Full article: China Investment Boom Starts to Unravel

And the relatively low Q1 state lending is showing the actual continuing policy constraint.

As previously discussed, China has what they consider an inflation problem, and there are precious few, if any, examples of inflation fights that didn’t cause hard landings.

Ch Headlines:

China to lower reserve requirement ratio
Q1 GDP slows in 29 provinces, regions
China 2012 Growth Forecast Cut to 8.1%, Citigroup Says
China 2012 Growth Outlook Revised to 8% From 8.2%, JPMorgan Says
China Growth Seen at 13-Year Low by Pimco as Banks Cut Forecast

CIC Stops Buying Europe Government Debt on Crisis Concern

By Andres R. Martinez

May 10 (Bloomberg) — Gao Xiqing, president of China Investment Corp., said the nation’s sovereign wealth fund has stopped buying European government debt on concerns about the region’s financial turmoil.

CIC will continue to look for new investments in Europe as part of its strategy to boost allocations to infrastructure, private-equity assets as well as emerging markets to help boost returns, Gao said. CIC, with an estimated $440 billion in assets, is the world’s fifth-largest country fund, according to Sovereign Wealth Fund Institute.

“What is happening in Europe right now is of course of concern,” Gao said in an interview in Addis Ababa, Ethiopia, during the World Economic Forum on Africa. “We still have our people looking at opportunities in Europe, even though we don’t want to buy any government bonds.”

Europe’s turmoil is reigniting on the second anniversary of policy makers’ first attempt to prevent Greece’s woes from spreading. That raises fresh doubt over the strategy just as Greece’s election spurs concern that the country may not meet the terms of its international rescues and will seek a solution outside the euro.

Boy in China reportedly sells kidney to purchase iPhone and iPad

April 6 — A teenage high-school student in China sold his kidney for an illicit transplant operation and used the proceeds to buy an Apple iPhone and iPad, state press said on Friday.

The 17-year-old boy, who was paid $3,500, was recruited from an online chat room and is now suffering from kidney failure and in deteriorating health, the Xinhua news agency said.

A surgeon and four others have been arrested and are facing charges of illegal organ trading and intentional injury.

The kidney donor, only identified by his surname Wang, agreed to the April 2011 operation in the central province of Hunan without his parents’ consent, the report said.

One of those detained was a hard-up gambler identified as He Wei, who acted as a middle-man between a hospital worker and the teenager.

Health ministry statistics show that about 1.5 million people in China need transplants, but only around 10,000 transplants are performed annually.

The huge gap has led to a thriving illegal market for organs.

So still looking to me like a case of

‘Because we fear becoming the next Greece, we continue to turn ourselves into the next Japan’

The only way out at this point is a private sector credit expansion, which, in the US, traditionally comes from housing, but doesn’t seem to be happening this time. Past cycles have seen it come from the sub prime expansion phase, the .com/y2k boom, the S&L expansion phase, and the emerging market lending boom.

But this time we’re being more careful of ‘bubbles’ (just like Japan has done for the last two decades). So I don’t see much hope there.

Still watching for the euro bond tax idea to surface, which I see as the immediate possibility of systemic risk, but no real sign yet.

Japan to purchase 65 billion yuan in China government debt

By Stanley White

March 13 (Reuters) — Japan said on Tuesday it had received approval from China’s government to purchase 65 billion yuan ($10.3 billion) in Chinese government debt in a move that can help Japan diversify its reserves away from the dollar and strengthen economic ties between the two Asian countries.

The timing of purchases hasn’t been set yet as Japan still needs to make some administrative preparations, but Japan is likely to start with a small amount and then increase purchases, Japan’s Finance Minister Jun Azumi said.

Japan will also consider the impact on financial markets when it decides the timing of its purchases, Azumi said.

China said on Monday it would continue its purchases of Japanese government debt but would reduce purchases when the yen is rising as China and Japan, holders of the largest and second-largest currency reserves, look to limit exposure to the dollar.

“We feel this is an appropriate amount when considering our mutual goal of strengthening economic cooperation between Japan and China,” Azumi told reporters.

Japan and China agreed at a summit in December to facilitate trade between the yen and the yuan as part of a broader push to strengthen economic cooperation.Japan said on Tuesday it had received approval from China’s government to purchase 65 billion yuan ($10.3 billion) in Chinese government debt in a move that can help Japan diversify its reserves away from the dollar and strengthen economic ties between the two Asian countries.

The timing of purchases hasn’t been set yet as Japan still needs to make some administrative preparations, but Japan is likely to start with a small amount and then increase purchases, Japan’s Finance Minister Jun Azumi said.

Japan will also consider the impact on financial markets when it decides the timing of its purchases, Azumi said.

China said on Monday it would continue its purchases of Japanese government debt but would reduce purchases when the yen is rising as China and Japan, holders of the largest and second-largest currency reserves, look to limit exposure to the dollar.

