China's Efforts to Cool Economy May Instead Be Fueling the Fire
Investors who are betting that China's high-flying economy will make a soft landing could eventually take some hard knocks.
That isn't to predict it's impossible to have a comfortable leveling off and cooling down for an economy that grew more than 9% last year. The steady flow of foreign direct investment, bulking up of China-related investment funds and strong interest in Chinese stock offerings indicate many investors aren't concerned about a possible crash-landing.
But unchecked lending practices and the resulting overheated economy could burn investors, just like they were burned by the volatility of a Chinese stock bubble during the early 1990s and the global Internet bubble at the end of that decade.
Given the pace of growth and credit expansion the country has been having, "there is no doubt that China is overheating," says Jonathan Anderson, regional economist at UBS in Hong Kong. "The only issue is how fast a slowdown will happen."
For people arguing the China market won't have a jarring crash, there are some encouraging developments. Recent data showing a decelerating trend in Chinese bank lending is a promising sign that authorities are getting serious about applying the brakes on overheated areas of the economy such as property, steel and automobile assembly. Some economists and analysts say easy credit from banks has pumped up prices in these sectors far beyond their fair value, fueling investment speculation by citizens who would be wiped out financially if the bubble were to burst. Wary of such a scenario, the government has been warning investors, since the middle of last year, about a possible economic burnout.
But while some government policies have tried to tame runaway bank lending to bring the economy gently back to earth, other actions are doing just the opposite. For example, an increase in liquidity into the debt-laden commercial-banking system from the central bank and a recently announced recapitalization of some of the country's biggest bad lenders, analysts say, threaten to bring lending levels right back up again.
"There are two very disparate messages we're getting out of China," says Jim Walker, chief economist at CLSA Emerging Markets in Hong Kong. "On the one hand they want to control areas of loan growth, and on the other hand they are encouraging banks to do more lending through recapitalization of banks and rural cooperatives," he said. "It makes me worry and wonder about the authorities' ability to engineer a soft landing."
The state's efforts to rein in bank lending run counter to another government goal: to extend prosperity into the countryside through economic development. And loan growth is the foundation of much of China's economic strength.
In China, there is about 19 trillion yuan ($2.296 trillion) in credit outstanding, or about 166% of gross domestic product. In most countries, says Mr. Walker, "bank lending normally represents a smaller proportion of GDP." The challenge for the government is to balance enough lending to keep the economy growing and attract foreign direct investment while keeping its debt-laden commercial banks from making more loans that will likely go bad.
The main policy change to date has been to increase banks' reserve requirements to 7% from 6%, leaving fewer reserves available for lending. Since the policy was implemented during September, early indications show it is having some effect in slowing loan growth. Credit data for December showed bank lending rose 21% from a year earlier. That's higher than the 19.5% figure reported for December 2002 but a significant decrease from a monthly high of 24% during August 2003.
These early signs are heartening, especially compared with the government's previous effort to slow growth during 1994. That was at the height of a development boom, when property and stock speculation was rife and annual inflation peaked at 28%.
"The government tightened monetary policy back then and it was a disaster," says Michael Spencer, chief economist for Asia at Deutsche Securities in Hong Kong. Rapid deflation set in and stayed for several sluggish years. This time, Mr. Spencer expects inflation to stay at about 3.2% for the first half of this year and take at least another year to fall to the government target of 2% annually. In terms of a slowdown in credit expansion, Mr. Spencer says he expects growth to slow to about 16% a year by the end of 2005.
Yet the trend toward containing credit growth isn't a sure thing. "There's been a mixed message," Mr. Anderson of UBS says. He notes the central bank increased its base money, created to give commercial banks the liquidity they need to make loans, during the fourth quarter of last year. The injection of this liquidity into the commercial-banking system "completely offset the increase in the required reserve ratio," Mr. Anderson says. "So in principle, banks could lend out more over the next quarters without worrying about running out of excess reserve funds."
Another central-bank action that has some analysts worried is Beijing's commitment to spend as much as $85 billion to recapitalize three out of the four biggest state banks. The funds, mainly in the form of U.S. Treasurys, can be left as capital on the banks' books and be used to write down some of their inventory of nonperforming loans before planned stock-market listings. In theory, the recapitalization also increases the banks' asset base, enabling them to make yet more loans.
With a fixed exchange rate that prevents the government from tinkering with interest rates, China must rely on prudent fiscal policy and limited monetary policy to rein in growth. Much of its success will depend on Beijing's ability to persuade banks, probably by edict, to stop making bad loans.
"There's no saying how far the government's moral suasion will go in limiting the banks' lending," says Mr. Walker, adding that he believes authorities are actually more concerned about creating jobs than nonperforming loans.
