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Finance & Economy

China plays down economic turmoil


China One Yuan Coins

China One Yuan Coins

China’s chief banking regulator said on Saturday that liquidity in China’s banking system is sufficient and pledged to control risks from local government debt, real estate and shadow banking.

Despite a cash squeeze that sent money-market interest rates soaring over the last two weeks, banks have more than enough reserves to meet settlement needs, Shang Fulin, chairman of the Chinese Banking Regulatory Commission (CBRC), said at a financial forum on Saturday.

“Over the last few days, due to multiple factors, the problem of tight liquidity has appeared in the market. But overall, liquidity in our banking system really isn’t scarce,” Shang said at a speech to the Lujiazui Forum in Shanghai

Shang said total excess reserves in China’s banking system totaled 1.5 trillion, which he said was more than double the amount necessary for normal payment and settlement needs.

On the issue of banks’ asset quality and, in particular, banks’ exposure to local government debt and the real estate market, Shang acknowledged risks but said they were manageable.

“Recently, some international organizations and industry insiders have expressed worry about a slowdown in China’s economic growth, local government debt, the real estate market, and related areas,” Shang said.

“Currently everyone is fully aware of the risks. As long as we take proper risk control measures, these risks are controllable,” Shang said.

On local debt, Shang pledged to closely monitor and control the growth in local borrowing and “alleviate hidden risks”.

Outstanding bank loans to local government financing vehicles totaled 9.59 trillion yuan at the end of the first quarter, Shang said.

Amid the cash squeeze earlier this month, CBRC repeated previous orders to banks to report all forms of local government debt exposure to regulators, including funds channeled through wealth management products (WMP).

The central bank, which had let short-term borrowing costs spike to record highs to drive home a message to banks that they could no longer count on cheap cash to fund riskier operations, said it would ensure policy supported a slowing economy.

On the topic of WMPs, which have exploded in recent years as households and firms have searched for higher-yielding alternatives to traditional deposits, Shang said the development was positive but also highlighted risks.

“In reality, wealth management products are investment products. Wealth management products are not the same as savings. Investors have to bear investment risk. When banks do these products, are they clearly explaining the risks to investors?” Shang said. Analysts have said that many WMP investors believe that many products carry an implicit guarantee from state-backed banks, even if no legal guarantee exists.

Bank-issued WMPs totaled 8.2 trillion yuan ($1.34 trillion) by the end of the first quarter, of which 70 percent were invested in the real economy.

Though Shang did not elaborate, the comments implied that the remaining 30 percent was invested in interbank assets, whose explosive growth was a key factor in the recent interbank liquidity squeeze.

On the real estate market, Shang downplayed the risk to the banking system, despite a three-year campaign by the central government to restrain housing prices.

Real estate loans totaled more than 13 trillion yuan by the end of April, of which mortgages comprised about 70 percent, Shang said.

“Chinese people are creditworthy. The non-performing loan ratio on mortgages is extremely low, far below 1 percent,” Shang said.

Source: Reuters “China bank regulator says liquidity ample, debt risks manageable”
 

About chankaiyee2

Author of the book "Tiananmen's Tremendous Achievements" about how with the help of Tiananmen Protests, talented scholars with moral integrity seized power in the Party and state and brought prosperity to China. The second edition of the book will be published within a few days to mark the 25th anniversary of Tiananmen Protests All the parts in the first edition remain in the second edition with a few changes due to information available later and better understanding. There are also some changes for improvements of style. The new parts are Chapters 12-19 on events in China after the first edition was published: The fierce power struggle for succession between reformists and conservatives; Xi Jinping winning all elders’ support during his mysterious disappearance for 2 weeks in early September, 2012; and Xi Jinping Cyclone. Chan Kai Yee's new book: SPACE ERA STRATEGY: The Way China Beats The US An eye-opening book that tells the truth how the US is losing to China. The US is losing as it adopts the outdated strategy of Air-Sea Battle while China adopts the space era strategy to pursue integrated space and air capabilities: It is losing due to its diplomacy that has given rise to Russian-Chinese alliance. US outdated strategy has enabled China to catch up and surpass the US in key weapons: Hypersonic weapons (HGV) that Pentagon regards as the weapon that will dominate the world in the future. Aerospaceplane in China’s development of space-air bomber that can engage enemy anywhere in the world within an hour and destroy an entire aircraft carrier battle group within minutes. Anti-satellite (ASAT) weapons, anti-ASAT weapons, stealth aircrafts, drones, AEW&C, etc. The book gives detailed descriptions of China’s weapon development based on information mainly from Chinese sources that the author monitors closely. U.S. Must Not Be Beaten by China! China is not a democracy. Its political system cannot prevent the emergence of a despotic leader or stop such a leader when he begins to bring disasters to people. A few decades ago, Mao Zedong, the worst tyrant in world history did emerge and bring disasters to Chinese people. He wanted to fight a nuclear war to replace capitalism with communism but could not bring nuclear holocaust to world people as China was too weak and poor at that time. If a despot like Mao Zedong emerges when China has surpassed the US in military strength, world people will suffer the misery experienced by Chinese people in Mao era. China surpassing the US in GDP is not something to worry about as China has the heavy burden to satisfy its huge population, but China surpassing the US in military strength will be world people’s greatest concern if China remains an autocracy. US people are of much better quality than Chinese people. What they lack is a wise leader to adopt the correct strategy and diplomacy and the creative ways to use its resources in developing its military capabilities. I hope that with the emergence of a great leader, the US can put an end to its decline and remain number one in the world. China, US, space era strategy, air-sea battle, space-air bomber, arms race, weapon development, chan kai yee

Discussion

3 thoughts on “China plays down economic turmoil

  1. Reblogged this on digger666 and commented:
    How very reassuring…

    Like

    Posted by digger666 | July 2, 2013, 9:11 pm

Trackbacks/Pingbacks

  1. Pingback: China will cut off credit to rebalance economy | China Daily Mail - July 6, 2013

  2. Pingback: Putting China’s debt into perspective | China Daily Mail - May 3, 2015

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