China Unleashes A Debt Tsunami: Creates $1 Trillion In Debt In First Two Months Of 2016
One of the more stunning economic updates this week was China’s unprecedented surge in Chinese loan creation, when as reported earlier this week, China unveiled a whopping CNY3.42 trillion in Total Social Financing, its broadest debt aggregate, an amount greater than half a trillion dollars, of which CNY2.51 trillion was in new bank loans.
The reason for the surge was largely the result of frontloading loans, as well as lending to government projects in the first year of 13th Five Year Plan, which helped to boost loan growth. Many economists had expected loans to slow sharply in February as lending to government projects wound down.
However, it turns out this was just the start of China’s latest policy, which is really just a return to its old policy of flooding the economy with debt: as Market News reports expectations that “January’s surprisingly strong new loan growth would prove temporary may have been premature as bank officials in a number of Chinese cities say February new loans look to be just as strong, even with a week-long holiday in the middle of the month.”
According to MNI, new loans so far in February were similar to the levels during the same days of January. The total so far in February is seen at around CNY2 trillion already.
MarketNews adds that this was achieved despite fewer working days in February because of the lunar New Year holiday, suggesting even more loans were churned out every working day.
It also means that if the TSF components rose at a comparable rate as in January, then the total increase in aggregate Chinese debt is on pace to surpass CNY6.5 trillion, or $1 trillion in new debt created in 2 months!
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