Hong Kong’s Populist Turn – Review & Outlook, The Wall Street Journal
“Hong Kong’s prosperity was built on its economic freedom…So it’s alarming to see the territory’s leaders turning their backs on that tradition…Hong Kong became wealthy by resisting the statist fashions of the postwar West. It would be tragic if it adopted those fashions just as we are re-learning the damage they can do.”
Chinese Banks: Informal Securitisation Increasingly Distorting Credit Data – Chu, Wen, and He, Fitch
“Against this backdrop, the reported deceleration in lending in H110 (Chart 1) has received much attention. The slowdown is cited as evidence that recent administrative tightening is working, and that China’s banks and economy are normalizing after the shock of 2008‐09. While the credit environment is less frenzied than in H109, Fitch Ratings cautions that lending has not slowed nearly as much as official data suggests, due to the increasing amount of credit being shifted off of Chinese banks’ balance sheets via informal securitisation (ie the re‐packaging of loans into investments products for sale to investors)…Fitch believes the vast majority of these transactions are not publicly disclosed by Chinese banks, and few, if any, traces of the loans remain in financial statements. The growing popularity of this activity is increasingly distorting credit growth figures at an institutional and system level, resulting in pervasive understatement of credit growth and credit exposure. Consequently, Chinese banks’ loan loss reserves and capital are more exposed to credit losses than current data suggests…Adjusted for informal securitisation activity, Fitch estimates that the net amount of new CNY loans extended in H110 was closer to CNY5.9trn, or 28% above the official figure of CNY4.6trn.”
Jeremy Jones, CFA
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