标题: 谢国忠：放款热的黑暗一面 [打印本页] 作者: ascom 时间: 2009-7-14 12:36 标题: 谢国忠：放款热的黑暗一面 Dark side of the lending boom
China’s lending boom since December 2008 has boostedbank loans by over Rmb 6 trillion. Many analysts think that an economicboom will follow in the second half of 2009. They will be disappointed.Much of the lending has not been invested and has flowed into assetmarkets. As money flows into speculation in asset markets, many believethat it will lead to spending boom through the wealth effect. First,creating a bubble to support the economy at best brings some short termbenefits and more long term pain. Second, some of the speculation isactually hurting Chinese economy. The surge in commodity prices isfueled by China’s demand for speculative inventory. The damage isalready significant. If lending doesn’t cool, this force would transferChinese income to foreigners and trigger stagflation for a long time tocome.
Commodity prices have skyrocketed since March. TheCRB index is up about one third. Several important commodities like oiland copper have doubled from the bottoms this year. As I have arguedbefore, demand from financial buyers is driving commodity prices. Theweak global economy can’t support high commodity prices. Instead, lowinterest rate and the fear of inflation are driving money intocommodity buying. For example, exchange traded funds (‘ETFs’) aloneaccount for half of the activities in oil future market. ETFs allowretail investors to behave like hedge funds. They could express theirviews efficiently. This product has serious implications for monetarypolicy making. One consequence is that the fear of inflation would leadto inflation through massive deployment of money into inflation-hedgingassets like commodities.
Financial demand alone can’t support commodityprices. Financial buyers can’t take physical delivery and must sell thematuring futures contracts. This force would lead to steep price curveagainst time. In early 2009 the six month futures price for oil wastwenty dollars higher than spot price. Unless spot price rises,financial buyers suffer huge losses. The wide gap between spot andfutures price increased inventory demand as arbitrageurs sought toprofit from the difference between warehousing cost and the price gapbetween spot and futures price. That demand flattened the price curveand diminished the losses to financial buyers. Without inventory demandfinancial speculation couldn’t work.
For some commodities the warehousing costs are low,i.e., the net loss for financial buyers is low. They can behave likepure financial products like stocks and bonds. Precious metals, forexample, are like that. Copper, though five thousand times lessvaluable than gold, still has low warehousing cost relative to itsvalue. Some commodities like lumber and iron ore are bulky, costly towarehouse, and should be less susceptible to financial speculation.Chinese players, however, are changing that. They can leverage China’ssize to make everything possible for speculation.
There is little doubt by now that China’s banklending since last December is driving speculative inventory demand forcommodities. Chinese banks lend for commodity purchases with theunderlying commodities as collaterals. The lending is structuredsimilar to mortgage. Banks usually need to be much more cautious aboutsuch lending as commodity prices fluctuate far more than propertyprices. Chinese banks are more lenient. As China is an industrializingeconomy, it is understandable that the country should supportindustrial activities like purchasing raw materials for industrialproduction. However, when buying commodities is for speculation, thelenders suffer high risk without benefiting the economy. In some casesit hurts banks and the economy at the same time.
The speculative demand for iron ore, for example, isgravely hurting China’s national interest. Rio Tinto was sufferingbankruptcy risk due to its overpriced and debt financed takeover ofAlcan. When iron ore price dropped by two thirds from the peak, themarket became worried about its viability and its share price becamevery low. Chinalco then negotiated a $19 billion investment in thecompany to support its finance. However, as its share price has nearlytripled from the bottom, it has decided to cancel the Chinalcoinvestment and issue new shares instead. Chinalco essentially gave RioTinto a free call option. It ditched Chinalco when a better optionbecame available. The issue is why its share price has done so well.
