The World Bank and International Monetary Fund is out today urging China to curb excessive credit growth in order reduce the risk of bubble-type excesses in certain sectors of its economy, particularly real estate.
What’s the point? We think this is “old news”. We have been hearing for many months now that China’s excess credit growth, particularly its so-called “shadow lending”, may be contributing to rising financial risk for China’s economy. Our sense is the Chinese authorities understand this and are taking measures to reign in credit as they attempt to pilot their economy to slower but more sustainable cruise speed. While it is now understood that China’s economy is slowing, the fact that China is taking more concrete actions to control credit is positive because it reduces the risk of bubble or financial excesses, and improves the likelihood that China can sustain growth on a more “organic” basis and not artificially induced growth through excess credit. We believe this would be a positive for global financial markets.
Link: http://money.msn.com/business-news/article.aspx?feed=AP&date=20140606&id=17677201
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