China Will Not Reverse Monetary Easing Policies

The reported liquidity drain of over RMB100 billion by China’s central bank does not indicate the start of the country’s monetary policy reversal. China will continue deploying further loosening policies via interest rate cut and bank reserve requirement ratio (RRR) cut, says a BofA Merrill Lynch Global Research report. The People’s Bank of China (PBoC) reportedly conducted more than RMB100 billion of 7 day, 14 day and 28 day targeted repo transactions with some big banks earlier this week. China’s …

China’s Shadow Banks May Have Expanded 58% In 2014

The size of China’s shadow banking sector may have expanded by 58% to RMB51.2 trillion (US$8.19 trillion) in 2014, a sharp acceleration from 2013’s RMB32.4 trillion (US$5.18 trillion), potentially making China’s financial system much more fragile, says a research report by BofA Merrill Lynch Global Research. There are many ways to gauge the size of the shadow banking sector in China. One way is to assess the conduits that channel funds into the space.

China Finally Cuts Bank Reserve Requirement Ratio

The People’s Bank of China (PBoC) today announced that it would cut the reserve requirement ratio (RRR) by 50 basis points to 19.5% for large financial institutions, effective tomorrow. This will immediately inject up to RMB600 billion (US$96 billion) to the banking system, which could help lower companies’ funding cost. In addition, the central bank will also slash the RRR by an additional 50 basis points for city commercial banks and non-county rural commercial banks that have met the lending …

China Scrutinizes Bank Margin Loan Practices

The Chinese regulators are disciplining bank margin trading loan practices in order to restrain speculation in the stock market, perhaps as a precursor to the central bank’s monetary easing policies, according to a research report by Nomura Holdings. China’s benchmark interest rates cut on November 21, 2014 helped to trigger a 40.7% surge in the CSI300 through mid-January, 2015. But a 7.7% tumble was observed on January 19, led by falls in Chinese broker and bank shares, as China’s securities …

Is China’s Shadow Banking In Quiet Resurgence?

The resurgence of non-bank-loan financing in December might suggest Chinese financial regulators have eased their grip on shadow banking activities in an effort to support growth, according to a BofA Merrill Lynch Global Research report. In December, new loans surprised on the downside while total social financing (TSF) surprised on the upside. The RMB697 billion new loans figure in December is still quite robust as new loans tend to decline towards year end, and that’s why year-on-year growth of outstanding …

Has China’s Central Bank Blinked?

China’s central bank has provided RMB500 billion of liquidity to the nation’s biggest five banks for RMB100 billion each, via its 3-month Standing Lending Facility (SLF). The amount is roughly equivalent to one 50 basis point rate cut in the commercial banks’ required reserve ratio (RRR). Has the People’s Bank of China finally blinked in the face of deteriorating economic conditions?

China’s August Credit Data Improves, But Risks Remain

China’s August monetary data suggest that China’s credit extension has improved somewhat after the sharp decline in July, which could ease concerns on a hard landing. But the rising market volatility and uncertainty could result in a disorderly de-leveraging in Chinese economy and increase systematic risks, says a report released by the Australia and New Zealand Banking Group Limited (ANZ). China’s new yuan loans bounced back to RMB703 billion in August, from the extremely low level of RMB385 billion in …

Why Markets Should Not Focus Too Much On China’s M2?

The markets have overreacted toward a remark regarding China’s M2 growth made by Chinese Premier Li Keqiang, as the M2 figure has become less sufficient in measuring credit growth, says a report by BofA Merrill Lynch Global Research. While speaking to business leaders on the eve of the World Economic Forum summer gathering in Tianjin, Premier Li said Beijing would continue the targeted easing policies to achieve around 7.5% growth, but he emphasized that he does not rely on money …

Is China’s Shadow Banking System Shrinking Too Fast?

China’s shadow banking system is experiencing fast de-leveraging. But a rapid and disorderly de-leveraging will be dangerous, and it is important for China to develop another well-regulated financing channel to meet the funding demand in the shadow banking system, says a report by the Australia and New Zealand Banking Group Limited (ANZ). The share of off-balance-sheet financing to the total social aggregate financing has declined from close to 40% in the beginning of this year to around 20% today, reaching …

How To Read China’s Shocking July Credit Data

The shocking drop of China’s July credit numbers are mainly a consequence of accounting differences, outdated statistics and financial innovations, and will not last into next month, says a report by BofA Merrill Lynch Global Research.

China To Set Up Five Local Bad Banks

The China Banking Regulatory Commission (CBRC) has approved the establishment of five local asset management companies in preparation for a surge of bad loans from Chinese banks, according to Chinese media reports.

China’s Shadow Banking Remains A Time Bomb

China’s loose credit and liquidity conditions have kept the explosion of shadow banking defaults at bay, but the delay will not last very long, according a new report written by Wang Tao, head of China economics research at UBS AG.