Chinese Banks Not Listening to Central Government
Chinese banks are not listening to its central government.
China's central bank raised the deposit reserve ratio four times last year so commercial banks would save more money.
Interest rates on loans were raised twice.
A quota of 2.5 trillion yuan was established for the year.
Still…Chinese banks lent 826.5 billion yuan MORE than they did in 2005 for a total of 3.18 trillion yuan….600 billion yuan more than the quota and 300 billion higher than the previous record of 2.8 trillion in 2003.
Uh….there is money to be made in lending. There is money to be made if you have a good idea and someone will lend you the money.
But, experience tells us that their are bad loans and equally as many bad business ideas.
Sooner or later, those loans will come due. Chances are the banks are big enough to cover the bad loans…maybe…
In the end, however, it is the companies that can pay back loans that have to endure higher interest rates to cover for the bank's losses.
The banks must slow down lending or be more careful to whom they lend it.
The day of reckoning is coming.
What do you think?
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