Monday, February 01, 2010

 

Chinese Bank Lending Unabated

Supposedly China is telling its banks to cut lending, but “Chinese Bank Lending Explodes In January” tells us that in January banks already lent a fifth of what they were supposed to lend for the entire year. One wonders how much China can do to cut lending and overcapacity, and bring down its real estate bubble. The Middle Kingdom needs something on the order of 8% growth just to keep absorbing all the new people coming into the labor market. No doubt many of those workers are kept busy by the overcapacity in manufacturing and by building lots of office space and condos that sit unused. That in turn is funded by this massive bank lending. If the leadership lets up on the gas too much, it could multiply the rolls of unemployed and lead to unrest. But because this fast growth and overcapacity can’t go on forever, it’s just a matter of time before more drastic measures become necessary.



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