CNBC Guest Blog
- Crescenzi: Claims Level Suggests End to Job Losses
- Schork Oil Outlook: Gas Bulls Pinning Hopes on Mother Nature
- Busch: The Debt-Interest Rate Paradox
- Busch: Markets Smell a Country Rat
- Schork Oil Outlook: Mission Impossible For The Bears?
- Losey: Asset Allocation At Retirement
- Farrell: Obama Hectored, Ignored and Restricted?
- Don't Dwell on Investment Mistakes; Move on, Like Buffett
- Hirschhorn: Greed...or Fear
- Schork Oil Outlook: Some New Hope For Nat Gas Bulls
MOST SHARED
- US Markets Bracing for Selloff On Worries About Dubai's Debt
- No Thanksgiving Rest for Retailers in Sales Race
- More Asia Executives Resigned to Economy Flights: Survey
- UK's Darling to Downgrade 2009 Growth Forecast
- Attraction of Switzerland to Businesses
- Dubai Debt Delays Revive Fear of Financial Crisis
- Acer Launches Android Phone, Says Targets on Track
- Japan Raises Prospect of G7 Statement to Cool Yen Rally
- 4 Thanksgiving Week Buys For Your Portfolio: Market Pros
- There's a 'Great Chance' For a Double-Dip Recession: Strategist
- Revenge of the Gangsta Nerds
- Will TCU See The "Flutie Effect?"
- Retail Earnings and Sales to Improve in Q4: Analyst
- Consumers Catching the Holiday Spirit
- It's Beginning To Look A Lot More Riskless
- Crescenzi: Claims Level Suggests End to Job Losses
- Hedge Funds Take Early Lead in Warren Buffett's 'Big Bet'
- Dubai Debt Delays Revive Fear of Financial Crisis
- US Markets Bracing for Selloff on Dubai Debt Worries
- Car Insurance Scofflaws Raise Health Reform Doubt Car
- US Dollar Falls to 14-Year Low Against the Yen
- ING Prices Share Issue at Hefty Discount
- UK's Darling to Downgrade 2009 Growth Forecast
- Tommy Hilfiger's Estate in Conn. Sells for $20 Million
- Cheap Robotic Hamsters Are Holiday's Unlikely Craze
- Almunia Set to Take Neelie Kroes' EU Competition Job
RSS FEED
Text Size 
CNBC Contributor
Yesterday on their website, the People's Bank of China announced a shocker. New Chinese bank lending for June was 1.53 trillion yuan ($224 billion), double the lending in May. The total already for the year is an astounding 7.4 trillion yuan when the target for the entire year was 5 trillion.
Putting this in context, total lending this year so far has amounted to 25% of 2008 GDP. As I wrote earlier this week, Chinese regulators are getting concerned that this lending is going towards poor credit and bleeding into commodity market speculation.
As most know, bank lending is high powered monetary stimulus due to its high velocity. This is the key difference between fiscal stimulus vs monetary stimulus. Actually, monetary stimulus will only work well if the banks receiving the funds lend them out. In the US, this is clearly not happening due to banks loan losses and caution over new lending (expanding balance sheet.) In China, this is not the case and new loans are flowing.
 |
Eugene Hoshiko / AP People walk at a shopping street in Shanghai, China. |
This means the impact will be faster and more dramatic. One place I believe this is showing up already is in new car sales.
Today, the Chinese announced new car sales for June rose 48% and have risen 36% yoy. Also stimulating demand, the Chinese government cut some retail taxes and provided vehicle subsidies in rural areas to spur demand.
Automaker stocks rose today on the announcement.
More than the 4 trillion fiscal stimulus, these loan levels are stimulating the economy and are making analysts/economists/IMF revise their estimates for 2nd half Chinese growth. But at what cost? Like the G8, the Chinese will sort out the problems caused by this stimulus after their economy rebounds.
Is there any example in the history of our global economy where a government pulled back their fiscal stimulus spending in time to avert price problems? I can't think of one...
________________________
|
Data is a real-time snapshot *Data is delayed at least 15 minutes