see one more benchmark lending rate cut by the end of the year,” said Connie Tse, economist at Forecast in Singapore.

Fears of the downside risks to growth though may be winning out after data on Sunday showed industrial output growth hit its weakest annual pace in August in more than three years.

Even where there was a rise in imports, analysts said it reflected grim domestic conditions - so while iron ore imports rose 7.9 percent in August from July to a three-month high, it was because buyers had turned to the international market as a collapse in prices had forced domestic producers to slash output.

China’s August copper imports fell 2.9 percent from the previous month, preliminary customs data showed on Monday, reversing July’s uptrend as the economic slowdown in the world’s top consumer of the metal cut demand.

Crude oil imports in August fell 12.5 percent from a year earlier to the lowest daily rate since October 2010.

External demand vital: The problem for Beijing is that despite deep government pockets, record tax receipts, a budget in surplus in the first half of the year and monetary policy still on the tight side, even with inflation near two-year lows, there is little policymakers can do to stimulate demand beyond their borders.

China’s biggest customers are the debt-ridden, recession-bound European Union and the still struggling United States.

Without a big boost in demand from those two economies, Beijing policymakers face an uphill battle.

The focus of investors has clearly shifted though to more aggressive efforts to stimulate domestic activity to compensate for declining external demand.

They are worried that six successive quarters of slowing growth risk sliding into a seventh in the third quarter despite the “fine-tuning” of economic policies that began in November 2011.

Two interest rate cuts, the freeing of an estimated 1.2 trillion yuan ($190 billion) for new lending by cutting required reserve ratios (RRR) at banks and a raft of tax tweaks have so far failed to halt the slide.

Instead China’s factories are running at their slowest rate of expansion since May 2009, data on Sunday showed. Industrial output growth in August eased to 8.9 percent year-on-year, according to data from the National Bureau of Statistics (NBS) on Sunday.

Surveys of purchasing managers in the manufacturing sector earlier this month showed concerns growing about new business, suggesting that factories would run inventories down further before they begin to turn production up again. reuters

 

[Audio]

no one has EVER said the growth model is forever sustainable, but the question isnt if we should adjust, its when.

you claim that china somehow has so much bad bank loans that the economy will collapse because of it, i disagree, china does have bad loans but no where near the amount that would collapse the economy and in fact it had been worst in the past, much worst yet the economy was still able to growth at over 10%. then you throw in some babble about how the ccp keeps in records sealed, same argument people throw out anytime people have no proof to back up what they say about china they just say oh china is communist and the government is secretive thus so and so must be true. lack of evidence is not proof of the negative.

for the record i dont not think you talk completely out of ur 4$$ but you take it too far without substantial evident to back you up,
some bad loans/= economic collapse

and about the banks,
Chinese banks' profits soar amid euro crisis - CNN

now compare that with western banks
they were too large to fail before, they have actually gotten larger since 2008 and have manage to influence the government enough that many of the safety systems put in after 2008 are being repelled so they can go back to doing what they have were doing till they cause another crisis.

that said there as certainly some problem with chinese banks but again no where near enough to cause them to fold in the way that western banks did in 2008

and for your last point

"Ofcourse trade with Germany is good, i never denied that, but the fact that CCP officials need to urge Merkel for as swiftest as possible solution to the EU crisis speaks a lot. They know about sustainability, you dont."

dont tell me what i know and dont know. of course they will ask for the quickest solution to the EU crisis, an end to that crisis is good for everyone and EU is a big market for china, asking them to quickly end the crisis is not equivalent to, nor can it be taken as evidence, that the CCP is somehow in trouble. is a slow down happenign? yes, is the economy crashing? No

To sum this up:

i never said it would crash or? That was purely your conclusion from my posts, however im quite sure the double digit growth is gone forever. That's what i meant with next year etc....
believe me, i have no special wish for China to fail, it's not in my nature to see people suffer, im just not too fond of boasting and i try to put it in perspective for you guys so you dont get all high with those 50 year predictions. That's all.

ps: if you think records in China are transparent, well, i have some beach front property to sell to you in the Himalayas.
And no, it was never worse in the past. For any of us.

 

[shuttler]

Jobs key to stimulus: China’s last officially declared stimulus package was the 4 trillion yuan ($635 billion) spending plan unveiled in 2008, when global trade ground to a halt and at least 20 million Chinese workers lost their jobs in a matter of months as financial turmoil swept around the world.

we still have this much muscle to wrestle against the global downturn! where is the loudest BRICS bragger?