International media has been reporting record amountsof China’s commodity imports. The surge is being portrayed asreflecting China’s recovering economy. Indeed, international financialmarket is portraying China’s perceived recovery at the harbinger forglobal recovery. It is a major factor in pushing up stock prices aroundthe world. But China’s imports are mostly for speculative inventories.Bank loans were so cheap and easy to get that many commoditydistributors used the financing for speculation. The first wave ofpurchases was to arbitrage the difference between spot and futuresprices. That was smart. As the price curves have flattened for mostcommodities, the imports are for speculating in price increase. Asthere are so many Chinese speculators, their demand is driving upprices, making the expectation self-fulfilling in the short term.
One obvious cost for China is the failure ofChinalco’s investment in Rio Tinto. When it saw its share pricetripling, it could raise money cheaper by issuing new shares to paydown its debt. The potential financial loss to Chinalco isn’t thepoint. Bigger cost would come from further monopolization of iron oremarket. After scrapping the Chinalco deal, Rio entered into an iron oreJV with BHP. Even though the two will keep separate marketing channels,joint production allows them to collude on production levels, whichwould have significant impact on future ore price.
The iron ore market has been brutal for China, partlydue to China’s own inefficient system. For four decades before 2003fine ore price fluctuated between $20-30/ton. As iron ore was plentifulin the world, its price was driven by production cost. After 2003Chinese demand drove it out of the range. The contract price quadrupledto nearly $100/ton. The spot price reached nearly $200/ton in 2008.China imports more ore than Europe and Japan combined. The skyrocketingore price has cost China dearly.
The gradual concentration of major iron ore minesamong the big three was a major reason for the price increase. Thenature of the Chinese demand was a major reason too. China’s steelproduction capacity has skyrocketed while the capacity is fragmented.Chinese local governments have been obsessed with promoting the growthof steel industry, which is the reason for the industry’sfragmentation. Huge demand and numerous small players are a perfectsetup for the big three to increase prices. They often cite high spotprices as the reason for jagging up the contract prices. But, the spotmarket is relatively small. They can easily manipulate it by decreasingsupply into the market. On the other hand, numerous Chinese steel millsall want to buy ore to sustain production for their governments toreport higher GDP, even though the GDP is money losing. China’s steelindustry is structured to hurt China’s interest.
As steel demand collapsed in the fourth quarter of2008 and first quarter of 2009, steel prices fell sharply. It should beled to a collapse in ore demand. The surge in bank lending armedChinese ore distributors with money to stock up ore for speculation. Ithas strengthened the hand of the big three enormously. The tie-up ofBHP and Rio Tinto has increased their monopoly power further. Eventhough China is the biggest buyer of ore by far, it has had no power inprice setting. When the global recession should have benefited China,the lending surge has made it even worse for China by financing Chinesespeculative demand.
China is a resource scarce economy. The need forimports will only increase. International suppliers are trying to takeadvantage of the situation by consolidating. But Chinese buyers arefragmented due to local government protection. Chinese lending surgehas made it worse by creating excessive speculative demand.
What is happening in the commodity market is aglaring example that China’s lending surge is hurting itself. Even moreserious is that it is leading Chinese companies away from real businessand further towards asset speculation. The tough economy and easycredit condition have led many companies trying to profit from assetappreciation. They have borrowed money and put it into stock market. AsChina’s stock market has risen by 70% since last November, manybusinesses feel vindicated for focusing on asset market rather thanreal business. The speculation has spread to Hong Kong. MainlandChinese money may have been the force between HIS moving up to 19,000from 15,000 and have been driving the luxury property sales. One way oranother the money came from China’s lending binge.
Borrowing money for asset market speculation is notrestricted to ** companies. State owned enterprises appear to belending money to ** companies at high interest rate, i.e., loansharking, with the cheap loans from the state-owned banks. Of course,we can’t estimate the magnitude of such SoE lending. What it has doneis to replace the high interest rate financing in the gray market. Asthe economy weakened in late 2008 ** lenders began demanding moneyback from distressed ** companies. The lending from thestate-owned enterprises may have kept many ** companies from goingbankrupt. It has served to re-channel the bank lending into cash forindividuals and businesses that were in the lending business. Thismoney may have flowed into asset markets. It is part of the phenomenonof the ** sector withdrawing from the real economy into thevirtual one.
