China 'faces subprime credit bubble crisis' Monetary tightening in China threatens to pop the $1.7 trillion (1.07 trillion) credit bubble in local government finance and expose the country's simmering "subprime" crisis, according to the Communist Party's economic guru. Mr Cheng said China is entering a "very tough period" as growth runs into the inflation buffers, threatening the sort of incipient stagflation seen in the West in the 1970s and leaving the central bank with an unpleasant choice. Cheng Siwei, head of Beijing's International Finance Forum and a former deputy speaker of the People's Congress, said interest rate rises and credit curbs to cool overheating were inflicting real pain on thousands of companies used by local party bosses to fund the construction boom. "The tightening policy is creating a lot of difficulties for local governments trying to repay debt, and is causing defaults," he told a meeting at the World Economic Forum in Dalian. "Our version of subprime in the US is lending to local authorities and the government is taking this very seriously." http://www.telegraph.co.uk/finance/...hina-faces-subprime-credit-bubble-crisis.html
Can't they just print more money? Seriously though, what's stopping China from printing money to repay this bubble? It's not like anyone knows how much RMB is actually floating around in China.
I was wondering about that too, since china is a centrally planned economy and all their data is released on need to know only, so who is monitoring china's money supply?
Indeed jpanggy. Used to joke about it all the time, they (police in China) would accept bribes only in HK Dollars or Ciggys because Chinese RMB was 'printed' in large quantities.
They (People's Bank of China) are still trying to work out more accurate measures of money supply according to reports so take those published numbers currently on the PBC website with a healthy dose of salt or a grain of skepticism: Source: http://www.nasdaq.com/aspx/stock-ma...easure-may-include-forexother-deposits-report Earlier reports on China's M2: China's missing M2 Found: China's missing M2
Wait till they recall all the peoples gold,receipt it-Turn it into $$ denominated gold coin-Return it-Voila-There it is quadruple the money supply without causing inflation.
Of course they can print more money but it is the inflation that is causing them to tighten policy in the first place that's causing the defaults. Catch22 once you let the inflation genie out of the bottle you can't stick it back in. Hard times ahead and Australia is in the firing line. Can't wait to hear JuLIAR talking about "fundamentals" if China imploded.
Just like every single nation on earth, if they can somehow keep the bubble going, they will forever kick the can down the road. Until a car runs em over for playing in the middle of the road that is.
It is individuals. Until recently about the only place Chinese citizens could park their savings apart from under their mattress was in real estate.
And many of them parked it in Australian real estate too, considered 'cheaper' by their standards. Whilst there's 'official' policy/law in Australia concerning foreign ownership of domestic property, it has to be said it was laughably enforced. Just go to any auction in Sydney and try convince yourself no foreign investors are parking cash here in domestic real estate. That all said, wasn't the red dragon Australia's great hope and salvation for our markets? Storm clouds 'abrewin!