中国经济能否软著陆仍是悬念
如果你相信高速发展的中国经济能实现软著陆，当心最后你会碰钉子。
这并不是说中国经济不能适度降温。去年中国经济增速超过9%，外国直接投资稳步流入、与中国有关的投资基金大量增加、中国概念的股票发行大受欢迎，这些都表明，许多投资者并不担心中国经济会遭遇硬著陆的风险。
然而，信贷失控及其导致的经济过热将令投资者受损，就像上世纪九十年代初期股市暴涨且巨幅波动时期以及九十年代末期全球互联网泡沫破灭时那样，投资者遭受了沉重的打击。
考虑到中国的经济增长速度以及信贷持续膨胀的状况，瑞银(UBS)驻香港的地区经济学家乔纳森?安德逊(Jonathan Anderson)说，毫无疑问，中国经济已处于过热状态，唯一的问题是，经济降温什么时候能开始。
对那些相信中国经济不会迅速回落的人来说，也有一些令他们鼓舞的迹象。近期数据显示，中国银行业放贷速度减缓，这表明，政府已经开始采取有力措施，放缓地产、钢铁和汽车装配等过热领域的发展势头。一些经济学家和分析师认为，很容易拿到的银行贷款已将这些产业的价格抬升到大大高于其合理价值的水平，吸引了大量投机性投资。泡沫一旦破灭，这类投资者将血本无归。正是基于这种担忧，政府从去年年中就开始向投资者发出警告，称中国经济可能会因发生过热。 但就在政府采取措施力图给银行信贷降温，从而使经济实现缓慢回落的同时，其他方面的做法却反其道而行。例如，中国央行向负债累累的商业银行系统增加了注资，最近还宣布对几家大型国有银行进行资本重组，分析师认为，这些都有可能使放贷水平再次回升。
里昂证券新兴市场(CLSA Emerging Markets)驻香港的首席经济师吉姆?沃克(Jim Walker)说，中国市场传递出两种截然不同的信息。一方面政府希望控制信贷增长，另一方面又鼓励银行通过资本重组增强放贷能力，并鼓励农村信用合作社增加放贷。因此，他对中国政府调控经济发展实现软著陆的能力表示担心和怀疑。
中国政府控制信贷失控的措施与另一项目标背道而驰，那就是通过经济发展带动农村群众致富，而信贷增长正是中国经济发展的重要基石。
中国目前的信贷规模约为人民币19万亿元（合2.296万亿美元），相当于国内生产总值(GDP)的166%。沃克表示，通常情况下，银行信贷规模应低于GDP规模。中国政府面临的挑战是，既要保持充足的信贷规模维持经济增长并吸引外资，又要防止商业银行背上沉重的坏帐负担。
到目前为止，政策方面最重要的改变就是将银行准备金率从6%升至7%，减少了银行用以放贷的资金。这项政策从去年9月份开始执行，目前已在遏制信贷增长方面初显成效。去年12月的信贷数据显示，银行放贷额较上年同期增长21%，高于2002年12月19.5%的增幅，但明显低于2003年8月创出的24%的最高月度增幅。
初步迹象令人振奋，尤其是与1994年同样为放缓经济增速而采取的措施相比更为显著。当年也是处于经济增长的高峰期，地产和股市价格飙升，通货膨胀率高达28%。
德银证券(Deutsche Securities)驻香港的首席亚洲经济师麦克尔?斯宾塞(Michael Spencer)表示，当年政府紧缩银根产生了灾难性的后果。通货紧缩随之而来，中国经济跌入了长达数年的低迷状态。这一次他预计，今年上半年通货膨胀率将保持在3.2%左右，至少还要一年时间才能降至政府设定的年通货膨胀率2%的目标。在谈到信贷增长回落的问题时，他预计，到2005年年末，信贷增速会降至16%左右。
然而，信贷膨胀能否得到控制，目前的迹象还不明显。瑞银的安德逊说，经济信号错综复杂。他指出，去年第四季度央行增加了货币基础，为商业银行提供了扩大放贷规模所需的资金。对商业银行体系的注资完全抵消了提高准备金率的收效。从理论上来说，接下来的几个季度中，商业银行由于无需为准备金不足而担忧，就可以放手增加放贷规模。
央行的另一个举动也让一些分析师颇为担忧。央行承诺为四大国有商业银行中的三家进行资本重组提供至多850亿美元资金。这些资金大多以美国国债的形式提供，可计入银行资本金，在商业银行募股上市前冲销坏帐。从理论上说，重组也相应增加了银行的资金基础，使其得以发放更多贷款。
由于中国实行固定汇率制，政府不能随时调整利率，因此就必须依靠谨慎的财政政策和限制性货币政策来控制信贷增长。这些措施能否取得成功，在很大程度上要取决于政府敦促银行遏制坏帐增加的能力了，必要时也许需要通过强制性法令。
沃克说，很难预见政府的"道义劝说"能在多大程度上限制银行放贷。而且在沃克来看，相对于控制坏帐而言，中国政府更关注的是增加就业的问题。
