May 242012
 May 24, 2012  Posted by at 4:48 pm Finance

What’s worse than creating hundreds of billions of dollars worth of absolutely unproductive debts over the course of a few years? Setting a target for how many hundreds of billions worth of unproductive debts you can create in one year, and then missing it, when the rest of the world is already saturated with debt and is relying on you to make up the funny-money difference. That is the situation in which China finds itself right now, in a nutshell. Well, actually, it’s even worse for them, and, by implication, the rest of the credit-starved, low-growth world.

Because, the Chinese population is already knee-deep in inflationary pressures, yet the Chinese authorities need to implement inflationary policies if they want to keep their epic infrastructure/housing credit ponzi afloat. Right now, they are jaw-boning about starting a series of “key infrastructure projects” in order to, once again, artificially boost demand for credit and sustain their inherently unsustainable rates of economic growth. I think they may have a harder time of it this go round, though.

A population already squeezed to death by high costs of living, horrible conditions of working and no return on savings, only to see the same destructive policies implemented over and over again, will not be a happy population for much longer. And all of the artificial domestic demand for unproductive credit in the world will not make up for the plummeting demand in the one sector that gives China all of its credibility as an economic powerhouse – exports. Here’s Jun Luo with the report for Bloomberg:

China Banks May Miss Loan Target for 2012, Officials Say


China’s biggest banks may fall short of loan targets for the first time in at least seven years as an economic slowdown crimps demand for credit, three bank officials with knowledge of the matter said.


A decline in lending in April and May means it’s likely the banks’ total new loans for 2012 will be about 7 trillion yuan ($1.1 trillion), less than the government goal of 8 trillion yuan to 8.5 trillion yuan, said one of the officials, declining to be identified because the person isn’t authorized to speak publicly. Banks are relying on small- and mid-sized companies for loan growth after demand from the biggest state-owned borrowers dropped, the people said.


The drying up of loan demand attests to the severity of China’s slowdown and may add pressure on Premier Wen Jiabao to cut interest rates and expand stimulus measures. The economy may grow in 2012 at its slowest pace in 13 years, a Bloomberg News survey showed last week, as Europe’s debt crisis curbs exports, manufacturing shrinks and demand for new homes wanes.


Press officials at the People’s Bank of China and the three largest lenders — Industrial & Commercial Bank of China Ltd., China Construction Bank Corp. (939) and Bank of China Ltd. (3988) — declined to comment. Press officials at Agricultural Bank of China Ltd. (601288) weren’t immediately available.


New bank loans last month dropped 33 percent from March to 681.8 billion yuan, missing the 780 billion yuan median forecast of economists surveyed by Bloomberg News. A third of April’s new credit was also so-called discounted bills, or short-term loans often used by banks to pad the total figure.


Worsening Situation


This month may be worse. The four biggest banks — which account for about 40 percent of lending — had advanced only 34 billion yuan as of May 20, Liu Yuhui, a director at the government-backed Chinese Academy of Social Sciences, said in an interview this week, without saying where he got the data. The lenders may rush to boost credit in the last few days, mainly through short-term notes, he said.


China hasn’t officially announced the quotas set for each bank or the total loan target for 2012.


Still, as recently as last month, policy makers were indicating the target was 7.5 trillion yuan to 8 trillion yuan. Lenders in China’s eastern province of Zhejiang, for instance, will aim to increase new loans to about 670 billion yuan, accounting for 8.4 to 8.9 percent of the nation’s total increase, the government-backed Securities Times newspaper reported on April 26, citing Liu Renwu, head of the PBOC’s Hangzhou branch.


Failing to meet the annual loan target would mark a turning point for Chinese banks, which have reached or exceeded the central bank’s goal every year that such quotas have been in place since at least 2006.




The lending slowdown reflects the faltering economy. China’s gross domestic product expansion, which dropped to 8.1 percent in the first quarter, may further slip to 7.9 percent in the three months ending in June, according to a Bloomberg News survey last week. That would be the sixth quarterly deceleration.


April’s weak trade and industrial-output data prompted the central bank on May 12 to announce the third cut in the amount that banks must set aside as reserves since November.


The Chinese government this week signaled a bigger focus on bolstering growth, saying in a statement it will intensify “fine-tuning” of policies “for stable and relatively fast economic growth.”


The nation will start a series of “key infrastructure projects that are vital to the overall economy and can facilitate growth,” and speed up construction of existing railway, environmental protection and rural projects, the government said on May 23, summarizing a meeting of the State Council, or Cabinet.



Still, Morgan Stanley this week joined banks including Goldman Sachs Group Inc. in lowering its estimate for China’s economic growth for the year. The annual GDP forecast was cut to 8.5 percent, from an earlier 9 percent goal, to “reflect the worse-than-expected slowdown” in the first four months, chief economist Helen Qiao said in a note to clients on May 21.



The waning demand for loans is also reflected in the three- month Shanghai interbank offered rate, or the rate at which Chinese banks say they can borrow from one another. The so- called Shibor has fallen every day since March 27, sliding 65 basis points to 4.30 percent, according to data compiled by Bloomberg.


The outlook for China’s economy may be even worse if Greece exits the euro and local policy makers don’t increase the stimulus, China Investment Capital Corp., the nation’s biggest investment bank, forecast this week. Economic expansion may drop to 6.4 percent in 2012 in that case, Beijing-based Peng Wensheng, CICC’s chief economist, said in a May 23 report.

