Tuesday, January 27, 2015

China Economy Stories Jan 23

["China is Falling" stories. May be true... or not.]


China's bad debt ratio rises to five-year high in 2014

JAN 23, 2015

BEIJING (Reuters) - The bad debt ratio of Chinese banks climbed to 1.6 per cent as of the end of 2014, government data showed on Friday, a level not seen since the global financial crisis and underscoring building financial pressures as China's economy cools.

The non-performing loan ratio rose to 1.64 per cent in the fourth quarter, up from 1.16 per cent at the end of September, the China Banking Regulatory Commission said.

China's bad debt ratio stood at 1.66 per cent in the third quarter of 2009.

The rise in the bad debt ratio is the latest sign of the challenges faced by the world's second-largest economy.

Data this week showed China's economic growth plumbed a 24-year low in 2014 as a cooling housing market and a downturn in investment and manufacturing dragged on activity.

Separate government and corporate data have shown that companies are delaying their debt repayments as business slowed.

Yet, in a bid to shore up economic activity, Chinese authorities have been funnelling more cash into banks to spur lending.

The central bank pumped 50 billion yuan (S$10.75 billion) worth of short-term loans into banks on Wednesday, its second cash injection in as many weeks to encourage lending to farmers and small businesses.

Banks' capital adequacy ratio, a measure of the level of protection offered to depositors, stood at 12.9 per cent at the end of November. The regulator did not say what the figure was as of the end of December.


China factories stall for second month, deflation pressures build: HSBC flash PMI

JAN 23, 2015

BEIJING (Reuters) - China's manufacturing growth stalled for the second straight month in January and companies had to cut prices at a faster clip to win new business, adding to worries about growing deflationary pressures in the economy, a private survey showed.

The HSBC/Markit Flash Manufacturing Purchasing Managers'Index (PMI) hovered at 49.8 in January, little changed from December's 49.6 and just below the 50-point mark that separates growth from contraction on a monthly basis.

A Reuters poll had forecast a second month of contraction with a reading of 49.6.

Reflecting the tumble in oil prices, which have more than halved in the last six months, a sub-index for input prices sank to 39.9, a level not seen since the global financial crisis.

But companies also had to cut output prices for the sixth straight month to sell their products, and more deeply than in December.

"Today's data suggest that the manufacturing slowdown is still ongoing amidst weak domestic demand," Qu Hongbin, a HSBC economist in Hong Kong said on Friday. "More monetary and fiscal easing measures will be needed to support growth in the coming months."

Falling prices are a concern for China, which wants to avoid Japan's fate of sinking into a 20-year deflationary funk that has depressed consumption and economic growth.

The survey showed final demand for China's factory goods rose this month, but only modestly as the sub-indices for new orders and new export orders stood close to the 50-point threshold.

Factories laid off staff for the 15th consecutive month in January in the face of tepid demand, the PMI showed.

There are already some signs of stubborn deflationary pressure in China.

Producer prices have fallen for almost three straight years.

That helped to drag China's annual consumer inflation to a near five-year low of 1.5 percent in December.

To contain deflationary risks, economists at state think-tanks who are privy to China's policy discussions said authorities are ready to cut interest rates further and pressure banks to step up lending. The central bank unexpectedly cut rates in November for the first time in more than two years.

Some Chinese consumers are already postponing purchases in anticipation that prices will fall further in the future, a classic warning sign of deflation that would deal another blow to the Chinese economy, where growth hit a 24-year-low of 7.4 per cent last year.

Although 2014 economic growth data was not as bad as some had feared, it suggested that a steady series of policy easing had not sustained activity as much as policymakers had hoped.

Economists polled by Reuters expect the economy to slow further this year to around 7 per cent, even with additional stimulus measures. A cooling property market, high financing costs and heavy corporate and local government debt loads will likely continue to drag on activity.

Chinese Premier Li Keqiang acknowledged on Wednesday that the world's second-largest economy will face downward pressures in 2015 but said it was not heading for a hard landing.

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