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Investing

China Shuts Down Lending

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By Douglas A. McIntyre Published
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The mainland Chinese government moved  in the direction of providing liquidity to its economy last year when it launched it $585 billion stimulus package. Now that the program seems to have been a success, it is rushing in the opposite direction by reigning in bank lending. The concern voiced by economists in the People’s Republic is that lending has become so excessive that it is the cause of emerging bubbles in real estate, equities, and agricultural goods.

The central bank, the Bank of China Ltd., says that it is sharply reducing its own lending and wants the rest of the financial system to target lower loan losses. That is simply another way of saying that overall credit availability will fall.

Some economists believe that the Chinese government is dragging its liquidity strategy to and fro, but factory production did drop sharply last year as did exports. The potential of high real estate value may be a small price to pay for reviving the country’s industrial machine.

The US will face the same problem on a much more muted scale this year. The Fed plans to end its programs to buy government paper and mortgage back securities on the theory that it can time the move perfectly as the American economy recovers.

The financial policies of China and the US are based on well-educated guesses which is what makes them so dangerous.

Douglas A. McIntyre

Photo of Douglas A. McIntyre
About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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