China has been the fastest growing economy in the world in the past decade, and it grew by over 10% in the last four years. But the global economic crisis since the beginning of 2008 has pulled down the Chinese economic growth to less than 6% in the recent past.
The Chinese government acted swiftly and has pushed the banking system to lend more to companies and individuals in the last since the beginning of 2009. The banking system has responded to the government initiative and has shown a massive 52% growth in lending in the first six months.
The strong lending has helped spur the domestic demand in a big way, and has helped China to record a strong 6.3% GDP growth in the second quarter, in spite of a sharp drop in exports during the period.
There are of course, some negative side effects of the massive bank lending. There are already reports that some part of the bank lending has gone into stock markets and commodity markets, which is not healthy.
The Chinese bank monitoring authorities are already looking into the issue and are likely to come out with stern corrective measures in the next few weeks.
China grows bank loans by 52%…heading for a disaster ?
August - 10 - 2009 - Monday
