China bank lending: A bubble in the making?
25 July 2009
The Chinese economy may be roaring back to life, but concern is growing that record lending rates are feeding a speculation bubble
While the U.S. and Western economies have faced a credit crisis, there is a credit feeding frenzy happening in China. China state banks have lent nearly $1.1 trillion in the first half of the year -- more than the $800 billion U.S. stimulus or the $586 billion the Chinese government is spending to bolster its economy. CNN's John Vause reports on China's spending »
The record lending spree -- equal to one-quarter of the nation's total economic output -- is helping China's economy grow close to 8 percent the last quarter.
While boosting domestic consumption is seen as crucial to help reduce China's reliance on exports, economists see signs of trouble ahead.
"China has a $4 trillion economy and has (public and private) loans out of $1 trillion," Jerry Lou, China strategist for Morgan Stanley, told CNN recently. "Its loan book is out of balance."
"Somewhere between a fifth and a third of total new lending may have ended up in such things as stock market speculation, real estate speculation and even a measurable amount may be showing up in the casinos in Macau," said Michael Pettis of Peking University.
source: cnn.com