It’s hard to be rich, dear readers. It’s true. Sometimes we’re at a loss for what to do with all this money, and it gnaws at us. Now, we realize that might come off as somewhat… ungallant. Surely we’d not rather be in bankruptcy, down to our last dime and about to close down the presses? But as China seems to be finding out lately, the larger one’s funds, the more issues that seem to pop up.
Take the stock market. Now, it’s technically still up around 70% from where it was a year ago. But it’s also down roughly 30% from its June 12 peak, at what turns out to have been a cost of about $144 billion to the country’s financial institutions so far. (Don’t worry, they’ve got that much and change still waiting in the wings.) Was it worth it? We leave that for you and the party’s apparatchiks to decide. But for the record, we’ve put our money back into property.
Worse, the burgeoning realm of online commerce is taking a hit from the market crash’s fallout. Online lenders, once the innovative pioneers of the industry in China, have seen equity loans drop 61% since a ban was put in place on July 12. And as if that’s weren’t enough, regulators introduced a new raft of regulations for approval this week that could limit daily payments through services like Alipay to as little as RMB1,000 a day. Regulators were also subsequently pilloried by China’s online populace, and rightly so.
Yet we doubt, dear readers, that these measures will do much to improve China’s financial straits. Shadow banking stagnated in the year’s first half, and bank lending grew in response, with the country’s financial risk ever-more concentrated on their balance sheets as a result. And, wouldn’t you know it, China’s bad loans grew by some RMB322 billion for the same period, to a staggering total of RMB1.8 trillion—closing in on 2% of total loans. And that’s to say nothing of the RMB2.65 trillion that commercial banks had to put under special watch for being at greater risk of default.
What’s that, you say? Ah yes, government debt. We’d almost forgotten: Only six of nearly 300 city governments surveyed in 2014 actually disclosed their debts in 2014. For the mathematically inclined, that’s somewhere in the neighborhood of, oh, 0.02%. And we can imagine why, since local government debt totaled around RMB56 trillion the year before, by one measure.
So yes, dear readers: While China may seem like it has all the money in the world, we’d advise against forgetting that its own financial house isn’t quite in order, either. More money, more problems, as they say.