1/6
The banking system is struggling to meet loan quotas while keeping bad debt under control. "Chinese bank rushed to meet their annual state-imposed lending quotas last month by buying up low-risk financial instruments rather than issue loans."
ft.com/content/70451e…
The banking system is struggling to meet loan quotas while keeping bad debt under control. "Chinese bank rushed to meet their annual state-imposed lending quotas last month by buying up low-risk financial instruments rather than issue loans."
ft.com/content/70451e…
2/6
The article goes on to cite one banker as saying: “The authorities want us to support the real economy while keeping bad debts under control. That is difficult to achieve in the current business environment.”
The article goes on to cite one banker as saying: “The authorities want us to support the real economy while keeping bad debts under control. That is difficult to achieve in the current business environment.”
3/6
In fact this has been the heart of the problem in the Chinese economy for the past 10-15 years. The banking sector is responsible for boosting economic activity to meet high GDP growth targets but, in so doing, has had to run up enormous debts that cannot be repaid.
In fact this has been the heart of the problem in the Chinese economy for the past 10-15 years. The banking sector is responsible for boosting economic activity to meet high GDP growth targets but, in so doing, has had to run up enormous debts that cannot be repaid.
4/6
This required the constant rolling over of hidden bad debts in order to work, which means it was always going to come to a head once the authorities tried to get bad debts under control. That seems to be what is happening now.
This required the constant rolling over of hidden bad debts in order to work, which means it was always going to come to a head once the authorities tried to get bad debts under control. That seems to be what is happening now.
5/6
I suspect that the regulators will ease pressure on the banks soon enough in order to get economy to pick up speed again, but while this will provide a breather for the banks and the economy, it doesn't address the underlying problem at all.
I suspect that the regulators will ease pressure on the banks soon enough in order to get economy to pick up speed again, but while this will provide a breather for the banks and the economy, it doesn't address the underlying problem at all.
6/6
At the end of the day Beijing can still only choose between getting debt under control and accepting much lower GDP growth rates, probably below 2-3%. What we have learned in the past year is how difficult it is to avoid this trade-off.
At the end of the day Beijing can still only choose between getting debt under control and accepting much lower GDP growth rates, probably below 2-3%. What we have learned in the past year is how difficult it is to avoid this trade-off.
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