By John Richardson
Everything is still going to plan. As the chart above shows, China’s official bank lending is down by 16% in the year to date as the government rations credit to the big state-owned enterprises. The last thing that China needs right now is even more unneeded industrial capacity and infrastructure.
But, of course, those with a short term trading perspective, as we discussed yesterday and have discussed many times before, always seek to ignore the long term fundamentals for the sake of quick gains.
And so the view is gathering momentum that China might cut interest rates in H2, following the slowdown in lending and the release of a raft other “disappointing” economic indicators at the weekend.
Fortunately, though, Xi Jinping, during his weekend meeting with President Obama and Li Keqiang, in a speech to provincial leaders on 8 June, indicated that they were determined to stay the course.
Lu Ting, head of Greater China economics at Bank of America Corp in Hong Kong, told Bloomberg that he expects “no new stimulus measures” and no interest-rate cuts, though authorities may speed up allocation of project funding. Let’s hope he is right.
For those in the chemicals and polymer industries with a longer-term perspective, the slide below might be useful. It shows areas of focus under China’s 12th Five-Year-Plan (2011-2015) that present enormous opportunities as China moves towards more sustainable growth.
