Another week, but the same stories everywhere.
Chinese banks may struggle to recoup about 23 percent of the 7.7 trillion yuan ($1.1 trillion) they’ve lent to finance local government infrastructure projects, according to a person with knowledge of data collected by the nation’s regulator.
And it seems the losses could be far worse, as China’s banks seemed to have learned a trick or two from their US and European counterparts.
The government has been grappling with how to rein in the credit-fuelled stimulus before it leads to overheating, according to a July 14 report by Fitch Ratings analyst Charlene Chu. Lending hasn’t slowed as much as official data suggests because Chinese banks are shifting loans off balance sheets by repackaging them into investment products that are sold to investors, the report showed.
“The growing popularity of this activity is increasingly distorting credit growth figures at an institutional and system level,” Chu wrote. “Consequently, Chinese banks’ loan loss reserves and capital are more exposed to credit losses than current data suggests.”
Re-packaging loans off balance sheets to create investment products. Hmmm.. That sounds familiar.
The U.S. economy expanded at a slower pace in the second quarter as consumer spending cooled and the trade deficit swelled, economists project a report this week will show.
We will have to wait a few more days to get the real numbers.
Everyone will be watching Europe tonight to see if the European Banking fairy tale has convinced anyone that Euro banks are actually in fine shape. It may be possible that the ECB has just made its problems far worse by releasing all that data on its commercial banks. But the equity market is a strange and crazy beast ,mostly powered by sentiment and delusion, so you never can really tell how it is going to take any news.
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