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Chinese are spooked by tightening credit markets

Bank of China

Crackdown: China has stepped up efforts to halt the explosive growth in credit.

China is seriously harming Western economies and a number of local jobs at the same time promoting the sub standard pay to their own people with very poor quality control and safety only to ensure growth is sustainable; this is a very sick system. However, they are improving. They know when they revalue their Yuan where it should be that they will lose their current advantage and the money will slowly move away and redistribute.

The new small middle class Chinese are now thriving at the moment because of their dominance in manufacturing, and they enjoy it and will do whatever it takes to keep it, but they would never be where they are today without the manufacturing sector that they are practically stealing from the Western world. However, this does not mean they should not be fair trade and fair-play market. There are so many things that people do not know about China and their way of doing business and what they will do to get what they want.

We should always remember Tiananmen Square in this regard, but in a way no one can really blame everything on China for this, because they were force fed foreign currency by foreign companies and foreign manufactured goods – which in the short term is very tempting and very addictive – and they will do whatever it takes to get more. Indeed, companies can save big money by out sourcing or relocating manufacturing to China, but they must prepare to face the consequences. It is a wonder for how long they can keep their economy artificially down without angering the world. In fact, this is already happening with tariffs and other political maneuvering is between China and the economies of the United States.

Chinese credit tightening chills Asian markets
China has stepped up efforts to halt the explosive growth in credit, ordering the country’s five top banks to raise capital over coming weeks or face lending sanctions.
By Ambrose Evans-Pritchard, International Business Editor
Published: 6:46PM GMT 24 Nov 2009

The move amounts to monetary tightening in China’s state-run banking system. The news triggered a sell-off on Asian stock markets and raised broader concerns about the strength of the global rally. The Shenzen index fell by 4.5pc on Wednesday.

“For practical purposes, the recovery in risk assets since last winter is now over,” said Charles Dumas, of Lombard Street Research.

The China Banking Regulatory Commission reminded banks that they must set aside money to meet a capital adequacy ratio of 10pc and to cover 150pc of bad loans.

New loans rose $1.3 trillion (£785m) in the first nine months of this year as Beijing mobilised banks as the main instrument of emergency stimulus.

While credit has driven a powerful rebound, much of the money has leaked into speculation on property and stock markets.

A chorus of officials have now begun warning that asset markets are spiralling out of control, risking a dangerous bubble.

Both ICBC – the world’s biggest bank – and the Bank of China said they were examining a range options to rebuild their capital base. The largest banks may need about $50bn in fresh capital.

You can read the full article at The Telegraph

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