This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

What to Expect From China in the Year of the Snake

NEW YORK ( TheStreet) -- Most Asian markets are closed this week, but the region's far from quiet: It's the Lunar New Year! As folks everywhere celebrate with scrumptious feasts and red envelopes, we think it's a great time to see what's in store for China in the year of the snake.

On the economic front, reacceleration seems likely. GDP growth bounced to 7.9% in the fourth quarter 2012, and January's combination of slowing inflation and a 15.9% increase in M2 money supply suggests the economy's in a "Goldilocks" sweet spot: Money, it seems, is flowing quickly enough to support continued growth, but slowly enough to keep the risk of runaway inflation in check.

Looking ahead, money should continue moving, though perhaps not at a gangbusters rate -- the official 2013 loan quota is reportedly 8.5 trillion yuan, which implies a slight deceleration in loan growth.

But bank lending is only one driver of money supply. As China liberalizes its financial system, total social financing --which includes bank lending as well as peer-to-peer lending, corporate debt issuances, shadow banking and more -- is becoming an increasingly important measure. In January 2012, new yuan-denominated bank lending comprised 736 billion the month's 980 billion yuan in total social financing. But in January 2013, after a year of financial sector reforms, new yuan-denominated bank lending of 1.07 trillion was less than half the 2.54 trillion yuan in total social financing.

This widening discrepancy suggests China's efforts to expand corporate borrowing options have had some success. Recall, one reason China's economy didn't reaccelerate as quickly as officials hoped in 2012 was small businesses' difficulty securing financing.

Looser loan quotas were supposed to benefit the entire economy, but the banks, which are mostly state-run, lent primarily to state-owned enterprises, or SOEs, shutting out many smaller, private firms. In the past, this wouldn't have been a huge headwind, as China's 144,000 SOEs were its primary growth engine.

But the private sector has grown rapidly in recent years, from 23.5 million in 2004 to over 40.6 million today. Because most of these firms couldn't get bank loans, they had an unenviable choice between stagnation and borrowing from loan sharks at credit card-like rates in order to invest and expand. This made growth exceedingly difficult for most Chinese business owners last year.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,823.90 +45.75 0.26%
S&P 500 2,077.09 +15.86 0.77%
NASDAQ 4,780.7690 +32.3730 0.68%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs