More Money Printing Expected In China

Follow us on TWITTER: http://twitter.com/cnforbiddennews Like us on FACEBOOK: http://www.facebook.com/chinaforbiddennews In recent years, bank loans have continued to grow in China. The Chinese Communist Party (CCP) has used it to boost the economy and to maintain high bank industry profits. In reality, China's economy has slowed down, and the banking sector has seen increasing debt. Analysts say that the CCP has run out of solutions to the banks' bad debt problems. They estimate that the regime might once again print more money, to shift the burden to the Chinese people. Recently, China's big four banks released a report. It claims that net income in the first half of 2013 has increased by some 12%. In July, the China Banking Association predicted that net profit of China's 17 listed banks will go down to 8% from 19% in 2012. The four banks' interim performance is slightly higher than previous forecasts. Yet, it does not help ease public concerns about high risks in China's banking industry. Since the beginning of 2013, share prices for China's listed banks have lost 9.1% on the Shanghai Stock Exchange. In contrast, the Shanghai Composite Index dropped 7.6%. Currently, China's bank stocks traded at the lowest price in the Asia-Pacific region, and third lowest in world rankings. Reportedly, its forward price-to-earnings ratio for the next 12 months is 4.8, only higher than Argentina and Bahrain. The UK's Financial Times (FT) Chinese edition reports that, Chinese authorities have announced a huge economic stimulus plan, to cope with the 2008 global financial crisis. The scheme has since doubled China's total amount of credit. Analysts at Goldman Sachs and Morgan Stanley have indicated China's credit-to-GDP ratio has reached 220%. The calculation takes into account bank credit, shadow banking financing, bond markets and government debts. Analysts said that excluding the central authorities' direct loans, China still has 105-Trillion Yuan of outstanding credit. In the late 1990s, China's non- performing loan (NPL) ratio was 20%. Using this figure, China has seen 21 Trillion Yuan of bad debts, with bad debt-GDP ratio up to 40%. In reality, China's officially released bank NPL ratio is below 1%, around 540 Billion Yuan. FT says that China's truth of bad loans may be hidden by the unveiled giant shadow banking. Duan Shaoyi, Economist: "State-owned commercial banks have mainly loaned money to state-owned enterprises. It's like a loan transferred from the left hand to the right hand. So, when some SOEs have defaulted loans, the banks won't let them go bankrupt. The banks usually just write it off as bad debts." FT points out two widely accepted views on China's banking sector: The size of bad debt dwarfs America's banking crisis in 2008. Chinese authorities' way of dealing with the banks bad debts differs from other governments. In the late 1990s, the CCP authorities wrote off bad assets of the big four state-run banks. The value was recorded as investment injected into four specifically established "Assets Management Companies". Xie Tian, Professor at University of South Carolina-Aiken: "The CCP used a trick to write off those bad debts. It wrapped up the bad debts and sold them to some Western financial institutions. These Wall Street financiers have actually injected the CCP with blood, and helped it to overcome the crisis." Xie Tian says that bad debt has grown in China's banking system. Meanwhile, Wall Street financial institutions are ailing. So, it is hard for the CCP to play the same trick again. Xie Tian: "Chinese banks' bad debt problems are connected with issues of local government debt and real estate bubbles. Once they break out all together, China's financial system and state-owned banks will collapse." Xie Tian forecasts that the CCP will increase currency assurance to defuse the crisis. This will directly lead to inflation, he warns. In other words, bad debt burdens will again pass on to ordinary Chinese citizens.