We’ve done local colour on China property, plus some horror graphs already today. Now a proper China watcher, Michael Pettis, chimes in, over at Ed’s place, with more background, especially on the interest rate policy bind that the Chinese are in. With respect to rate rises, his verdict in short form:
they’re damned if they do and damned if they don’t
There’s plenty more to it than that, so read the whole thing, of course. Note also that he is more sanguine than your scribe about how long the ball can be kept in the air. though that mild optimism is balanced by this all too plausible guess at how things really are, behind that report on local authority loan losses:
I would suggest, based on my pretty extensive experience in emerging markets, that we should assume the real problem is worse than the initial evaluation. It almost always is.
For my part, I think there has already been a tightening of sorts, via the regulatory change that I remarked on already today:
But analysts say the apparent success of the clampdown on lending disguises a worrying new trend that involves banks co-operating with lightly regulated trust companies to keep loans off their books.
The regulator ordered a stop to this type of lending at the start of the month.
So I suppose we just keep our ears open (and we might want ear plugs).