Monday, June 29, 2015

China real estate bubble deflating

China has also embarked on indirect QE in response to slowing growth. Chinese officials are permitting banks to use local government bailout bonds as collateral for low-cost loans from the central bank, while local governments can sell new bonds with explicit government guarantees. Three interest rate cuts since November and two reductions in bank reserve requirements have not spurred credit demand. 

Meanwhile, Chinese companies and local governments remain heavily indebted as the real estate bubble deflates.