Dong Tao, the China Economist of Credit Suisse, voiced his worries over the Chinese economy after the weak monetary statistics report.
In his note after the publication of monetary statistics, he explicitly said that “the risk of a hard landing is on the rise, in our judgement”. He is particular worried about the problem of distribution of liquidity, which means that banks keep lending to state-own enterprises after series of credit tightening while small- and medium- sized businesses are having difficulties in obtaining credit from the formal banking system, a big problem which has been covered here, here and here.
Just as I pointed out earlier, these sector of non-bank credit explosion is not showing up in the monetary data, as Dong Tao reckons:
Liquidity conditions among the SMEs and exporters are very tight in the provinces of Zhejiang, Fijian and Guangdong. None of this is shown in the official lending data, but if this situation
does not improve, it would surface in 2H11 macro data, in the form of weakened demand or rising account receivables.
And just as pointed out earlier by Dong Tao, the Chinese banking regulators are trying to fine-tune the monetary tightening to solve the problem of distribution of liquidity or credits:
While Beijing still holds a tightening-biased monetary policy stance, its words and actual tolerance towards slightly stronger lending are evident, highlighted by recent guidelines from the China Banking Regulatory Commission which urged more credit to the SMEs.
But this is by no means a signal to easing, thus he believes that the risk of hard-landing is now on the rise.
This article originally appeared here: Dong Tao: The Risk Of Hard Larding Is On The Rise
Also sprach Analyst – World & China Economy, Global Finance, Real Estate
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- China: Monetary Statistics For May 2011
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