China’s Massive Debt Cram-Down

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

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  8 comments for “China’s Massive Debt Cram-Down

  1. d
    Feb 17, 2016 at 4:42 am

    That much “New” lending in this economic environment, is either.

    1 Refi’s including interest due. Which is in itself a bad sign.

    2 BS.

    3 fraud (of some kind) on a huge scale.

    These a chinese Economic “Stats”, so lets hope for 2.

  2. Keith
    Feb 17, 2016 at 6:41 am

    To increase domestic consumption they need a good welfare state.

    Western consumers don’t worry about saving because they have a safety net.

    Asian savings rates are high because there is no safety net.

    • Nicko
      Feb 17, 2016 at 9:16 am

      China is greying rapidly now as well (just like Japan), the problem will only grow worse.

  3. nick kelly
    Feb 17, 2016 at 10:02 am

    Fundamental reforms?
    True- but job one is somehow getting rid of the CCP or marginalizing it as Britain did with the its upper house the House of Lords (the only reason the US has a Senate BTW is that their system is a re-vamped British system circa 1780 )
    The CCP members and their families consume about 85 % of China’s health care budget.
    All large enterprises pay one form of protection or another.
    In Feb.2015, REAL China expert Ann Stevenson-Yang said she could name CCP members who would benefit from the Alibaba IPO even though they had no connection or ownership.
    It’s funny how all these revolutions end up with an upper class, really a royalty, even smaller and more powerful than the ones they overthrew.

    • d
      Feb 18, 2016 at 2:54 am

      “It’s funny how all these revolutions end up with an upper class, really a royalty, even smaller and more powerful than the ones they overthrew.”

      Every-time. You forgot Eviler.

      Vietnam. Largest transfer of privately owned land to the state, then back to communist party members private hand’s, in less than 25 years in SE Asia, outside china. In effect a mafia orchestrated land grab on a massive scale.

      After Cromwells death, his kind were ejected from power and a King returned. As a King was deemed the lesser of the available evils.

      Many of Cromwells Ejected Regicides and supporters went to America. Where the became refereed to as the “Pilgrims”. Those who didnt go with them seemed to disappear from the pages of history.

      The KMT (Chinese Fascist Nationalists) from Taiwan has been getting closer to the mainland, as the ccp is now what the KMT used to be a. A group of Fascist, Criminal family’s/Warlord’s.

      Hence the new Taiwanese premiers determination, to put some daylight between her party, and the mainland.

      The Xi corruption hunt is noting but a Mafia gang war.

      All the arrested and convicted are either from other clans who oppose the Xi clan. Or people who have become rich paying off people who oppose the Xi clan.

      All the business people who have recently been detained then released, have returned much lighter in pocket. Many have been forced to “Invest” huge amounts, at completely inflated prices in the chinese stock market.

      The “Shares” can nor be sold, with out the CCP regulators permission.

      Just as an Upper-house would not overturn the hold of the “Putin” and other Mafia clans on Russia, so it will not on china either.

      Democracy in its present form is a failed experiment, in what becomes a regularly leftist bought election, and effectively handout taking Mob Rule. As once the handout taking mob reaches electoral mass it is undefeatable democratically, the result is greece, followed by Venezuela, Zimbabwean, and implosion.

      O bummer has prepared the ground, Sanders would take the American handout taking mob, over 50 %., Having achieved that he will bring electoral campaign reform, and tax reform, on terms preferable to the DNC, not America. America will then be dead in the water, and the world a dangerous and unpleasant place to be..

      The mistake the English made, was in Allowing to much power to be taken from the Throne.

      This is demonstrated in the inability of the Throne to stop Blair going to war illegally in Iraq.

      After he illegally entered into a pact with bush to go to war in Iraq, to remove Saddam. 18 months before he had authority to invade iraq from parliament.

  4. Vespa P200E
    Feb 17, 2016 at 10:09 am

    I was watching PBS nightly biz report last night and 1 of the reason for market going up yesterday was BoC announced that in January, China had created about $500 billion of NEW DEBT – more than 50% higher than expected in the form of new loans.

    Wonder how much longer BoC can afford to give out HALF trillion loans monthly with ever growing NPL/bad debts as sounds more like blow off in making!

    Feb 17, 2016 at 10:19 am

    If massive borrowing and new debt don’t accelerate the economy enough, then just increase the amount of borrowing and new debt.

    I learned that in college.

  6. JT
    Feb 20, 2016 at 2:05 pm

    The chinese are signalling their cover. At this moment the two mile deep tunnels under the planet have high speed military transports….CBS and NBC have first shot at 30 million chinese troops emerging from the JPGetty catacombs
    Ok, so i watch stupid shows like Alex Jones. One needs to watch these while very high on grass. It is vacuous laughter at our plight.
    We need to wake up and tell the congress to live, and triumph for doing the right thing, before they die from irrelevence. Currently, they are not even good at graft and corruption. No senator, it is not too late. Follow me if you want to live.

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