China may well have enough on their own plate to distract them from initiating world domination with an invasion of Australia. This by Alan Kohler from The Eureka Report
China’s Corruption Purge
Last night, while talking over dinner to a well-connected person from China, I heard two remarkable things that I had not heard before: 63,000 Communist Party officials have so far been picked up in President Xi Jinping’s corruption purge, and there have been three assassination attempts on Xi just this year.
I’d seen the arrest of Zhou Yongkang, the former head of the police force and state security, two weeks ago, and understood the significance of that. Zhou was the most feared politician in China because he has all the dirt on the other politicians. It would have been like Richard Nixon having J. Edgar Hoover arrested: he certainly wanted to, but didn’t dare.
But President Xi has done it, and he arrested Bo Xilai, another powerful warlord, plus 63,000 other crooks. No wonder they are trying to kill him.
China’s corruption purge is incredible. Bankers in Hong Kong, Singapore and Zurich, I heard last night, are trembling, waiting for the phone call from Beijing explaining that a certain deposit of millions, or perhaps billions, does not belong to the depositor, and the Party wants it back.
In fact most senior Communist Party leaders are billionaires. According to Bloomberg, Xi Jinping himself is worth $300 million. Every mayor of every town has at least $50 million.
So the Great Chinese Corruption Purge is a very good thing, but there are some things that are not so good. For example…
China’s Social Financing
Total social financing (TSF) in China collapsed in July, from 1,974.5 billion yuan in June to 250 billion yuan. Now, that might have passed you by, or you might have seen some reference to it, and thought: “Don’t know what that means … move on.” Actually, stay put – it’s important.
TSF was invented in 2011 by Beijing to measure what was happening in the private financial sector, as the economy moved away from state-controlled money. It sums up total fundraising by non-state entities, both borrowing and lending. The People’s Bank of China says: “The TSF is a money-added concept, indicating total funds the real economy obtained from the financial system over a certain period of time.”
Basically the July TSF number suggests that there is an incredible credit crunch taking place in China. The collapse was so shocking and puzzling that the PBoC put out a statement trying to explain what happened and soothe nerves: it was due, it said, to “unfavourable seasonality, weak credit demand, heightened risk management of commercial banks and tightened regulation on interbank activities.” Move along, move along, nothing to see here.
Yes, but if that fall in credit demand and supply is taken together with the 16.3% drop in property sales – the worst since 2008 – it suggests that China’s high-wire act of a real estate sector is starting to get the wobbles. The central bank is not going to tighten credit conditions, but maybe it’s happening anyway.
Don’t forget that the 2007 credit crunch in the US, which led to the 2008 global recession, was not caused by central bank tightening, but by the financial system seizing up of its own accord because of a lack of confidence in real estate values, and therefore bank balance sheets.
China’s weird ‘total social financing’ data bears watching.