China Hides Rampant Inflation in Money Binge

[BoyRacer]

China Hides Rampant Inflation in Money Binge → bloomberg.com/news/2010-10-1 … vanec.html

As inflation comes out from hiding, authorities may be forced to sharply rein in liquidity, turning China’s cash-fueled boom into a bust.
If it seems like there’s a lot of money sloshing around the Chinese economy, that’s because there is. Over the past two years, M1 expanded by 56 percent, M2 by 53 percent. Currently, even with much-touted “cooling measures,” both are still growing at an annual rate of about 20 percent.
Unlike the U.S., China never really had a fiscal stimulus, where the government spends its own money directly. The funding for infrastructure and other projects to juice up the Chinese economy came almost entirely from a boom in lending by the state-run banking system.
In 2009, those banks made almost 10 trillion yuan in new loans – more than double any previous year – expanding the country’s loan portfolio by a third. This year, they will probably lend 8 trillion yuan, almost twice as much as in 2008.

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Broken BRICs - Martin Hutchinson → atimes.com/atimes/Global_Eco … 6Dj01.html

There are other reasons to expect Chinese growth to slow. Because of its size, the country has forced up commodities prices worldwide, a factor that itself will produce consumer price inflation and possible resource shortages. Further, the immense Chinese export machine is running into increasing resistance in the West. With European and US growth subdued for several years, it is likely that various forms of protectionism and “voluntary restraint” will restrict its further growth.

China must increase domestic wages and thereby consumption, but by doing so it will find its export industries undercut by cheaper competitors in India and elsewhere. Finally, China’s banking system, state sector and commercial real estate industries are a mass of corruption and undeclared losses.

The ADB’s estimate of 5.5% growth for China over the 2010-2030 period is probably on the high side. China’s trajectory is likely to be one of financial crisis followed by several years of very slow growth and adjustment, followed by a much healthier “catch-up” period. Both China and India probably have a healthy long-term future, but it is not quite as untroubled as current markets predict.
For the West, the BRICs’ troubles will be something of a relief - their extraordinary growth in the last few years has caused huge stresses in Western economies that require time to adjust. The process of wage differential shrinkage between Western and emerging markets will continue (there are, after all many emerging markets beyond the BRICs, most of which have not yet enjoyed their fastest periods of growth) but maybe at a slightly slower pace.

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[BoyRacer]

Is China actually bankrupt? → articles.moneycentral.msn.com/In … krupt.aspx

More debt than meets the eye

If you look only at the current position of China’s national government, the country is in great shape. Not only is the current budget deficit at that tiny 2.8% of GDP, but the International Monetary Fund projects the country’s accumulated gross debt at just 22% of 2010 GDP. U.S gross debt, by comparison, is projected at 94% of GDP in 2010. The lowest gross-debt-to-GDP figure for any of the Group of Seven developed economies is Canada’s 79%.

But China has a history of taking debt off its books and burying it, which should prompt us to poke and prod its numbers. If we go back to the last time China cooked the national books big time, during the Asian currency crisis of 1997, we can get an idea of where its debt might be hidden now.

The currency crisis started in 1997 with the collapse of the Thai baht – and then, like dominoes, the currencies of Indonesia, South Korea, Malaysia and the Philippines collapsed.

The majority of bank loans, says Jubak, went to state-owned companies – about 70% of the total. The collapse of China’s export trade following the crisis meant that its banks were suddenly sitting on billions in debts that were clearly never going to be paid. But that was when China’s largest banks were trying to raise capital by selling stock in Hong Kong and New York, and no bank could go public with that much bad debt on its books.

**The creative solution? The Beijing government set up special-purpose asset management companies for the four largest state-owned banks, the equivalent of the “special purpose vehicles” designed by Wall Street to funnel real estate loans off U.S. bank books. The Chinese entities ultimately bought $287 billion in bad loans from state-owned banks. To pay for the loans, they issued bonds to the banks, on which they paid interest. The state-owned banks thus got $287 billion in toxic debt off their books and turned the bad loans into an income stream from the bonds. **

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[yoganmahew]

ft.com/cms/s/0/a6bfae34-6ccc … z1KJiSRCuN

Shanghai fuel protests unnerve Beijing

By Leslie Hook in Beijing

Published: April 22 2011 13:29 | Last updated: April 22 2011 19:54

Chinese authorities were locked in negotiations on Friday with striking truckers who have besieged the country’s largest port, in a bid to prevent the unrest from spreading to other cities.

Truck drivers at the Shanghai port of Baoshan are demanding relief from rising fuel costs and port fees, in a rare industrial action that will reinforce government fears about the destabilising impact of rising prices.

While localised labour and land disputes are common and usually contained, one of the government’s greatest fears is that popular discontent over inflation could spark a wider protest movement.

“Every intersection has riot police,” one Baoshan trucker interviewed by phone on Friday afternoon, who declined to be named, said. “I don’t know how long it will last.”

In an alert, a logistics company at the port warned clients that strikers had blocked traffic in a protest over “domestic fuel [costs] and the high handling fees charged by port terminal operators”.

This might explain Sinopec’s move?