Published Tue, 10 Jan 2017 08:25:52 -0500 on Seeking Alpha
News that manufacturing in China has risen once again, must be music to the ears of market bulls, given entirely different circumstances exactly one year ago.
However given the concerns about China's lending policies how does all of that measure up now, and how could an interested investor take advantage of one while avoiding banking risk in the other?
China's industrial production certainly seems to have plateaued during 2016, with a major low created last January.
The Chinese Government has been trying to rebalance the Chinese economy with policies which support domestic demand rather than relying on exports. Reports suggest services now outweigh manufacturing in China, which also seems positive for general growth. However some economists are concerned this has had the effect of a huge credit creation and therefore corporate debt, which has created another imbalanced in the banking sector:
According to Euromoney:
In October, China's State Council approved a programme of debt-to-equity swaps to bring down China's soaring corporate debt, now estimated at the equivalent of $18 trillion, or 170% of GDP. Reaction to the news has been mixed. China analysts and commentators have urged it to do something about the corporate debt load - with the IMF the latest to do so in a detailed working paper in October - but there is also concern that the measure fails to deal with an underlying problem and just lets errant... Read more