Bubbles forming in commodities, stocks, property: Bank of China
It sees potential risk of liquidity going into asset market
Bloomberg 11 September 2009
(DALIAN) Bank of China, which led the nation’s US$1.1 trillion lending spree in the first half, said ample liquidity has caused ‘bubbles’ in stocks, commodities and real estate.
‘The potential risk is that a lot of liquidity goes to the asset market,’ vice-president Zhu Min said in Dalian yesterday. ‘So you see asset bubbles in commodities, stocks and real estate, not only in China, but everywhere.’
China’s record credit expansion, which helped the country’s economy expand 7.9 per cent in the second quarter, has raised concerns that bank loans have been diverted and used to buy stocks and real estate, fuelling unsustainable gains in equity and property markets.
The Shanghai Stock Exchange Composite Index has gained 61 per cent this year, compared with a 20 per cent increase in the MSCI World Index of 1,659 companies. House prices in China’s 70 biggest cities rose at the fastest pace in 11 months on record lending and climbing confidence, according to a National Bureau of Statistics report yesterday.
Bank of China advanced 1 trillion yuan (S$209 billion) of new loans in the first six months, more than any other Chinese lender. It said last month it plans to slow credit growth in the rest of the year and improve loan quality.
China Construction Bank said last month it will cut new lending by 70 per cent in the second half from six months earlier to avoid a surge in bad debt. Chairman Guo Shuqing said excess cash in the banking system has led to asset bubbles.
An estimated 1.16 trillion yuan of loans were invested in stocks in the first five months of this year, China Business News reported on June 29, citing Wei Jianing, a deputy director at the Development and Research Centre under the State Council.
The China Banking Regulatory Commission said on Sept 3 it will implement stricter capital requirements for banks. Lenders were also required to raise reserves to 150 per cent of their non-performing loans by the end of this year, up from 134.8 per cent at the end of June.
The Shanghai Composite Index fell into so-called bear market last month on concern slowing lending growth and tighter capital requirements would derail a recovery. The gauge has bounced back this month, rising 9 per cent.
New loans in July were less than a quarter of June’s level. August new- lending figures to be released today may show a 10 per cent decline to 320 billion yuan, according to the median estimate of nine analysts surveyed by Bloomberg.
Loans surged in the first six months of this year after the central bank scrapped quotas limiting lending in November to support the government’s 4 trillion yuan stimulus package and key industries.
Zhang Xiaoqiang, vice- chairman of National Development and Reform Commission, China’s top economic planning agency, said he sees ‘little bubbles’ in the nation’s new energy sector and is looking into measure to curb excesses at an early stage to allow for healthy development for the industry. - Bloomberg
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Bubbles forming in commodities, stocks, property: Bank of China
It sees potential risk of liquidity going into asset market
Bloomberg
11 September 2009
(DALIAN) Bank of China, which led the nation’s US$1.1 trillion lending spree in the first half, said ample liquidity has caused ‘bubbles’ in stocks, commodities and real estate.
‘The potential risk is that a lot of liquidity goes to the asset market,’ vice-president Zhu Min said in Dalian yesterday. ‘So you see asset bubbles in commodities, stocks and real estate, not only in China, but everywhere.’
China’s record credit expansion, which helped the country’s economy expand 7.9 per cent in the second quarter, has raised concerns that bank loans have been diverted and used to buy stocks and real estate, fuelling unsustainable gains in equity and property markets.
The Shanghai Stock Exchange Composite Index has gained 61 per cent this year, compared with a 20 per cent increase in the MSCI World Index of 1,659 companies. House prices in China’s 70 biggest cities rose at the fastest pace in 11 months on record lending and climbing confidence, according to a National Bureau of Statistics report yesterday.
Bank of China advanced 1 trillion yuan (S$209 billion) of new loans in the first six months, more than any other Chinese lender. It said last month it plans to slow credit growth in the rest of the year and improve loan quality.
China Construction Bank said last month it will cut new lending by 70 per cent in the second half from six months earlier to avoid a surge in bad debt. Chairman Guo Shuqing said excess cash in the banking system has led to asset bubbles.
An estimated 1.16 trillion yuan of loans were invested in stocks in the first five months of this year, China Business News reported on June 29, citing Wei Jianing, a deputy director at the Development and Research Centre under the State Council.
The China Banking Regulatory Commission said on Sept 3 it will implement stricter capital requirements for banks. Lenders were also required to raise reserves to 150 per cent of their non-performing loans by the end of this year, up from 134.8 per cent at the end of June.
The Shanghai Composite Index fell into so-called bear market last month on concern slowing lending growth and tighter capital requirements would derail a recovery. The gauge has bounced back this month, rising 9 per cent.
New loans in July were less than a quarter of June’s level. August new- lending figures to be released today may show a 10 per cent decline to 320 billion yuan, according to the median estimate of nine analysts surveyed by Bloomberg.
Loans surged in the first six months of this year after the central bank scrapped quotas limiting lending in November to support the government’s 4 trillion yuan stimulus package and key industries.
Zhang Xiaoqiang, vice- chairman of National Development and Reform Commission, China’s top economic planning agency, said he sees ‘little bubbles’ in the nation’s new energy sector and is looking into measure to curb excesses at an early stage to allow for healthy development for the industry. - Bloomberg
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