Saturday, August 8, 2009

Lending in China

Been no secret surrounding the China lending boom. The only question is has been going into anything productive or just asset prices to create asset bubbles. Considering the Shanghi Composite Index is up 79% this year it was seem the latter. Despite the surge in the U.S. markets last week China was actually down. Part of it has to do with the possibilty of Chinese officials clamping down on the stock market. Bloomberg ran a story on the disuccsion. Most of the article is your normal mumble jumbo and how things really won't change except maybe for the stock market. Then you get to the end of the article. Why does it seem that anything of any value has always been pushed to the end of the article.

China Construction Bank Corp. President Zhang Jianguo said Aug. 6 that the nation’s second-largest bank will cut new lending by about 70 percent in the second half to avert a surge in bad debt. Construction Bank plans to extend about 200 billion yuan ($29 billion) of loans, down from 708.5 billion yuan in the preceding six months. The company’s new lending through June 30 was 42 percent more than for all of 2008.

That is a massive cut!!!! It could be why the Chinese markets are showing signs of weakness for the first time in months. China Construction Bank Corp basically takes their marching orders from the government. If these are the marching orders for more than just this bank, the China growth story going forward could be much different. Short copper anyone?

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