Crikey has a piece today from some bloke in China who is presumably Michael Sainsbury, former correspondent with The Oz:
Just when many thought the fall in China’s economic growth showed no signs of abating, its government has ramped up a stimulus program worth trillions of yuan that has turned assumptions on the imminent plunge in prices for iron ore and other commodities on its head.
…China’s official line on its economy shifted last month when Premier Li Keqiang set the stage for more stimulus, saying: “The bottom line for economic growth is 7%, and this bottom line must not be crossed.”
So this has now emerged as an imperative for the ruling Communist Party, and pushed to the head of the priority queue ahead of the deep, painful reforms necessary to re-structure an economy unanimously said to be dangerously unbalanced. By bolstering the economy at this time, Li aims to give the leadership ammunition against its internal conservative party critics at it battles them for an effective reform agenda.
“This upturn is the result of another round of desperate stimulus,” Beijing-based J Capital Research managing director Tim Murray told Crikey. “The underlying economy is weak. Stimulus is less effective and this upturn will be short lived. Li Keiqang’s rhetoric is rebalancing and actions are stimulus. A lightly different flavour, but basically the same as the last leadership.”
At the sharp end of the latest government strategy is understood to be a move by the People’s Bank of China to tip as much as 500 billion yuan directly into the economy, say sources in Beijing close to the government. This is in effect quantitative easing — or in old fashioned terms, printing money. While the exact details of its size and destination have yet to emerge, at present this move is opaque but most likely being used to help refinance local government investment and the troubled property corporations, some suggested.
The government has massively ramped up a US$40 billion project to build a tunnel across the 123 kilometre-wide Bohai Strait, increased infrastructure spending on railways and metropolitan subway systems and conducted government-sanctioned off-balance sheet financing known as “social financing” — trust loans, bank assurance deposits and other sophisticated instruments — despite being down from its dizzying levels of more than 2 trillion yuan in January, providing more than 1 trillion yuan a month in the background.
This morning The South China Morning Post reported the mainland government is “quietly” offering financial stimulus to key cities and provinces. As well, Shanghai is taking up a huge loan from a state-owned Agriculture Bank. The paper said the city government last signed up for a loan worth 250 billion yuan — equivalent to about 12.5% of Shanghai’s GDP — for last year.
Not saying it isn’t so. And maybe the author just has his terminologies a little confused. But Total Social Financing isn’t rising, it’s collapsing, as I pointed out this morning. We already know Beijing has been rolling out targeted stimulus so there is nothing new here.
Crikey really needs to stop printing this feel good jibber jabber. It’s the last thing our political class needs to hear when they’re already preparing delusional economic forecasts based upon endless Chinese riches.
