The China bomb keeps getting bigger

The China bomb keeps getting bigger (Source China dropped a few bits of economic data over the weekend suggesting things will get much worse before they get better. The most important piece of data is  HYPERLINK “″ total social financing, or TSF. It’s a figure the Chinese government made up back in 2011 to track all the money in the system. That includes credit out to borrowers and even parts of the country’s opaque shadow banking system. So you can imagine why tracking this is important. As Business Insider’s Julia La Roche reported, this is what hedge fund land considers ” HYPERLINK “″ a ticking time bomb.” And the bomb is just getting bigger, according to last month’s tally. New TSF in January came in at a whopping $522 billion. That’s up from $276 billion in December, and it beat expectations of $337 billion. Outstanding credit grew by 12.1% from the same time a year before. In other words, credit is still expanding at an eye popping rate in China. And that may not even be the whole load either, as Bloomberg economist Tom Orlik writes: That acceleration might even understate the pace of credit expansion. Taking account of local government bond issuance — which isn’t included in the official data — outstanding credit accelerated to 15.1%, according to Bloomberg Intelligence Economics’ calculations. China is going through the difficult transition of moving from an economy based on investment to one based on domestic consumption. The country’s corporate entities are loaded down with debt, they’re not productive, and the economy is slowing down. That slowdown is part of why you see the yuan depreciating — it’s what’s rocking global markets.

Leave a Reply

Your email address will not be published. Required fields are marked *