China's new yuan-denominated lending stood at 2.76 trillion yuan ($441.6 billion) in the first quarter, up 294.9 billion yuan year on year, the People's Bank of China announced Thursday, reported Xinhua.
Saw that. If we had that kind of "monetary velocity" here in the U.S., QE would have led to serious inflation by now.
In China, lending explodes via the "money multiplier" with little monetary stimulation necessary. That's what you get when everybody wants to invest in industry there... along with the obligatory growth that comes with it.
In the US, no amount of stimulus generates any growth, so QE3 continues on without any resulting money velocity that would queue up inflation. But, of course, all those humongous bank reserves are still sitting there, like water piling up behind a weak, creaky dam...
... and everybody's wondering if the fed will drain some of the water out before it breaks out of sheer volume before any velocity actually happens.
Such a sick situation... and a president who couldn't give a rip.
A different perspective in the paper today: Total credit outstanding in China is expected to rise to a whopping 240% of GDP in 2013, and continues to rise at a faster pace which would lead to mass debt defaults, according to a Zerohedge article.
The article was published on the finance blog Thursday following China’s central bank statistics showing that the country’s new yuan loans in March hit 1.06trillion yuan, up 51.5billion yuan year-on-year. Chinese financial institutions extended as much as 2.76trillion yuan in new loans in the first quarter, a rise of 294.9 billion from the same period a year ago. The Chinese corporate debt, at 151% of GDP, is the biggest in the world and the bubble is the largest of any developed and developing country, wrote Tyler Durden, author of the article.
Durden said China has to continue injecting massive amounts of debt, which he called the “true driver of an economy”, in order to maintain its breakneck annual GDP growth of 8%. China’s total social financing hit 6.16 trillion in the first three month, up more than 2.27 trillion compared with the same period of last year.
The world’s second largest economy could face mass corporate defaults which it has been desperate to avoid, if debt injections are to continue, said Durden. At that point, he warned, China would have to remove any pretense of money creation via the commercial bank complex and proceed to outright monetization of created assets, thus flooding the system with as much money as it needed to preserve the illusion of growth.
“With the Chinese stock market having proven itself to be a horrible inflation trap, the inflation explosion that would result would be epic,” Durden said.
A double edged sword warning that could be a reason for the new government's emphasis on balancing the economy emphasizing the need for consumer spending and exports.
China's new yuan loans in March hit 1.06 trillion yuan, up 51.5 billion year on year, the People's Bank of China said on Thursday.
Chinese financial institutions lent out a total of 2.76 trillion yuan in new loans in the first quarter, an increase of 294.9 billion from the same month a year ago.
M2, a broad measure of money supply, rose 15.7 percent year-on-year to 103.61 trillion yuan ending March, up 0.5 and 1.9 percentage points from the end of the previous month and the end of last year, respectively.
Meanwhile, the narrow measure of money supply, M1, jumped by 11.9 percent to 31.12 trillion yuan, according to central bank data.
Total social financing was up over 2.27 trillion yuan from the same period of last year, to hit 6.16 trillion in the first three months, the central bank said, quoting preliminary statistics.
Total social financing stood at 2.54 trillion yuan in March, up 1.48 trillion from the previous month, and up 673.9 billion from the same period last year.