China’s consumers and companies are massively withdrawing their deposits from the banks, political analyst Victor Shih reports in the Financial Times. An explanation for this banking meltdown is still lacking.
In July this year, households and companies withdrew a total of Rmb1,100bn ($172.5bn) from China’s banks, equivalent to 2.5 per cent of GDP. In August, household deposits barely clinged to positive territory at Rmb26bn, despite receiving over Rmb188bn in new loans that month.
Corporate deposits grew a bit more, but were still abnormally low. Although the September numbers are not out yet, Chinese press reports suggest that the deposits in the major state banks declined substantially in the first half of the month. Where did all the money go?…
Although the mystery remains unsolved for the moment, solving the mystery is important for investors who want a sense of where the economy is heading.If large sums are indeed disappearing into the shadow banking system, then a rapidly rising share of the financial system is beyond the direct control of the government.
If large sums are indeed flowing out of China, we may have the beginning of major, sustained outflows from China.
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- There are many ways to count Chinese debt (ftalphaville.ft.com)