Posted by: jhamon | July 10, 2009

Chinese Bank Bombshell

A Shanghai branch of Industrial and Commercial...

ICBC China

From Chinese bank announces bombshell:

Yesterday on their website, the People’s Bank of China announced a shocker. New Chinese bank lending for June was 1.53 trillion yuan ($224 billion), double the lending in May. The total already for the year is an astounding 7.4 trillion yuan when the target for the entire year was 5 trillion. Putting this in context, total lending this year so far has amounted to 25% of 2008 GDP. – CNBC

Daily Bell’s Commentary: China has incorporated a façade of Westernism but to cast China as the world’s financial engine is to understand how desperate the West has become. China’s economy grows by 10 and 15 percent a year, and now appears be heating up even more. This is not normal growth but central banking generated growth. The same clique still runs China, but the economy has been supercharged by additional printing.

China is said to be turning inward now, as Western countries cannot afford to buy its products. But whether China will be able to maintain its growth by using its own huge population as a purchasing pool remains to be seen. What will certainly happen sooner or later is that the supercharged money being used by the Chinese will create the same boom-bust cycle as has happened elsewhere. Only when it ends in China after so many years, it will be the mother-of-all blow-offs.

Conclusion: It is difficult to see what Chinese leaders expect to happen once the bubble busts. Maybe they are gambling that they can control the unrest that will come in its wake. Maybe they assume the bubble will not bust for many years.



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