Forbes: “China’s New “Secret Stimulus” Program: Likonomics Is Dead”
I posted last week on the huge stimulus loans being made quietly in China:
- Agricultural Bank of China makes a huge stimulus loan to Shanghai, equivalent to 12.5% of Shanghai’s GDP last year
- SCMP: China Development Bank loans point to stealthy economic stimulus
Forbes columnist Gordon Chang has an article recapping this stimulus:
- Premier Li Keqiang is implementing a new round of pump priming,
- A senior official at the state-owned China Development Bank called “unofficial economic stimulus.”
- Puts funds into key provinces and cities through the country’s banking institutions instead of making direct disbursements from the central government
- Beijing is so far funneling the “silent stimulus” through two state banks,
- CDB (China Development Bank) is making large infrastructure loans to three provinces, Hebei, Jiangsu, and Qinghai.
Hebei will use loan proceeds for slum renewal and an airport zone,
- Jiangsu’s funds will go to urban infrastructure and the province’s regional transport network.
- Qinghai is for roads, railways, and waterways.
- The South China Morning Post called the agreements “the latest sign of an effort by Beijing to prop up growth with targeted bursts of lending.”
- Also, Agricultural Bank of Chinais lending 250 billion yuan to Shanghai to establish the first “Hong Kong-like free-trade zone” in China, and build Shanghai Disneyland
- Says “Likonomics” is dead
The National Bureau of Statistics maintains that China grew 7.5% in Q2, so it would seem that Li Keqiang sees no need for Beijing to inject stimulus.
Yet on-the-ground observers report that the central government has been flooding the economy with money, at least since early July. J Capital Research’s Anne Stevenson-Yang notes that Beijing has been injecting stimulus through China’s five largest commercial banks. “I don’t think the debate is even about whether or not to stimulate: it’s all about what type of spending to engage in,” writes Yang, who often spots Chinese economic trends first. “There is a genuine acceleration in infrastructure spending and many announcements about how the government will accelerate ‘slum renovation,’ water projects, and roads.” She points out there has also been an obvious increase in some of the riskiest loans, those to local government financing vehicles, the notorious LGFVs.
More at the link
Reports of China stimulus like this (be aware, of course, that reports were in the market last week, this is not new news, just a recap) are perceived by the market as an AUD positive.