China's Credit Bubble

An economy already saddled with overcapacity will ahve to deal with even more, as hasty loans are used to build new factories, steel mills and chemical plants.,

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The Communist party is now readying lavish celebrations for its 60th anniversary in power in October."

and also on in the FT on that same day:

"The great free-for-all of China"

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However, China's inreasingly fretful banking regulator worries that rampant credit growth "poses risks" to the financial system. The warning comes after banks advanced Rmb 5'840 bn (USD 855 bn) of new loans in the first five months, almost triple the amount a year earlier.

As for June's lending, at USD 220 bn it was a blockbuster as banks pumped up their quarterly loan numbers, just as they did in March (to USD 280 bn).

An unknowable amount of this cash has ended up on the blackjack tables of Macao - pr that other casino, the Shanghai Stock Exchange, where daily volumes are currently three times the five-year average.

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China failed to complete a USD 4.1 bn auction of one-year government bonds yesterday, suggesting that investors are positioning for higher inflation caused by the credit surge."