Lending Out of Control...AGAIN
June 29, 2009
– Comments (3)
This time in China.
That article makes a couple of relevant bearish points:
1. Chinese stimulus lending has not gone to building the real economy, but has rather been invested in the stock market or in stockpiling commodities (which has spurred price increases that some have taken for a global economic recovery).
2. China can't seem to stop their banks from lending even though they've told them to stop. So either they actually haven't told them, or the banks have lost control.
3. China is more committed to putting up an impressive GDP growth rate than it is to helping the economy transition away from low-cost export manufacturing.
These are all real problems, but do note that the article is quoting the two China bears (Mr. Pettis and Mr. Xie) that have been quoted in all of these types of articles. But there is truth in what they're saying, though I do continue to believe China will be a long-term economic success story.
But...evidence that you should be discreet when picking Chinese stocks and not buying the index that has massive exposure to those Chinese banks that the article calls "an accident waiting to happen."
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