Desperate Measures for Desperate Times
By Christine Hughes, Canada. Chief Investment Strategist, OtterWood Capital:
Chinese banks aggressively expanded their balance sheets in January so much as to top all prior months of lending in history. Aggregate financing jumped to 3.42 trillion Yuan significantly beating expectations of 2.2 trillion yuan in a Bloomberg survey.
This massive debt cram-down shows China’s desperation to shore-up borrowing and spur economic growth. The surge in lending also coincides with very weak trade data for January which authorities were trying to offset (imports fell 14.4 % year-over year and exports fell 6.6% year-over year).
Not many pundits believe this much new credit is positive, especially when considering the last surge in lending in 2009 created a property bubble that subsequently burst. The Chinese government also encouraged citizens to borrow on margin to buy stocks in 2015 and those policies didn’t do the country any favours after it failed and the stock market crashed. Long term, these kinds of policies add to a country’s downside risks and don’t replace much needed fundamental reforms.
By Christine Hughes, OtterWood Capital,
It’s more than China. Global trade is skidding south at a breath-taking speed. It simply doesn’t let up. Read… I’m in Awe at Just How Fast Global Trade is Unraveling