From the FT:

 

The government has yet to give an explicit explanation for the central bank’s move to allow rates for lending between banks to surge on Thursday. But the commentary from Xinhua, which Beijing often uses to make policy statements, comes the closest it has yet to that.

 

The news agency argued that while banks, the stock market and small and medium-sized enterprises lacked money, the broad money supply M2 had still expanded by 15.8 per cent compared with the same period last year,  new loans were still high and total social financing aggregate, a broad liquidity measure, continued to grow rapidly in the first five months of this year.

 

“Is China really experiencing a ‘cash crunch’ where liquidity is being squeezed?” asked Xinhua, and added that many large enterprises continued to spend heavily on wealth management products, capital was still in search of speculative investment opportunities and private lending continued to be strong.

 

“This contrast clearly shows that this seemingly ferocious ‘cash crunch’ is in fact structural funding constraints caused by a misallocation of funds. It is not that there is no money, but that the money has not reached the right places,”

 

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Quite obviously YZJ HTM loans of nearly 12b/16b equity is playing the credit game . Banks are using corporations to circumvent reserve ratio requirement in off balancesheet lending thru Wealth mgmt product.The risk of default is being passed to corporations while the banks takes a equal cut of the return without an ounce of risk. Who is the fool here. We all knows how it will end when companies go big time speculating in non core business with no knowhow. Their central bank had given their most explicit acknowlegement by offering no unlimited liquidity and warned them while shibor spikes to 1100 basis points . For reference singapore rates is ony 57 basis points.

  Cavet emptor!

 

笑 傲 江 湖   (Click)