China’s bank lending soars -- and fuels worry
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China’s stimulus program is getting money into the economy. Now the government may be wondering whether the cash infusion could be too much of a good thing.
From Bloomberg News:
China’s new lending surged more than sixfold from a year earlier to a record 1.89 trillion yuan ($277 billion) in March, adding to signs that growth in the world’s third-biggest economy is gathering pace. M2, the broadest measure of money supply, grew 25.5%, the central bank said on its website today. That’s the fastest since Bloomberg began compiling data in 1998. China’s banks, which are mostly state-owned, have already met the bulk of the government’s target of at least 5 trillion yuan of new loans this year. Lending may top that level by as much as 3 trillion yuan, according to JPMorgan Chase & Co.
But some analysts, and government officials, are concerned about the risk inherent in this explosion of lending. One worry is that some of the money has just flowed directly into the stock market, via speculators.
The Shanghai stock market has been one of the world’s best performers this year, with a gain of 34.2%.
From Bloomberg:
‘The central bank had to ensure it did enough to reflate the economy,’ said Kevin Lai, an economist with Daiwa Institute of Research in Hong Kong. ‘The question now is whether it has done more than is needed. Some of the money has gone to the property market, some to the stock market. It is not what the central bank wants to see.” A concentration of loans in infrastructure projects is a potential hazard for banks, China Banking Regulatory Commission Vice Chairman Jiang Dingzhi wrote in the April 1 edition of China Finance, a magazine affiliated with the central bank. Unusual growth in discounted bills, which are used for working capital and dilute banks’ lending profits, ‘deserves high attention,’ Jiang said. ‘The biggest dangers to China’s economy and financial system come from within, not from outside,’ Jiang Zhenghua, former vice chairman of China’s parliamentary standing committee, said at a financial conference in Beijing today. ‘The biggest of these hidden dangers is the degree of bad loans in China.’
With the world starved for growth, the rest of us can only hope that China’s day of reckoning for the lending surge is a long way off.
-- Tom Petruno
market rebounds, after profit-taking hit on Wednesday. Credit: Eugene Hoshiko / Associated Press