Lending by State owned banks is an important source of aggregate demand.
With lending both down and front loaded, a moderate first half could be a prelude to a very weak second half.
China’s Bank Lending Cools, Easing Overheating Risks
April 12 (Bloomberg) — Chinese banks extended a less-than- estimated 510.7 billion yuan ($74.8 billion) of new loans in March after the central bank told lenders to set aside bigger reserves and pace credit growth.
The figure compares with 700 billion yuan in February and the median forecast of 709 billion yuan in a Bloomberg News survey of 21 economists. The central bank released the latest data on its Web site today.
Lending Spurt
First-quarter new lending was 35 percent of the government’s full-year target of 7.5 trillion yuan, partly because Chinese banks lend more at the start of each year. March lending was down from a monthly record of 1.89 trillion yuan a year earlier. In the first three months of 2009, lending was 48 percent of the year’s total.
Meantime, a smaller trade surplus in the first quarter — down 77 percent from a year earlier at $14.49 billion — capped the increase in the nation’s foreign-exchange holdings. Li Wei, a Shanghai-based economist at Standard Chartered Bank Plc, said the U.S. currency’s strength last quarter reduced the value in dollar terms of reserves held in currencies such as the euro.
Andy Xie comments here. He doesn’t think they can stick it out.
Tom,
This is an interesting post from Warren in light of his post last week wrt China external debt increasing. here is a link to the TIC data. Between the mainland and Hong Kong, the external debt is fast approaching the level of US Govt securities China holds. Perhaps as China domestic lending is being reduced, foreign lenders are stepping up a bit to keep up sales to China (sort of vendor financing).
Resp,
China’s massive bad loan problem is still lurking. There is reasonable doubt that they haven’t cleaned up bank balance sheet problems from 2001.