China's shadow banking boom rings alarm bells

Loan growth in China’s shadow banking system surged to near record levels in March, prompting fresh warnings that the country’s credit bubble is spinning out of control.

New loans jumped by $400bn, mostly in the less regulated pockets of the banking system. Trust loans have surged by 360pc over the past year.

barooman: does it matter? sure some will lose but this is pocket change for a nation with the reserves that China has. If it happens it will all be pushed under the rug.

Zhanglan v.295 1/2: very few western people have any direct experience of the Chinese residential property market and revert to stock mantras about "Ghost Cities" and property bubbles - http://m.theatlantic.com/china/archive/2013/04/ordos-a-ghost-town-that-isnt/274776/ I own 6 properties in China, and could pick up a reasonably modern 2-bed/2 bath apartment in a second-tier city for a little over £25k. I pay my non-clerical staff around £300 per month, so compare that to the UK average wage and the UK average house price

tonydartford:  £300 per month is £3600 per year a modern apartment costs £25,000 so is 8 times earnings, the same as U.K.

ifnotwhynot: commie stooge #295.5 A 2 br apartment for £25,000 !! 2nd tier my arse, outer Mongolia may be! Shanghai et al apartments around, Yuan 20-45k/sq m or £2,000 to 4,500 per sq meter.(depending on closeness to center etc) (far more for the best ones). Say 2 br/2bathroom is 100sq mts, then cost is around £200,000 to £450,000 . Now £300/mth is £3,600 per year . Say average price is £325,000 then wage to cost is almost 100 times average salary!!!! 100 times!!!! not 8 times like here! Keep your propaganda for Beijing!

wallywright: Sorry, but he's right.  I a Brit who lives in Beijing.  I have properties up north in Heilongjiang and down south in Guangxi that cost around the  £25,000 mark. And there's no such place as "Outer Mongolia".

chungkwoyan: "Outer Mongolia" means China is going to recover the sovereignty of land once was its. Good prediction from an well-educated DT moderator, though.

たなか (Tanaka) 幸せなら手を叩こう: No problem. Japan ally Manchu Mongol Recover all China Great 3 Emperor Dynasty

Longshan: Of course Heilongjiang is about as close to where I imagine ifnotwhynot thinks Outer Mongolia would be, right up in the far north, part of the Chinese rust belt and bordering the Russian border. Guangxi is also one of the poorest provinces in China.  I developed property in a small city in Liaoning in the north east.  Part of the old Manchurian region along with Heilongjian and the sort of rates Zhanglan refers to might have applied 10 years ago.  The Chinese economy has without doubt many high risk aspects, which if left unattended will surely cause major problems.  Unfortunately the Chinese fanatical pre-occupation with "Loss of Face", endemic corruption, astonishing levels of arrogance, a culture of narcissism both individual and national and despite what the Chinese media constantly pumps out, an almost total inability to be innovative, make it ever less likely they will be able to make the changes so urgently required. If you want a simple proof of this, look around you.  Apart for the odd generally low end mobile phone where can you see Chinese branded products or anything in the way of new technology, or come to that, anything new at all, developed in China?  Now compare that to Taiwan, South Korea or even more Japan.  The construction/cheap manufacturing model of development is constantly reported as urgently needing to be changed, in truth this process should have begun more than 10 years ago but did not.  To  my mind this alone should question the ability of the central party to manage the changes required.  The very fact there is such a vast and uncontrolled shadow banking system should further demonstrate that there is one area where the Chinese are innovative - getting round the inconvenient orders that arise from Beijing!

Longshan:  Having moved to Reuters from the Telegraph, here is a convenient article to support the argument and you might bear in mind this does not even begin to mention the vast amount of non performing loans held by the Chinese banking system. Most of them hidden by rolling over bad debt.  If the word could really see the true levels of debt and leverage in the construction industry alone, most would be buying gold and heading for the hills.  Two of the top construction companies, China Vanke and Evergrande have had huge loans, amounting to $100's of billions rolled over because they cannot afford to pay down by due date.  Zombie banks might be another comparison with Japan! http://uk.reuters.com/article/2013/04/11/china-debt-local-idUKL3N0CXF8420130411

ifnotwhynot: I doubt you are British. Your Grammar is similar to a, 'well educated Chinese person'. You should write 'As a Brit'…not "I a Brit" ! Further , being British you should know that 'Outer Mongolia' is an expression not an actual place! Say Hi to Zhanglan when you next talk to him! But you are Wally all right!

chungkwoyan: I must have missed it? Could you put it back, Guest ? If  not , why not.

OneTermDave: Welcome to the world of consumerism.

Bilforum: Its only time before the property bubble burst in the UK. 

Transpar: The intelligent margins never return past Hong Kong and the smart money has left or leaving. Some people have become addicted to development and it will collapse as the planning was based on greed. They have the ability to buy and sell everything and anything so no need to be overly concerned. Over 14 regional banks have been said to have had major help because of bad lending. Some countries would call it fraud.

notamervynkingfan: It would be helpful if the lessons of Easter Island could be taught to all the nations of the world, but particularly to China. Never again in human history will such a large lump of the human race's population all try to learn to fly before they can run.    China's version of keeping up with the Joneses has already raped the resources around the planet, and for what?  So that one mayor of one city can swagger in challenge to Shanghai? Of course, our Boris is above that sort of thing.   Isn't he????   Didn't they teach him about Easter Island in his Classics classes at Oxford? What do they teach at Oxford?

Zhanglan v.295 1/2: "developers switch strategy to evade curbs on residential homes, with extreme over-building in second tier cities or deep in the interior. " no risk of boom & bust here, Ambrose -as you so presciently pointed out less than a year ago, CHINA'S PROPRTY BOOM HAS PEAKED FOREVER!!!! http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100016724/chinas-property-boom-has-peaked-forever/

ifnotwhynot: Beware Chinese TROLL ALERT

chungkwoyan: Usual stuff from the Daft, aka the moderator. Working late tonight?

bonkthebonk: Kind of reassuring to know that short-term thinking, greed and dishonesty fueled by testosterone-charged idiocy has not escaped our 'communist' brethren either.

elliemaesgrandad: Perhaps they're preparing for an influx of Romanians and Bulgarians?

blueprint: Has Ambrose finally given up on his doomed euro wet dream then? Probably if you plot a graph of the frequency of his Chinese scare stories against the strength of the euro on the FOREX, there will be a nice regular linear relationship. God help us if he ever gets made foreign correspondent, we will be deluged with apocalyptic stories about how Kim Wrong Un is going to blow up the planet with his arsenal of nukular warheads (AKA a few kilotons of fertiliser down a well shaft).

ifnotwhynot: AEP's Economic credentials are excellent. Economics is not an exact science.(far from it) His timing is out, that is all I suspect. Since there is huge political will keeping the Euro together and pushing against economic reality, it is very hard to get the timing right. Again in China you have a Communist Govt. with huge political power and enormous Surpluses/reserves , which allows them to swim up stream, for AWHILE. Not indefinitely. That is his point I think.

elliemaesgrandad: Has Ambrose been on another bike ride in China? What's the 'built-environment' like; similar to Spain?

yadam: If it's comparable to Spain then things should be real interesting. I expect it will be more like America, just with less contagion. 

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