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If the latest monetary growth figures are anything to go by, Chinese policymakers continued to favour supporting near-term economic growth in September, pushing aside mounting concerns about the nation’s mounting debt level.
According to figures released by the People’s Bank of China (PBOC) on Tuesday, total social financing — the broadest measure of credit which captures lending from both traditional and non-traditional sources within China’s financial system — rose by a further 1.72 trillion yuan last month, easily exceeding forecasts for an increase of 1.39 trillion yuan.
It was also well above the 1.47 trillion yuan level of August, and left total outstanding social financing at 151.51 trillion yuan, up 12.5% on the levels of a year earlier.
China Outstanding Social Financing. Source: Thomson Reuters
New bank lending also exceeded forecasts, coming in at 1.22 trillion yuan. That figure was above the 1 trillion yuan level expected and 948.7 billion figure of August.
Over the past year, outstanding bank loans grew by 13.0%. In the first nine months of the year total bank lending rose to 10.96 trillion yuan.
According to Reuters, the acceleration in lending was driven by a sharp jump in local government debt swaps, aimed at reducing their interest payments, along with strong mortgage demand.
Indeed, so far this year, household loans, largely used to finance property purchases, accounted for 46% of total loans, up from 39% in the first half of the year.
Hot, in other words, and helping to explain the continued recovery in Chinese economic data seen in recent months, along with recent measures introduced in some Chinese cities to quell bubbly property price growth.
The only figure to miss economist forecasts was M2, or broad money growth, and even then it wasn’t by much.
It grew by 11.5% year-on-year in September, up from 11.4% in August but below the 11.6% level expected.
M2 includes cash along with other liquid financial assets such as deposit accounts, money market securities and mutual funds.
M1 monetary growth — cash and demand-deposit accounts — grew by a larger 24.7% over the same period, although this was below the 25.3% level of August.
Despite concerns being expressed by a growing number of groups, including the Bank of International Settlements and the Reserve Bank of Australia, over the potential for heightened financial stability risks as a result of China’s rapid dent accumulation, those warnings, as yet, are seemingly taking a backseat when it comes to supporting near-term economic growth.
The monetary growth figures come a day before the release of Chinese retail sales, industrial output and urban fixed asset investment figures for September, along with quarterly GDP growth.
Economic growth is expected to have grown 6.7% compared to the same quarter in 2015, the same pace seen in the previous two GDP reports released earlier in the year.
The stabilisation in economic activity has been underpinned by state-backed infrastructure investment, property investment and, of course, debt — three factors that many would deem to be old growth drivers in China.
Recent strength in property prices is likely to have underpinned household consumption due to perceived wealth effects, although regulators in some cities have recently taken steps to cool their housing markets.