http://www.zerohedge.com/news/2013-07-30/overnight-news-not-terrible-enough-assure-new-all-time-highs
Overnight News Not Terrible Enough To Assure New All Time Highs
Submitted by Tyler Durden on 07/30/2013 - 07:05
While the market's eyes were fixed on the near record slide in Japanese Industrial Production (even as its ears glazed over the latest commentary rerun from Aso) which did however lead to a 1.53% jump in the PenNikkeiStock market on hope of more stimulus to get floundering Abenomics back on track, the most important news from the overnight session is that the PBOC's love affair with its own tapering may have come and gone after the central bank came, looked at the surge in 7 day market repo rates, and unwilling to risk another mid-June episode where SHIBOR exploded to the mid-25% range, for the first first time since February injected RMB17 billion through a 7-day reverse repo. The PBOC also announced it would cut the RRR in the earthquake-hit Lushan area. And with that the illusion of a firm and resolute PBOC is shattered, however it did result in a tiny 0.7% bounce in the SHCOMP.
http://www.theguardian.com/business/2013/jul/30/china-central-bank-liquidity-injection
China's central bank injected funds into the money markets on Tuesday for the first time since February, easing fears of a repeat of the panic in June when cash markets were squeezed.
The People's Bank of China pumped 17bn yuan (£1.8bn) into markets through seven-day reverse bond repurchase agreements.
The bank made the liquidity injection after allowing a credit crunch to happen in late June as a warning against risky lending practices.
It set the reverse rate to be paid at 4.4%, much higher than the last official guidance of 3.35%.
"The [high rate] could...serve as a signal that the era of ultra loose money and easy money is over and liquidity has to be appropriately priced," said Wee-Khoon Chong, an economist at Societe Generale in Hong Kong.
Money rates showed signs of easing following the move, and markets rose. China's Shanghai Composite Index rebounded from a three-week low, closing up 0.6%.
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http://www.theguardian.com/business/2013/jul/29/china-audit-local-authorities-debt
China's local authorities and state enterprises will come under scrutiny in the coming months after the government said it planned to audit their debts.
In a one sentence announcement on its website, the National Audit Office (NAO) said it planned to embark on a nationwide assessment of borrowing by public bodies, underlining fears that thousands of local councils and state-owned businesses in the world's second biggest economy have over-stretched themselves and are close to collapse.
The NAO said other audit projects would be frozen to complete the task, but failed to give a publication date.
Some analysts believe China's myriad local and state enterprises, many of which have borrowed heavily to invest in property, new factories and machinery over two decades of rapid economic expansion, have racked up debts of about $3tn (£2tn).
There is a suspicion that companies, especially in the heavy industrial sector and commercial property industry, have used cheap loans to increase production and pay higher wages rather than assess the long-term viability of their businesses.
Local governments, which are prevented from taking on debt directly, but have borrowed heavily through special-purpose vehicles, have frequently borrowed from companies in private arrangements at high cost, with the money often used in speculative real-estate projects.
Much of the lending is also believed to be directed to businesses that pay the highest bribes, undermining standard credit controls.
Last year a new communist party leadership took control in Beijing promising to crackdown on corruption and graft.
A slowdown in output over the past six months has been blamed on tackling corruption alongside a greater emphasis away from investment towards domestic consumption.
A local government buckling under the weight of its own debt is a troubling scenario for the leadership, and one that Deutsche Bank has said could potentially pose a systemic and macroeconomic risk to the country.
Standard Chartered, Fitch and Credit Suisse have estimated local government debt in China at the equivalent of anywhere between 15% and 36% of the country's output, or as much as $3tn based on World Bank GDP figures for 2012.
Chinese economists point out that the state has access to $3.5tn of foreign reserves built up in the boom times, which can be used to bail out failing enterprises or for investment in areas that ministers believe will create economic benefit.
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