1. Same story, different day...........year ie more of the same fiat floods the world
    Dismiss Notice
  2. There are no markets
    Dismiss Notice
  3. Week of 6/24/2017 Closing prices & Chg Over Last Wk---- Gold $1256.40 Silver $16.64 Oil $43.01 USD $96.94
  4. "Spreading the ideas of freedom loving people on matters regarding high finance, politics, constructionist Constitution, and mental masturbation of all types"
    Dismiss Notice

China's Debt Load Is (Much) Higher Than Previously Thought, Goldman Says

Discussion in 'Coffee Shack (Daily News/Economy)' started by Scorpio, Jun 6, 2016.



  1. Scorpio

    Scorpio Скорпион Founding Member Board Elder Site Mgr Site Supporter ++

    Joined:
    Mar 25, 2010
    Messages:
    23,754
    Likes Received:
    25,299
    Trophy Points:
    113
    China's Debt Load Is (Much) Higher Than Previously Thought, Goldman Says

    New credit creation points to an "uncomfortable" trend

    Tracy Alloway tracyalloway
    June 6, 2016 — 4:28 AM CDT


    [​IMG]


    Casting shadows across the Chinese financial system.

    Photographer: Nelson Ching/Bloomberg

    Count total social financing (TSF) as another Chinese statistic of increasingly dubious value, according to analysts at Goldman Sachs Group Inc.

    With many investors grappling to understand the degree to which China's economic growth has been fueled by debt, efforts to get a grip on measures of new credit creation have gained fresh urgency. To date, many have relied on the TSF invented by the Chinese authorities in 2011 as a way of capturing a larger slice of the country's shadow banking activity, but Goldman analysts led by M.K. Tang cast fresh doubt, in a note published on Wednesday, on the measure's ability to gauge credit creation.

    They identify a discrepancy between China's official TSF and Goldman's new proprietary estimates of credit, describing the increasing difference as "an uncomfortable trend that has gotten more discomforting."

    Of particular issue is the rise in opaque loans given noises surrounding China's circular financing schemes, which involve banks lending to nonbank financial institutions (NBFIs) as opposed to directly to companies. While this "round-tripping," as Goldman dubs it, does help boost bank profits, it also means more investments on bank balance sheets and more money meandering through the financial system as opposed to moving into the real economy through an increase in M2 money supply.

    [​IMG]
    Source: Goldman
    Faced with an increasingly tangled system of financing and a money supply measure that doesn't fully encapsulate new credit creation, the Goldman analysts opt to take a slightly different approach to gauge the strength of China's recent credit boom. They look at the (adjusted) flow of money emanating from households and companies and going into various financial investments.

    On that basis, China's credit creation came in at 24.6 trillion yuan ($3.7 trillion) last year—far outstripping the 16 trillion yuan increase in money supply and the 19 trillion yuan of TSF.

    [​IMG]
    [​IMG]
    Source: Goldman
    "Such a scale of deterioration [in China's leverage] certainly increases our concerns about China’s underlying credit problems and sustainability risk," the Goldman analysts conclude. "The possibility that there is such a large amount of shadow lending going on in the system that is not captured in official statistics also points to [a] regulatory gap, and underscores the lack of visibility on where potential financial stress points may lie and how a possible contagion may play out."

    http://www.bloomberg.com/news/artic...h-higher-than-previously-thought-goldman-says
     
  2. nickndfl

    nickndfl Midas Member Midas Member Site Supporter ++

    Joined:
    Jan 7, 2011
    Messages:
    11,252
    Likes Received:
    8,854
    Trophy Points:
    113
    Location:
    Florida
    They are propping up their real estate and stock markets with leveraged cheap crap exports to the USA. Chinese central planning got them into a mess that will take time to unwind. Hopefully it does not unravel in the process because it will take down the rest of Asia with it.
     

Share This Page