Bodynsoul's List: China's Credit Bombshell

• Credit warning signs are flashing for heavily indebted Chinese semiconductor, software and commodities firms as the government cautiously steps aside to let market forces play a bigger role in deciding winners and losers.
• Chinese companies owe just over $1 trillion in domestic bonds, of which 15.8 percent is coming due this year,
• Some 80 percent of China's 60.3 trillion yuan in total corporate debt comes from bank loans. Trust loans and microcredit accounted for 4.8 trillion.

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• Chinese banks and so-called shadow banks have lent far too much, too recklessly over the past five years, and that a reckoning may loom.
• to create vast amounts of credit to fund investment, and stimulate economic growth to offset deflationary forces imported from the rest of the world.
• widespread recognition that excessive amounts of debt have been accumulated by speculators, property developers and local governments, inter alia, makes it much riskier for the central bank to continue the recent policy of stoking up an investment boom each time there is a blip in China's growth.
• To put it another way, what's currently worrying global investors isn't just that the Fed seems poised to stop manufacturing all that almost-free money (see my earlier blog), it is that this could happen at a time when what's happening in China may reinforce a global squeeze rather than counteracting it.
• a second and much more disturbing possible implication of spiking lending rates in China - which is that the slowdown in credit creation will lead to tumbling asset prices, widespread bankruptcies and the crippling of the banking and wider financial system.
• According to a recent and influential report by Fitch, outstanding loans by Chinese banks and shadow financial institutions were equivalent to 200% of GDP at the end of 2012, up from around 125% of GDP in 2008.
• nvestment in China has been equivalent to around half of GDP, more than three times what it is in Britain (a not very relevant comparator), and about 50% greater than it was in Japan just before that economy went pop

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• stepped up efforts to re-energize the country’s economy, data showed Tuesday, pumping more money into the system last month and pressing banks to extend more loans.
• reported a stronger-than-expected 1.08 trillion renminbi, or about $170 billion, of new loans in June, nearly 20 percent more than market expectations.
• The broad money supply, which includes cash, and checking and savings deposits, jumped 14.7 percent last month from a year earlier
• Outstanding renminbi loans grew 14 percent from a year earlier, slightly better than expectations, while the total social financing aggregate, a broad measure of liquidity in the economy, swelled to 1.97 trillion renminbi in June, from 1.4 trillion renminbi the month before.
• Government spending surged 26.1 percent in June from a year earlier, to 1.65 trillion renminbi, further reflecting Beijing’s determination to revive growth momentum.

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