Posted on 11/19/2007 5:32:55 AM PST by Brilliant
Chinese authorities are slamming the brakes on bank lending, in their latest attempt to curb the runaway investment threatening to overheat what is soon to be the world's third-largest economy.
In recent weeks, regulators have quietly ordered China's commercial banks to freeze lending through the end of the year, according to bankers in several cities. The bankers say that to comply, they are canceling loans and credit lines with businesses and individuals.
A China Banking Regulatory Commission official here confirmed that local and Chinese subsidiaries of foreign banks have been asked to ensure that loans at the end of the year don't exceed the total outstanding on Oct. 31. The official described the request as "guidance aimed at supporting the macro-control measures being implemented."
Over the past few years, Chinese authorities have repeatedly sought to rein in investment in sectors such as property development, where they deemed it was becoming excessive. But even in China a blanket edict to halt lending growth is unusual.
Curbing lending by raising interest rates, as China already has done four times this year, would be more in keeping with Beijing's increasingly market-oriented approach to business. But the lending freeze shows how the slowing U.S. economy may be complicating Chinese policy making. Lower interest rates in the U.S. give Beijing less room to push up rates without creating a ripple effect.
By raising rates further China could risk boosting the value of its currency, the yuan, too much for the comfort of its exporters, a critical part of the Chinese economy. A stronger yuan would make Chinese exports less competitive in world markets...
(Excerpt) Read more at online.wsj.com ...
Eventually, I think the Chinese are going to discover the hard way that a large complex economy like their own cannot be run effectively by bureaucrats in Beijing.
This got no replies? Frankly I think this is the financial story of the day, not GS slamming C.
Ping Pong, China’s Gone...
“We US we play joke, you economy up in smoke”
Thanks for all the cheap stuff, now we’ll go somewhere else...
So do i.
And it would serve as a lesson to all the Bush-haters screaming about the “horrible” economy.
A falling dollar IS NOT a bad thing, except for oil, since Democrats have made us so dependent on imports..
I guess Greenspan came out said the same thing. If a weak currency does not cause inflation, higher bond yields, it is actually a good thing. And if you believe all the screaming and yelling coming from europe and canada about now... they aren’t too happy about our induced weak dollar, and their skyrocketing currencies.
check this out
And other commodities, and products that are priced in dollars. A falling dollar is a bad thing when it is used as a substitute for real growth that comes from investment and innovation.
The Chinese should look up Herbert Hoover and what he did in 1929.
By raising rates further China could risk boosting the value of its currency, the yuan, too much for the comfort of its exporters, a critical part of the Chinese economy. A stronger yuan would make Chinese exports less competitive in world markets.
Expand on that.
Hoover had the Federal Reserve jack up margin rates so high that nobody would use it.
Bump.
The result being that eventually, the credit bubble burst, contributed to the bust?
Imagine owning a business, relying on credit lines, then getting cut off. You can’t borrow money, to give to the other guy, who can’t pay the other guy, who can’t pay the other guy...
Beijing's concern about the stability of the yuan may be the reason, since higher interest rates tend to attract more depositors, an unwelcome prospect for Chinese policy makers keen to minimize enthusiasm for the yuan. A stronger yuan could hurt exporters by making some goods more expensive for buyers paying in dollars or euros.
Unless a replacement source of funding is quickly available, such as American investors, you’re right. China just kicked its feet out from under itself.
Well, I would think (almost hope) it’s not anywhere close to total. I can’t see how even a secretive bureaucracy like China’s would be carry out something like this “quietly.” That’s like logging in a forest of hundreds of feet high trees “quietly.”
China just kicked its feet out from under itself... Dang, wish I’d come up with that, very accurate description.
And yes, I guess they can hope for the Lone Ranger to come and financially bail them out, buy their shares/stuff, at the good ole USA discount for saving stupid people!
I always knew that this undervalued currency, much like the overvalued ones, had some sort of pin prick element. Unfair trade, is always made fair later. I mean come on, the Chinese only needed to look at Japan’s history to see that the eventuality was going to be chaos. And I suspect that the Chinese banking system is way farther out there than Japan was in 1989.
Would you agree that this might mean something more than the GS vs C pissing match today?
Do you think that much of our stock market weakness is in tandem like March, with what is going on in China?
Give me your thoughts, and I’ll show you a short vid of me smacking a golf ball into my head...
Maybe the real question isn’t if China’s bubble bursts, or even how, but what will happen because of it? Do the Chinese then start dumping us bonds, to cover the social/econ consequences of their market imploding?
I very accurately predicted the financial stocks blowing up, but what I failed to do, was connect the dots to the corporate bond market. If I had, then I’d feel genius especially. So, maybe with some freeper help, we can figure out the long run game here, not just the initial trigger?
What are the three, four consequential steps of the Chinese stock, credit markets seeing a massive crash?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.