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Monday, January 12, 2009

China: Increase Bad Loans, Relax Credit to Save the Economy

Another brilliant plan! Easy credit caused the mess… and easier credit is supposed to fix the mess? WTF?

Chinese policy makers must have gone to the same damn schools that unleashed the same pump monkeys who destroyed the American economy.


The Fiscal Insanity Virus (FIV) will eventually devour everything.

China to Tolerate More Bad Loans, Relax Credit Rules (Update2): “China will tolerate an increase in bad debt this year as it eases rules governing bank lending to revive the slowing economy, the nation’s banking regulator said.

The China Banking Regulatory Commission will drop its target of reducing the balance and ratio of bad loans after five years of declines, and instead aim to prevent a “massive and rapid rebound” in soured debts, Chairman Liu Mingkang said in Beijing today. A transcript of his speech was obtained by Bloomberg News.

Bank of China Ltd. and Industrial & Commercial Bank of China Ltd. fell in Hong Kong trading today. Looser requirements may fuel concerns about a surge in bad loans, four years after China finished a cleanup of its banking system that cost more than $500 billion. Lenders will likely face weaker asset quality, rising defaults and “significant” constraints on profits in 2009, Standard & Poor’s said Jan. 7.

“What we’re concerned about is whether banks will, after government interference, boost lending without properly recognizing the risks,” said Liao Qiang, the rating company’s Beijing-based analyst, in an interview. “Governments tend to relax prudential regulatory requirements in difficult times. The key is how banks react.”

Measures to boost credit include allowing banks to lend to businesses afflicted by temporary financial woes because of the global recession but with sound fundamentals, Liu said. Lenders can also restructure loans and “scientifically” adjust the types and maturities of debt, and the regulator will support the sale and securitization of loans, he said without elaborating.”