“We feel this is an appropriate amount when considering our mutual goal of strengthening economic cooperation between Japan and China,” Azumi told reporters.

Japan and China agreed at a summit in December to facilitate trade between the yen and the yuan as part of a broader push to strengthen economic cooperation.

As previously discussed, while China may successfully engineer a soft landing in their fight against inflation, I’ve never seen anything but hard landings elsewhere when fighting inflation. And with China a ‘first half/second half’ story, a weak first half generally means an even weaker second half.

China says January lending down 28% from year ago

February 12 (AFP) — Chinese bank lending fell 28 percent in January from a year earlier, official data showed, suggesting Beijing is reluctant to open the credit valves too quickly for fear of reigniting inflation.

State-owned lenders issued 738.1 billion yuan ($117.26 billion) in new loans in January, down 288.2 billion yuan from the same month last year and well short of analyst forecasts for one trillion yuan, the central bank said Friday.

Banks handed out 640.5 billion yuan in loans in December.

Chinese banks typically ramp up lending at the beginning of the year to avoid losing quotas issued by regulators and the effects of changes in monetary policy. Analysts said the weaker-than-expected data partly reflected the earlier than usual Chinese Lunar New Year holiday, which fell in January, and the government’s still tight restrictions on credit.

Mark Williams, an economist at Capital Economics in London, said it was the lowest December to January increase since 2007.

“It is hard to escape the feeling that the weakness of lending was at least partly a reflection of the slow pace at which policy is being eased,” he said.

Late last year the central bank eased lending restrictions on banks and analysts expect similar moves this year as authorities try to spur economic activity and prevent a collapse in the property market.

But most experts had forecast another easing of bank reserve requirements before the week-long Lunar New Holiday and the government’s failure to act suggests it does not expect a sharp slowdown in economic growth.

There is growing evidence that the world’s second largest economy is slowing as turmoil in eurozone countries and weakness in the United States hurts demand for Chinese exports, a key driver of the Asian giant.

The International Monetary Fund this week warned that an escalation of Europe’s fiscal woes could slash China’s economic growth by half this year, and it urged Beijing to prepare stimulus measures in response.

But Chinese leaders, worried about reigniting politically sensitive inflation, have signalled their intention to move cautiously and fine-tune policy as needed.

China Should Weigh Fiscal Boost if Euro Crisis Deepens

Feb 8 (Bloomberg) — China should consider fiscal stimulus if Europe’s sovereign-debt crisis sparks a recession there that affects the U.S., Asian Development Bank Managing Director-General Rajat Nag said.

“The European crisis is a major cloud on the horizon,” Nag said in an interview at the ADB’s Tokyo office today. “Countries, particularly China, have to consider the possibility of coming in with necessary fiscal stimulus if the euro zone crisis becomes more serious and if the effects of that spillover into the U.S.”

The International Monetary Fund said two days ago that a worsening of Europe’s debt turmoil could almost halve China’s growth rate, which the lender projects at 8.2 percent in 2012. Fitch Ratings said yesterday that a “hard landing” for the nation was a key risk for the global economy.

“Our assessment is that the situation will probably not be a hard landing,” Nag said. “If the euro zone crisis resolves itself in an orderly fashion, China could still grow at over 8 percent in this calendar year.

Not if, but Wen-

China’s Wen Suggests Euro Funding After Meeting With Merkel

Feb 6 (Bloomberg) — Chinese Premier Wen Jiabao raised the prospect of contributing to the euro-area’s bailout programs, telling Chancellor Angela Merkel that China may be prepared to assist in resolving its debt crisis.

The Chinese government is considering funding options for the temporary European Financial Stability Facility and its permanent successor, the European Stability Mechanism, through the International Monetary Fund to help stabilize the monetary union, Wen said yesterday after meeting Merkel in Beijing. China has previously said that it needs more detail on any plan to contribute funds to the euro area.

China is “investigating and evaluating ways, through the IMF, to be more deeply involved using the ESM and EFSF channels in solving the European debt issue,” Wen said at a briefing alongside Merkel, who arrived in China early yesterday on her fifth visit to the world’s most populous country as chancellor.

Premier Wen says China needs to help Europe – report

Feb 5 (Reuters) — Chinese Premier Wen Jiabao said that China needs to help Europe stabilise its markets due to strategic considerations in its relations with the region, the official China Securities Journal reported on Monday.

China also needs to keep its policy on imports and exports stable via more encouragements rather than restrictions, the newspaper quoted Wen as saying during a visit to China’s southern province of Guangdong earlier this month.

“Europe is now in a debt crisis,” Wen was quoted as saying. “We must consider our relations with Europe from strategic needs, maintaining our nation’s own interest.

“On the other hand, Europe is our largest export market. Europe is our biggest source of technological imports. Helping Europe stabilise its markets is thus helping ourselves.”