 

[applesauce]

To sum this up:

i never said it would crash or? That was purely your conclusion from my posts, however im quite sure the double digit growth is gone forever. That's what i meant with next year etc....
believe me, i have no special wish for China to fail, it's not in my nature to see people suffer, im just not too fond of boasting and i try to put it in perspective for you guys so you dont get all high with those 50 year predictions. That's all.

ps: if you think records in China are transparent, well, i have some beach front property to sell to you in the Himalayas.
And no, it was never worse in the past. For any of us.

u didnt? well forgive me for coming to that conclusion when u posts things like this:

"It's coming, get ready. I see People's bank doing the same mess as was done here and in the US."

"People are buying houses and cars on credit, they loose their job because of xyz reason, bank gets left with nothing. That bank got the money from the central gov, which is pumping the banks like the West does."

"after 30 years the unsustainability is starting to show.
Like i said, CCP has a lot of money they can keep injecting to hide it, but that money will run out and what's worst it will contribute to the bubble."

and i had already agreed that a slow down is happening and the growth model cannot last forever and has to change at some point, however was i disagreed on was how bad the current situation is, i am argueing that the PRC has plenty of rom to maneuver still and can certainly avoid a crash.

and if you dont think things were worst at certain times in the past then you are truly ignorant

 

[james5]

China is take the place of superpower in Asia.its growth very fast in the present time.

 

[sweetgrape]

Closure of the world’s largest span railway-highway bridge
Closure of the world’s largest span railway-highway bridge | China's Great Science and Technology

2012-09-16 — On Sep. 16th, Huanggang Yangtze River Bridge, the the world’s largest span railway-highway bridge, is finished its closure of main span steel girder. The completion of Huanggang Yangtze River Bridge will realize “seamless connection” of from the full range of road and railway transportation between Huanggang City and Wuhan. Huanggang Bridge is the 6th railway-highway bridge above Yangtze River.

At 10:16, a 70-ton rotary dedicated girder machine accurately lift a steel beam rods to the main bridge final closure, ahead of the construction workers waiting immediately stepped forward, adjust, move, and will soon be a rod pieces fixed on the final closure.

China bridge construction of one of the main the MBEC bear Bridge construction tasks, already five in the Yangtze River railway bridge by it. According to Liu Jiewen, the person in charge of the project department, in order to ensure that the main span steel girder precise closure, researchers for the first time use modern image recognition measurement techniques used in the bridge closure precise measuring.

Huanggang Yangtze River Bridge has length of 4008 meters, is designed for the double-deck, lower for two-way high-speed railway, the upper is four-lane highway. The main bridge’s structure is the twin towers steel truss cable-stayed bridge with double cable planes. Its main span is 567 meters and is the largest one of same type bridge which ever built and is being built.

23 billion is invested in Huanggang Yangtze River Bridge, which started in February 2010, is the trinity control project of Wuhan-Huanggang highway, railway and intercity rail. Bridge is to open traffic by the end of 2013, when the transportation time from Wuhan to Huanggang is shorten to just 28 minutes.

 

[sweetgrape]

Closure of the world’s largest span railway-highway bridge
Closure of the world’s largest span railway-highway bridge | China's Great Science and Technology

2012-09-16 — On Sep. 16th, Huanggang Yangtze River Bridge, the the world’s largest span railway-highway bridge, is finished its closure of main span steel girder. The completion of Huanggang Yangtze River Bridge will realize “seamless connection” of from the full range of road and railway transportation between Huanggang City and Wuhan. Huanggang Bridge is the 6th railway-highway bridge above Yangtze River.

At 10:16, a 70-ton rotary dedicated girder machine accurately lift a steel beam rods to the main bridge final closure, ahead of the construction workers waiting immediately stepped forward, adjust, move, and will soon be a rod pieces fixed on the final closure.

China bridge construction of one of the main the MBEC bear Bridge construction tasks, already five in the Yangtze River railway bridge by it. According to Liu Jiewen, the person in charge of the project department, in order to ensure that the main span steel girder precise closure, researchers for the first time use modern image recognition measurement techniques used in the bridge closure precise measuring.

Huanggang Yangtze River Bridge has length of 4008 meters, is designed for the double-deck, lower for two-way high-speed railway, the upper is four-lane highway. The main bridge’s structure is the twin towers steel truss cable-stayed bridge with double cable planes. Its main span is 567 meters and is the largest one of same type bridge which ever built and is being built.

23 billion is invested in Huanggang Yangtze River Bridge, which started in February 2010, is the trinity control project of Wuhan-Huanggang highway, railway and intercity rail. Bridge is to open traffic by the end of 2013, when the transportation time from Wuhan to Huanggang is shorten to just 28 minutes.

