What is happening in China?
The Financial Times reported last week that China had warned its banks of rampant illicit borrowing by steel companies, a development that underscores the financial dangers for the country as the government mulls a new stimulus effort to support the slowing economy.
The article read “Some Chinese steel trading companies had borrowed excessively from banks and then used the funds to speculate on property and stocks, the bank regulator said in a directive that was seen by the Financial Times”.
We keep talking about the slowdown in Chinese steel demand due to decreasing housing and automotive sales as well as export opportunities, and its potential consequences . Here is the confirmation that the Chinese authorities share similar concern.
The Chinese government may attempt to stimulate the economy once again, as they did back in 2008 and 2009, and keep the Chinese people happy. But this time they have to think more than twice on how.