S&P has cut China's credit rating, citing its rising debt load

• Frank Tang, South China Morning Post

• 7h
• 1,333

A weight-lifting contest in Incheon, South Korea, in 2014.AP Photo/Dita Alangkara

S&P Global Ratings on Thursday cut China's sovereign credit by one notch, citing economic and financial risks raised by the country's prolonged period of strong credit growth.

The downgrade, from AA- to A+, is the second by an international rating agency this year. Moody’s lowered its sovereign rating in May on similar concerns.

"The recent intensification of government efforts to rein in corporate leverage could stabilise the trend of financial risk in the medium term. However, we foresee that credit growth in the next two to three years will remain at levels that will increase financial risks gradually," the agency said in a statement.

China has reported higher-than-expected growth of 6.9% for the first half of this year. But questions remain about Beijing's investment policy.

Outstanding aggregated financing rose by 13.1% at the end of August, according to the People's Bank of China, despite its claims of adopting a prudent and neutral monetary policy to facilitate financial deleveraging and structural adjustment.

"We expect such a trend to weaken the Chinese economy's resilience to shocks, limit the government's policy options, and increase the likelihood of a sharper decline in the trend growth rate," the rating agency said.

Read the original article on South China Morning Post. Copyright 2017. Follow South China Morning Post on Twitter.

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Tesla is reportedly working with AMD to develop AI chips for self-driving cars

• Reuters

• 18h
• 742

Tesal CEO Elon MuskReuters

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Electric carmaker Tesla is working with Advanced Micro Devices to develop its own artificial intelligence chip for self-driving cars, CNBC reported on Wednesday, citing a source familiar with the matter.

AMD spin-off GlobalFoundries Inc Chief Executive Sanjay Jha said his company is working directly with Tesla, according to the CNBC report. 

GlobalFoundries, which fabricates chips, has a wafer supply agreement in place with AMD.

Tesla isn't completely going it alone in chip development, according to the source, and will build on top of AMD intellectual property, CNBC reported.

More than 50 people are working on the project under Jim Keller, a longtime chip architect and the head of Autopilot hardware and software of Tesla, according to the report.

AMD shares were up 2.2 percent in extended trading.

Tesla, AMD, and GlobalFoundries did not immediately respond to requests for comment.

Get the latest Tesla stock price here.

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ALBERT EDWARDS: The Bank of England is helping to fuel 'monetary schizophrenia' around the world

• Will Martin
 

• 4h
• 483

Reuters/Toby Melville

• Global central banks are engaging in "monetary schizophrenia," Societe Generale's Albert Edwards says.
• Central banks are actively fuelling the credit bubbles they seek to deflate, Edwards says.

LONDON — Societe Generale's notoriously pessimistic strategist Albert Edwards let rip at central banks, accusing them of "monetary schizophrenia" in their approach to policy.

Edwards focuses most of his ire on the Bank of England, which he accuses of inflating a consumer credit bubble, while at the same time warning of the dangers of rising consumer credit levels.

"The simple fact is monetary policy is way too loose in the UK as well as in the US, and let us not forget the BoE cut rates in the immediate aftermath of last July’'s Brexit vote. Bubbles are appearing in areas like consumer credit because interest rates are far too low and need to be raised," Edwards writes in his weekly Global Strategy note, 

Citing a recent article by Ed Conway, the economics editor of Sky News, Edwards notes that the Bank of England has just extended its Term Funding Scheme to the tune of £15 billion.

The Term Funding Scheme — which Conway describes as "one of the most technical, abstruse schemes" ever thought up by the bank — was brought in last August when the bank cut interest rates.

The basic rationale behind the scheme was to try and make sure that retail banks kept lending to customers if the UK's economic situation deteriorated, and to ensure that they passed on lower rates to those customers.

That was done by lending large sums of money to those banks through the TFS — as it is known.

By engaging in this scheme while also warning about the dangers of growing consumer debts and record low household savings, Bank of England Governor Mark Carney is making himself look "ridiculous," Edwards says.

"This makes Governor Carney’'s cautious statements about consumer credit look ridiculous and takes BoE monetary policy to a new level of schizophrenia."

Ultimately, when the credit bubble pops, Edwards argues, the Bank of England will be faced with popular anger when the public realises the role the bank has — in his view — played in blowing that bubble.

"Yes, when interest rates are excessively low, both borrowers and lenders do stupid things. But to ignore their own role in creating debt misery for millions, the BoE can only deal with its own cognitive dissonance by blaming someone else. When this debt bubble blows, I suspect citizens’ rage will be directed where it belongs."

Edwards has made a similar point about "citizens rage" before, saying in a June note that central bankers will be the 'next sacrificial lambs to throw to the wolves' of populist rage in the coming years.

His criticism is not focused entirely on Carney and the Bank of England.

Here Edwards is one last time (emphasis ours):

"I do not think this debt time-bomb is specific to the UK. We are in a QE, zero interest rate world, where central banks are effectively force-feeding debt down borrowers’ throats. They did it in 2003-2007 and they are doing it again. Most of the liquidity merely swirls around financial markets, but there is certainly compelling evidence now of a consumer credit bubble in both the UK and US (as well as a corporate credit bubble in the US)."

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