Chinese Monetary Policy: Little Effect on Overcapacities, and Risks of Blowing a Property Bubble

China showed few signs of credit tightening in Q3, despite a slowdown in lending growth from the torrid pace of the first half of 2009. Although new lending fell to RMB 517 billion in September from June’s record RMB 1.5 trillion, total loans outstanding still climbed 34.2% y/y, barely slower than the record set in June. New local currency lending is well on track to grow by more than RMB 10 trillion (US$1.47 trillion) this year, more than double last year’s level and a figure equivalent to a third of China’s 2008 GDP. This surge in credit growth has been a major factor propelling China back to economic growth this year but has sparked real risks including overcapacities, asset price bubbles and future inflation.

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-The following video was featured as Business News Network’s Report of the Day on October 22:

Business News Network -- As the Chinese economy keeps growing, are there real signs of a housing bubble emerging?  BNN speaks to Rachel Ziemba, senior analyst, RGE Monitor [6:04]