A milestone of sorts was reached last year when, for the first time ever, more bank credit as a percentage of GDP went to emerging markets than developed markets.
That is not exactly counterintuitive, since emerging markets, especially in Asia, have always relied heavily on credit to fuel their growth.
When the European banks seized up following the global financial crisis that began in the US, the concern was almost as great in Asia as it was in Europe itself. The concern was especially intense because European banks accounted for a huge part of trade finance, the lifeblood of Asia. At that time, though, regional banks were able to largely fill the gap. Moreover, the US Federal Reserve was about to flood the world with liquidity, with much of it flowing to emerging markets. The cost of capital remained low, allowing these markets to continue to grow.
Now, though, these benign trends are reversing – and arguably there is worse to come. The cost of capital is going up for emerging markets and as it does so, growth will slow. That in itself is unlikely to trigger a crisis but will lead to problems for many indebted emerging market companies, fuelling bad debts at the banks. That in turn will make the cost of capital go even higher.
China is a big factor in this new dynamic. Today, the world is focusing on the implications of slower growth in China. But it also needs to start focusing on the role of Chinese banks as a source of liquidity for neighbours and emerging markets generally.
Any capital crunch in China is not immediately obvious. So far, much of the concern over China has to do with excessive growth of credit, which is now close to 180 per cent of GDP. A new study from the Institute of International Finance shows that Chinese international bank loans amounted to almost $100bn last year, a jump of more than 60 per cent since 2011. (The figure excludes Hong Kong, Macau and Taiwan.)
Since the study relies on data on publicly announced loans, that number probably understates the extent of activity. Moreover, Chinese banks lend to corporate borrowers that otherwise might have trouble attracting capital, such as in Pakistan or Bangladesh.
But excess credit growth may soon be yesterday’s problem. As the Chinese regulators put pressure on the shadow banks by implementing periodic liquidity squeezes, they will chill all banking activity and make the price of all money more expensive, since the line between the regulated and unregulated world is so porous.
In addition, the dynamic at home is also changing the way the Chinese banks price their money. Competition from the shadow banks that can offer much higher returns than banks that set deposit rates artificially low means household savings are increasingly less likely to go into bank deposits. That in turn means banks have an increasingly hard time giving loans to favoured borrowers at artificially low rates. Now, Chinese banks are having liquidity troubles of their own, compelling them to ask borrowers not to draw down credit lines.
Rules making it difficult for whole classes of borrowers, such as property developers, to access credit at all mean some Chinese borrowers are going offshore to international capital markets for capital and competing with other borrowers in the process, driving up prices there too. International debt securities from Chinese issuers rose by a factor of five from the end of 2009 to the end of the third quarter of last year to a total of $240bn, according to data from the Bank for International Settlements cited by Christopher Wood, an analyst at CLSA.
Liquidity dries up
Other sources of liquidity for Chinese banks are also drying up. Executives at international and regional banks that have provided funds to second-tier Chinese banks in the wholesale market say they are cutting back, concerned about declining creditworthiness of such counterparties.
All this would matter less if there was less confusion about the state of the US economy and Fed policy. The disparity in analyst predictions about where 10-year Treasury yields will be in coming months is becoming wider by the day. Analysts at HSBC say the rate could go as low as about 2 per cent, while others see the rate rising to more than 3.5 per cent.
Regulators appear to be speaking with forked tongues. Some are still wedded to low rates. But at the same time, they are either trying to squeeze the shadow banks, as in China, to drive activity into the official sector, or they are squeezing the banks, driving activity into the shadow banks, as in the US.
In either case, they may or may not be making their financial system safer – but they are surely making the cost of money go up for most borrowers in the real world.
中国的任何资金紧张不会马上表现出来。迄今人们对中国的大部分担忧都与信贷过度增长有关，目前中国的信贷总量已接近GDP的180%。国际金融协会(Institute of International Finance)的一项新研究显示，中国去年的国际银行贷款总额将近1000亿美元，比2011年高出60%以上。（香港、澳门、台湾排除在这一数字以外。）
现行政策使某些类别的借款人（比如房地产开发商）难以贷到款，这意味着部分中国借款人在前往国际资本市场获取资金，在此过程中与其他借款人竞争，推高国际市场的资金价格。里昂证券(CLSA)分析师克里斯托弗?伍德(Christopher Wood)援引的国际清算银行(Bank for International Settlements)数据显示，从2009年底至2013年第三季度结束，中国发行者发行的国际债券增加了5倍，总额达2400亿美元。