How is trade doing for China? Down, straight down and continuing to fall down. I think the escape of Chinese capital to foreign lands will continue. Wealthy Chines have few choices, and the American housing bubble is one of them.
First Moody's and now Finch:
Fitch Ratings-Shanghai/Singapore-07 March 2016: The continued rapid growth in wealth management products (WMPs) invested through Chinese banks could be a key source of credit and liquidity risk for certain financial institutions, says Fitch Ratings. The fast rise in WMPs is closely connected with the continuing growth in domestic credit, and they are accounting for an increasing proportion of funding at Chinese banks - especially mid-tier institutions.
Recently released data showed the outstanding balance of WMPs rising to CNY23.5trn (USD3.6trn) at end-2015 from CNY15trn a year earlier, with an average of over 3,500 new products issued every week during the year. Nearly three-quarters of these are non-guaranteed WMPs; and over 60% of funds invested in WMPs come from retail investors, attracted by the higher rates of return than that for ordinary deposits. Importantly, they continued to grow faster than bank deposits, resulting in WMPs equating to 16.8% of system deposits at end-2015, up from 13.6% at end-1H15. As a result, banks with large sales of WMPs relative to deposits could face liquidity and funding pressures in the event of renewed market volatility.
Fitch believes that the most common source of WMP repayment is through the issuance of new products, resulting in persistent rollover/payout pressure on banks. WMP issuance during 2015 topped CNY158trn - from CNY114trn in 2014 - highlighting the high churn rates of these products. When banks are unable to roll over, they have to either draw on their on-balance sheet liquidity or borrow money from the interbank market to meet payouts.
Sounds like a Kanosian 'debt is good' plot, right out of the Dick Cheney playbook.
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