Chinese bank in credit crunch.

There a sources from financial institutions say the problem is "minor" but
it look a bit bigger than that.

Beijing – A number of banks have temporarily halted lending to businesses and individuals apparently due to mounting pressure from liquidity shortages.

They include some branches of Bank of China (BOC) and Industrial and Commercial Bank of China (ICBC), sources from the two banks said. The bank was already having a hard time keeping up with deposit-to-loan ratio requirements even before the liquidity shortages hit, not to mention executives' recent determination to sort out the bank's liquidity management and control loans.

BOC plans to resume lending on July 15, he said. As for ICBC branches, the amount of loans they can make is routinely capped under a monthly limit set by headquarters, a source from the bank's Shenzhen branch said. It was not unusual for branch banks to reach lending quotas before the end of month, he said. What was rare, however, was that headquarters had cut down on the quotas to make room for its own operations. "All of our loans have been put on hold," the source said, "There may be some credit line when it comes to July, but it will definitely be used up in a few days."

Meanwhile, a banker from ICBC's Shanxi branch said it could still offer loans. CITIC Bank and Huaxia Bank had suspended mortgage loans, the manager of a real estate agency said. Industrial Bank halted making loans and discounting bills, an insider said.

And it's not just business its public as well.

On June 23, ICBC customers had trouble using its online, counter and ATM services. This included making withdrawals and paying bills. The same thing happened to BOC users a day later.

The two banks responded by saying the disruptions were caused by system upgrades. However, users of China's Twitter-like weibo services were not convinced the problems were unrelated to the banks' liquidity situations.

CAIXIN

Another source said "there was no need to worry about large banks" which oddly enough
makes me worry.

I'm continously amazed how everyone on this planet seems to think that we can generate growth when there's a finite amount of resources. Once we have found the max amount there's only one way ahead and that's bubbles, inflations and subsequent crashes.

Humans are an irresponsible and illogic race that have no greater perception of things. You really shouldn't care about how much you have right now, because once you are good and dead and slowly decompositing back into soil, what the hell are you going to use all that wealth for?

These are indeed sure signs that those banks are in trouble, and not many people should be surprised to see them playing this down. This is what all banks do, because the risk of further collapse due to fears in the marketplace can cause system to break.

If more than one bank is experiencing the same problem, and there's an impact on the consumer too, there is most definitely more to this than they are letting on.

This actually works well with what a lot of other people have been warning of over the last few weeks too. Analysts have been expecting to see a problem, and many independent economists and traders out there have been warning of a coming collapse in the markets.

It's time for people to really pay attention now. Greece is in turmoil, China is experiencing these liquidity problems which will impact on the bubble they've created, and this will definitely affect the rest of the world if either China or Greece experiences an internal collapse.

Watch the markets closely.

reply to post by skuly


I've been hearing this and personally felt prior to hearing about this that the same thing that happened to the US economy would happen to China.

It's being done on purpose IMHO also. America has almost outsourced all our business to China and they've been booming for awhile now in all fields same as when America was having the major ups....

What goes up must come down, I think China is the last piece of the puzzle to cause a Global Meltdown.

Call me crazy

I remember reading something about this yesterday, and I believe the article stated that the halt in lending was not due to liquidity issues, but rather an attempt to stop the interbank shadow lending practices that a lot of small and mid-sized businesses in China utilize. I'll update my post if I find the source.

Shadow Banks

As you will note, this has a lot to do with mandates coming down to maintain certain ratios between deposits and loans.

Traditionally, Chinese people have been big savers. But more recently, a huge number of Chinese have become Real Estate speculators...taking money from savings to buy multiple housing units (and, or course, taking out mortgages to complete the purchases), hoping to capitalize on the rise in property values.

We all know, but many people in China don't seem to realize, that this kind of thing...if left to its own devices...will inevitably lead to a bubble burst. This would (will?) create massive problems for individuals and financial institutions in China.

In recent years, as well, Chinese banks have been very eager to lend to companies who are building factories in support of the Export Economy that has fuelled China's rapid economic rise. But, already, there are many signs that this strategy is beginning to falter (as was also very predictable)...with plant closures, anti-dumping tariffs being imposed - and new factories now springing up in places like Myanmar, Thailand and Vietnam...because now (with their rising middle class) Chinese labour is becoming relatively expensive.

The authorities there, it would seem, are now recognizing the warning signs, and are trying to keep their ratios in line by simply imposing monthly lending limits. A short term solution perhaps...but this will also have the impact of slowing the economy, so the proper amount of braking will have to be applied.

Should be "interesting".

Damn.

Looks like my 5 yuan deposit in ICBC Sanxi, might be forfeit then.

Was keeping it "Just in case" haha.

There can be no such thing as permanenet growth......
In trees or people or economies......
How stupid to believe that things will just keep rolling along that way....................
The human life span is too short for us to think in longer term consequences.....

Those here who mentioned the inevitability of this coming to pass a few years ago were ridiculed.

reply to post by SLAYER69


Well, nothing has 'come to pass' yet.
The 'credit crunch' in China may not be the same as what is happening in the US and Europe, and its severity is unknown. I've read many articles about how its the worst thing in history, and I've read just as many that say the problem is not overly severe.
Here's what I think will happen: the property bubble will pop. Banks that made bad bets will be allowed to fail. If some banks are bailed out, their bankers will almost certainly be executed. Corrupt officials on all levels will be weeded out and executed. The growth rate will drop for a year or so, and will then pop right back up (but not to the crazy levels they were). This is how a real capitalist economy functions. The US will still be languishing in its no-growth economy.