The trend of businessmen becoming de facto fundmanagers or speculators is a worrisome one. It happened ten years agoin Hong Kong. Its economy has stagnated since. Some may argue thatChina has state-owned enterprises to lead the economy forward. However,even though state-owned enterprises account for more GDP, **companies account for most employment. The government is spending hugeamounts of money to support temporary employment for the collegegraduates in 2009. If the employment in the ** sector doesn’tgrow, the government may have to spend even more next year. Thegovernment is using fiscal stimulus and bank lending to supporteconomic recovery. But the recovery may be a jobless one. China needs adynamic ** sector to solve the employment problem.
We are seeing the dark side of the lending surge insupporting asset speculation. The commodity speculation is doingsignificant damage to the Chinese economy. More bank lending may leadto higher commodity prices, threatening stagflation for the Chineseeconomy. This self-inflected damage from China’s lending boom should bea major consideration in China’s lending policy. Cheap loans benefitforeigner commodity suppliers, not necessarily the Chinese economy.
Many analysts argue that GDP growth follows loangrowth as money is spent. Inflation becomes a problem only when theeconomy overheats, which is still not a problem. This sort of thinkingis naïve. We see the lent money is not spent in creating demand. It isbeing channeled into asset market speculation, which leads to inflationwithout boosting the economy. The long-term damage could be moreserious as ** businesses withdrawing from the real economy intothe virtual one. When ** companies don’t expand, China wouldsuffer a lasting employment crisis. The lending surge may be hurtingthe Chinese economy both short term and long term.
The way that the bank lending has been channeledreflects that China’s economic problems couldn’t be fixed by liquidity.China’s growth model is based on government-led investment and foreignenterprise-led export. As exports grow, the government channels theincome into investment to support export growth. As the global economyhas collapsed, China’s exports have too. Unless the global economycomes back, China’s exports wouldn’t rise. There will be no incomegrowth to support investment growth. The investment stimulus now isspending the saved income from past exports. It couldn’t last.
Unless China’s economic model changes, businessesreally don’t want to invest. Without exports, who would be theircustomers? Hence, their response to put money into speculation isn’ttotally irrational. It is better than expanding capacity, which wouldsurely lead to losses.
If exports remain weak for years, China could onlybring back high growth by shifting demand to household sector fromexport. It requires significant rebalancing of wealth and income in theChinese economy. I have written repeatedly that a new growth cyclewould start with distribution of the shares of the listed state-ownedenterprises to Chinese households. It would lead to a virtuous cyclelasting a decade.
China’s bank lending surge has led to assetappreciation. Buoyant asset markets make many think that the economicproblems are fixed. This may be an **. The lending surge may havecreated more problems than it solves. China’s economic problems arestructural. They couldn’t be fixed by stimulus.作者: ascom 时间: 2009-7-14 12:37
哈哈，慢慢看，学学英语作者: 无铭 时间: 2009-7-14 12:39 作者: ascom 时间: 2009-7-14 16:32
自08年12月份开始的贷款井喷开始，中国的新增银行贷款总和已经超过了6万亿人民币。分析师预计从09年的第二季度开始经济将会出现爆发性的增长，但是结果将会使他们失望。许多贷款不是用来投资，而是流入了资产市场。许多人认为大量货币进入投机资产市场会带来财富效应，从而促进消费的繁荣。而实际并非如此。首先，通过制造泡沫来支撑经济增长确实会带来短期的效益，但是会导致更多的长期问题。其次，许多投机行为会伤害到中国经济。投机性存货助推了大宗商品价格的飞涨，这种伤害已经开始显现。如果放贷热不降温，将会导致收入的外流，和引起长期性的滞涨。