 

[Audio]

and i had already agreed that a slow down is happening and the growth model cannot last forever and has to change at some point, however was i disagreed on was how bad the current situation is, i am argueing that the PRC has plenty of rom to maneuver still and can certainly avoid a crash.

and if you dont think things were worst at certain times in the past then you are truly ignorant

Exclusive: Ghost warehouse stocks haunt China's steel sector

(Reuters) - Chinese banks and companies looking to seize steel pledged as collateral by firms that have defaulted on loans are making an uncomfortable discovery: the metal was never in the warehouses in the first place.

China's demand has faltered with the slowing economy, pushing steel prices to a three-year low and making it tough for mills and traders to keep up with payments on the $400 billion of debt they racked up during years of double-digit growth.

As defaults have risen in the world's largest steel consumer, lenders have found that warehouse receipts for metal pledged as collateral do not always lead them to stacks of stored metal. Chinese authorities are investigating a number of cases in which steel documented in receipts was either not there, belonged to another company or had been pledged as collateral to multiple lenders, industry sources said.

Ghost inventories are exacerbating the wider ailments of the sector in China, which produces around 45 percent of the world's steel and has over 200 million metric tons (220.5 million tons) of excess production capacity. Steel is another drag on a financial system struggling with bad loans from the property sector and local governments.

"What we have seen so far is just the tip of the iceberg," said a trader from a steel firm in Shanghai who declined to be identified as he was not authorized to speak to the media. "The situation will get worse as poor demand, slumping prices and tight credit from banks create a domino effect on the industry."

Stuff like this buddy, article continued at Exclusive: Ghost warehouse stocks haunt China's steel sector | Reuters

btw, how were things worst in he past? True, standards were lower, if thats what you mean, but you collectively also lived within your means, which means no credits which cannot be paid back, now there are credits that cannot be paid back....
you see that line in the above article that says "tight credit"? Wanna know why it's tight? I think you are eloquent enough to find out for yourself, that is if nationalistic tendencies dont cloud your judgement.

 

[shuttler]

Stuff like this buddy, article continued at Exclusive: Ghost warehouse stocks haunt China's steel sector | Reuters

you better worry about the ghosts along the banks of indian rivers!

Once the RMB 4 trillion stimulus plan starts to roll, we will be rocking again!

 

[Audio]

you better worry about the ghosts along the banks of indian rivers!

Once the RMB 4 trillion stimulus plan starts to roll, we will be rocking again!

Because that worked so well everywhere else.....

ps: you still think im Indian?

 

[karan.1970]

China's external debt touches $785 billion - The Economic Times


BEIJING: China's outstanding external debt rose by USD 34 billion the second quarter to reach USD 785.17 billion by the end of June this year, the country's foreign exchange regulator said Monday.

The amount excludes outstanding external debt of the Hong Kong and Macao special administrative regions ,the State Administration of Foreign Exchange (SAFE) said in a statement on its website.

Of the total outstanding external debt, registered external debt reached USD 495.07 billion while the balance of trade credit between enterprises amounted to USD 290.1 billion, it said.

Most of the debt owed to foreign creditors resulted from short-term borrowing, as outstanding external debt with a term of one year or less amounted to USD 588.22 billion or 75 percent of the total, up from 74. 2 percent at the end of March, according to SAFE.

Long- and medium-term external debt outstanding amounted to USD 196.95 billion.

China's debt is rising in the back of drop of slowing down of its economy and its plans to implement over USD 150 billion stimulus to undertake various infrastructure projects.

A recent report said China's corporate debt ratio, currently world's highest has reached "dangerous levels".

Experts have warned that any stimulus measures to boost domestic demand to compensate falling exports could add heavy strain on corporate firms.

China's corporate debt-to-GDP ratio stood at 107 percent in 2011, the highest in the world, Li Yang, vice-president of the Chinese Academy of Social Sciences, a top government think tank said.

Data from the China Banking Regulatory Commission show China's banking system had 55 trillion yuan (USD 8.63 trillion) in outstanding loans by the end of 2011, according to a recent write up in state run China Daily.


SITUATION 6 MONTHS BACK

http://www.defence.pk/forums/world-...rnal-debt-soars-27-year-high-695-billion.html

China added 90 billion dollars debt in last 6 months

 

[ANPP]

wowww chines debt is really high..
What is INDIAN debt............any estimation?

 

[IndoUS]

@Karan, you only tell the truth and nothing more right?

 

[shuttler]

Latest credit ratings (per wiki)

Fitch:
China A+ stable
india BBB- negative

S & P
China AA- stable
india BBB- negative

If you are the banker, which country will you lend your money to? what interest rate will you give to india for bridging their finance?

ps I dont have time to look into other favourable financial data over pathetic india! can someone help?