by Chris Becker
Another day and another set of official statistics from China that seem hard to believe with an official bad-loan ratio of 1.75% amid one of the biggest credit bubbles in history:
From Bloomberg:
The China Banking Regulatory Commission didn’t give reasons in Wednesday’s data release. Lenders have stepped up efforts to clean up nonperforming debt and profits have improved in some struggling industries.
The 1.75 number contrasted with BMI Research, part of Fitch Group, saying on Wednesday that “highly understated” official numbers mask the potential for a ratio at 20 percent, $1.9 trillion of losses, and the need for central bank money-printing to recapitalize banks in coming years.
The latest numbers showed a strengthening of the industry’s provisioning ratio — which stood at 176 percent of existing bad debt, versus 175 percent in March. The improvement “indicates less pressure on earnings in the second half,” Cao said.
Other key numbers:
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Nonperforming loans rose by 45.2 billion yuan ($6.8 billion) in the quarter to 1.44 trillion yuan
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Including at-risk or “special-mention” loans, troubled credit swelled to 4.7 trillion yuan
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Banks’ total profits rose 3.2 percent from a year earlier to 899.1 billion yuan in the first half; that was faster than a 1.5 percent gain in the same period in 2015
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The CBRC said a 1.81 percent bad-loan ratio disclosed in July was for banks’ domestic operations only, and Wednesday’s number also included business overseas
Given that the SCMP recently skewered the “official” capital flow figures in a recent article titled “China’s economic reality lies buried beneath a stream of meaningless data”
In the four quarters to the end of June this year the mainland suffered a net capital outflow of, yes, wow, US$689 billion.
The data says that mainland tourists spent almost twice as much abroad per person over the last year as they did in 2013, the high mark of the mainland’s economic fortunes
I would guess that up to half of this additional spending represents tourists stashing savings abroad as a safe haven. If so, we can add another US$100 billion to the capital outflow.
Similarly, a common ploy for surreptitiously taking money abroad is over-invoicing of imports. You just tell the foreign seller of these imports to stash the difference over the real price in an account abroad under your name.
This is called money laundering. We in Hong Kong do it for mainland entities all the time. We thrive on it. It’s against the law but it’s perfectly safe as long as you do it in a big way and don’t step on the toes of anyone big. But do it in sums of less than a billion and you could go to jail for ten years.
The problem with believing a set of figures that emanates from a centrally controlled quasi communist economy, is that the figures emanate from a centrally controlled quasi communist economy – with a lot of force behind them if they are “incorrect” and differ from the glidepath that the central committee deems necessary.
You think the ABS is under heat if they print the “wrong” numbers?