The attitude among the top leadership – and the history of the PBOC’s relationship to the Shibor – suggests that the concerns are not liquidity but the fiscal structure of local governments. The difference is important; if you think the PBOC failed to react to the Shibor hike because it was “teaching the banks a lesson,” then you miss the point that the PBOC considers the Shibor to be a sideshow compared to the issues in the larger economy.
1/17/14 China’s shadow banking tug of war | East Asia Forum
Sara Hsu, State University of New York, and Andrew Collier, Orient Capital Research
The party is over for Chinese banks, who have for the last few years enjoyed record profits. Since the end of 2008, the Chinese leadership’s desperate bid to keep the wheels of growth turning has let a flood of credit into the banking system……
Our latest survey asked a simple question: what are the hottest trends in your town? We posed this question to young people in eight cities across China. We purposely left the question open ended in order to solicit wide open opinions. The results varied from the expected (KFC) to the more obeat (cosmetics for men). The survey provides insight into the sentiment and cultural mores among Chinese youth. For investors, it also pro- vides window into the buying habits of the future middle class.
CRC has completed a short survey of consumer expectations for the Chinese economy. The survey polled 120 residents in a cross-section of ten representative Chinese cities. We asked residents about a number of key economic issues, including the expected trend for inflation, GDP growth, property prices and un- employment. We conclude that there is a significant amount of concern about the future of the Chinese economy that could impact everything from property values to inflation expectations to purchasing deci- sions.
The liabilities of China’s shadow banking system are unknown and uncontrolled
By ANDREW COLLIER
Early in the debate on China, the most vehement bear was probably Jim Chanos, who in a Fortune Magazine article called China “Dubai Times 1000.” Most analysts in this debate — along with the Chinese government — are focusing on the property market. While many of the broad arguments are well known — overlending, property as proxy for savings, rising interest rates — my belief is that analyzing China’s property market using macro data provides only part of the picture. Many of the most pressing issues are really best understood as an issue of the extent of local debt.
Grandma’s Mortgage
Who’s Paying for China’s Property Bubble?
CRC asked 132 property owners in China what was their source of capital for the real estate they acquired? In addition to personal savings, most buyers borrowed funds from a complex array of third party lenders. This reliance on “friends and family” and “other” sources of capital is a form of non-bank lending that is little understood and is a potential liability in the financial system.
Grandma’s Mortgage: Who’s Paying for China’s Property Bubble