Home Forums China is Missing Its Own Targets

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    What’s worse than creating hundreds of billions of dollars worth of absolutely unproductive debts over the course of a few years? Setting a target for
    [See the full post at: China is Missing Its Own Targets]


    “A population already squeezed to death by high costs of living, horrible conditions of working and no return on savings, only to see the same destructive policies implemented over and over again, will not be a happy population for much longer.”

    I’ve read some amazing articles on the massive unrest in China. Not just the 18 girls who committed suicide from jumping off the top of the factory, but massive numbers of strikes and demonstrations that seem to never be mentioned in MSM. I’ll look for info on these.

    China has a past where workers were honored (at least by lip service) and they fought back against the Japanese and later over threw a government. Conditions are so bad today, I expect we only hear the tiniest amount of info from TPTB there.

    steve from virginia

    The question in China was the choice between currency arbitrage/dollar preference and hyperinflation or collapsing credit and deflation. China has a lot of dollars loose on the streets …

    China also has a massive debt overhang. Deflation pushes short rates down to zero while dollar preference and plunging fuel prices (caused by/resulting from) dollar preference amplify … what exactly? Confusion and disorder.

    China looks to be the world’s biggest accounting control fraud: outcome? Chaos.


    good grief – all that log in stuff and I forgot what I was going to say!

    Oh yes… and we are helping this position by only buying local. As we are encouraged to do. Its all very odd – do one thing and you cause mayhem in one direction but do the other and the mayhem simply moves to somewhere else!

    A nice cave with no electronic media of any kind might be the answer. Preferably one with a comfortable sofa, a library and a good garden attached – complete with gardener 🙂

    On a more realistic level, I suspect that this problem will eventually have to be solved by the local populace as a whole as the world in general is in no fit state to do so.

    viv in nz


    According to Parsons, during the period 1629–44, there were as many as 234,185 insurrections in China, averaging 43 events per day, or 1.8 outbreaks per hour” (Deng 1999:220) (note in David Graeber : Debt, The first 5000 years)

    1.8 outbreaks per hour, and there weren’t a billion chinese at the time.

    Mark T

    “We now live in a world where deflation has become public enemy number one. In this current economic environment, governments seek a condition of perpetual inflation in order to maintain the illusion of prosperity in the developed world. But in reality, deflation is the free-market approach to rectify a secular period of superfluous money supply growth, debt accumulation and asset price appreciation.”

    “The plain truth is that the current debt levels, carried by the developed world, demand a period of massive deleveraging to occur. A healthy and cathartic period of deflation is needed; where asset prices fall, money supply shrinks and debt levels are reduced to a level that can be supported by the free market. This is the only viable answer for various nations struggling with solvency.

    However, the return journey from rampant inflation and asset bubbles always carries insolvency and defaults along for the ride. Defaulting on debt is deflationary in nature and restructuring your liabilities is the only choice when you owe more money than you can pay back.

    The prevalent idea among heads of state and central banks is that a country can borrow and print more money in order to eliminate the problems caused by too much debt and inflation. But more inflation can never be the cure for rising prices and piling on more debt can’t solve a condition of insolvency. “

    Deflation Isn’t the Enemy


    Mark T post=3157 wrote:
    Deflation Isn’t the Enemy

    Uh, yes it is. The [D]elites are incredibly adept at psychology and misinformation.

    For example, they have everyone feeling smart talking about “the business cycle” when, in reality, it is their “societal asset stripping cycle” where they manipulate the money supply to bankrupt people and then take their physical assets.

    Yet people think they are part of the “in crowd” discussing the “business cycle.”

    In a debt based, fractionally reserved, 1 quadrillion derivativized monetary system, deflation IS THE ENEMY.


    Bank accounts will be zeroed out. Stock values will collapse. Housing prices will collapse. Government tax receipts will collapse.

    Social Security payments will collapse. FDIC will collapse. Medicare will collapse. Job opportunities will collapse. Unemployment will collapse. States will collapse and the [D]elites will buy up all the state resources for cheap (insider deals with those they financed into office) and then toll their subjects to death.

    The whole point of a monetary deflation is to take your real stuff – so yes, it will be nasty.

    Remember one thing, though, as this plays out. The bubble and the bust ARE A MONETARY PHENOMENON.

    The “Money Masters” are using the monetary systems of the world to enslave the nation states and they will pose as our saviours… the criminals in charge who created this fraud will pose as the solution with another fraud that gives them even more wealth and more control.

    Education the people regarding the stealth asymmetric warfare that is Debt Money Tyranny.

    Expose the Federal Reserve and all their media, education and political collaborators as the lying criminals they are:

    Read the mandate and then look how they lie about it to cover the fact they’ve broken it for 25 years running.

    Also note that their “law” has no penalty.

    Sweet – criminals make their own laws without penalties. Must be nice, eh?

    Denninger said he read the entirety of FinReg and said there WAS NOT A SINGLE *ORE ELSE* CLAUSE IN THE WHOLE THING…. no penalties for breaking it.

    They will play us for fools every time. The only question is… will we play the role of fools?

    Golden Oxen

    Triv Quoted “Remember one thing, though, as this plays out. The bubble and the bust ARE A MONETARY PHENOMENON “.

    This was a super posting Triv, The no penalties for these vermin is an excellent point that is brought up much to infrequently. You definitely have all the qualities of becoming a hard core gold bug. How I wish I could convert you to the Faith. Regards, From A Serious and Jesting Go.

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