Posts tagged ‘June’

13/08/2014

Rising inflation, weak industrial output dampen hopes of economic turnaround in India

New economic data casts dark clouds over economic revival

The Consumer Price Index increased from 7.46%  in June to 7.96% in July, according to data released by the government on Tuesday. The CPI measures the change in market price levels for a representative basket of goods and services purchased by households. Meanwhile, overall factory output has decelerated by 1.8% in June to 3.4% due to a sharp decrease in the manufacturing activity.

via Scroll.in – News. Politics. Culture..

Advertisements
15/07/2014

One injured as explosion hits Xining airport car park in Qinghai | South China Morning Post

An explosion rocked the car park of Xining’s main airport today, state media reported. One person was injured by shrapnel, according to the authorities.

xining_blast-net.jpg

Police and bomb experts rushed to the scene within minutes of the blast and cordoned off the area around the busy Caojiapu (variably spelled as Caojiabao) airport.

One cleaner was hit when the object detonated in the lot just outside the terminal, the China West Airport Group said in a press statement at 4pm.

According to Chinanews.com, the staff was hit by a piece of glass and was sent to hospital.

Airport operations were not affected, the airport authority said. Cars in the parking lot were moved to other areas to clear the scene.

The Qinghai public security bureau and armed police are now conducting further investigation.

The explosives were concealed in a rubbish bin at the corner of the car park, according to the China Youth Daily.

A person surnamed Bao working for the public security bureau of Haidong prefecture near Xining told the South China Morning Post that the bureau’s command centre were not informed of the blast as yet, but that they would be sending staff to the scene.

“Airport police, anti-terror police, SWAT and paramilitary [officers] have cordoned off the site and are doing further investigation,” Bao said.

The Caojiapu airport is the busiest airport in the Tibet Plateau region. According to the airport’s figures, it handles four million trips a day.

Earlier in June, the airport held an emergency rescue drill – the largest held in the past 10 years – involving firefighters, medical emergency response teams as well as runway and airport maintenance teams.

Clearing explosives was part of the drill.

via One injured as explosion hits Xining airport car park in Qinghai | South China Morning Post.

03/07/2014

China services sector booms in June, suggest economy steadying | Reuters

Activity in China’s services sector expanded at its fastest pace in 15 months in June, a private survey showed on Thursday, reinforcing signs that the broader economy is stabilizing.

A worker wipes sweat on his forehead next a man taking a nap on a bench, in Beijing June 23, 2014.  REUTERS/Kim Kyung-Hoon

The services purchasing managers’ index (PMI) compiled by HSBC/Markit rebounded to 53.1 in June from 50.7 in May, well above the 50-point level that demarcates expansion in activity from contraction.

“The expansion in the service sector reinforces the recovery seen in the manufacturing sector, and signaled a broad-based improvement over the month,” said Qu Hongbin, chief economist for China at HSBC.

via China services sector booms in June, suggest economy steadying | Reuters.

03/01/2014

China’s Runaway Train Is Running Out of Track – Bloomberg

A financial drama is unfolding in China as the new year begins. Last week, for the second time in six months, interest rates in the critical interbank lending market spiked above 10 percent, prompting fears of a liquidity crisis that would trigger mass defaults and cripple the world’s second-largest economy.

Western investors largely ignored the cash crunch and failed to grasp its potential significance. Although the situation has largely eased after the People’s Bank of China hastily injected at least $55 billion into the market, that isn’t the end of the story. These repeated crises are a sign that the foundations of China’s investment-driven growth model are crumbling — with unsettling implications for the rest of the global economy.

To those who wrote off China’s first banking seizure in June as a fluke, this latest episode appeared to come out of nowhere. They cast about for explanations: Perhaps some seasonal surge in cash withdrawals was to blame, or the U.S. Federal Reserve’s decision to taper its bond-buying policy. Optimists assumed the PBOC was tightening credit on purpose, as a warning to banks to rein in unsafe lending practices. With inflation at manageable levels, they reasoned, the People’s Bank of China had plenty of room to loosen monetary policy again and ease the cash crunch.

In fact, loose monetary policy is the problem, not the solution. Two simple words — bad debt — are the key to understanding why China has too much money, yet not enough. In the years since the global financial crisis, China has racked up impressive growth in gross domestic product by engineering an investment boom, fueled by a surge in easy credit. Total debt has risen sharply, from 125 percent of GDP in 2008 to 215 percent in 2012. Credit has spiraled to $24 trillion from $9 trillion at the end of 2008. That’s an additional $15 trillion – – the size of the entire U.S. commercial banking sector — lent out in just five years.

A lot of that money has gone into projects whose purpose was to inflate the country’s economic statistics, not to generate a return. Officially, China’s banks report a nonperforming loan ratio of less than 1 percent. In reality, they are rolling over huge amounts of bad debt, both on their own books and by repackaging it into retail investment products — many of them extremely short-term — that promise ever higher rates of return.

China’s banks can hide bad debt by playing this shell game, yet that doesn’t change the fact that they’re not getting their money back. With their capital locked up in existing projects, the only way they can finance the next round of big investments — and keep China’s GDP growth rates from collapsing — is by expanding credit. More and more of that new credit is now eaten up paying imaginary returns on the growing pile of bad debt.

This year, total credit in China grew about 20 percent, from an extremely high base — hardly tight money. Yet the cash needs of China’s banks aren’t what they seem. In addition to its declared balance sheet, each bank is juggling a host of dubious assets and hidden cash obligations (in the form of quasi-deposits) on what amounts to a “shadow” balance sheet. Rein in credit growth, even modestly, and there isn’t enough to go around.

That’s what Chinese authorities discovered in June, and again last week. In both instances, the People’s Bank of China didn’t take away the punch bowl by tightening credit, it merely tried to resist handing over an even bigger punch bowl. The result, both times, was a near-meltdown in the interbank lending market that threatened to unleash a cascade of defaults throughout the economy. Nor have the signs of financial stress been limited to the interbank market: Over the past few months, yields on Chinese government and corporate bonds have steadily risen, even as the economy slows.

The PBOC could, and did, halt the immediate liquidity crisis by injecting more cash. But in doing so, it effectively cedes control over monetary policy to the shadow banks. Runaway lending continues, bad debts mount even higher, and the need for more cash to paper over losses becomes that much more acute. Far from solving the problem, pumping in more cash just kicks the can farther down a dead-end street.

The implications of this brewing storm are bigger than many global investors realize. China’s credit-fueled investment boom has been a driver of metals prices and machinery exports. China has become the world’s largest automobile market, its largest oil importer, and its largest buyer of gold. Although foreign banks have relatively little direct exposure to Chinese financial markets, capital flows into and out of the mainland are potentially large enough to have a significant impact on asset classes not normally associated with China. A financial train wreck would send tremors through global markets.

The detailed blueprint for market reform published by the Communist Party in November encouraged many. China’s leaders clearly recognize that its economy needs to move in a new direction. But the first crucial step, weaning China away from its addiction to debt-fueled stimulus, is proving a lot harder than many imagined. China’s leaders are riding a runaway train that they don’t quite know how to stop. And they’re running out of track.

via China’s Runaway Train Is Running Out of Track – Bloomberg.

Enhanced by Zemanta
Law of Unintended Consequences

continuously updated blog about China & India

ChiaHou's Book Reviews

continuously updated blog about China & India

What's wrong with the world; and its economy

continuously updated blog about China & India