This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

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

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

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

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
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!
SYM TRADE IT LAST %CHG
AAPL $128.46 0.00%
FB $78.97 0.00%
GOOG $558.40 0.00%
TSLA $203.34 0.00%
YHOO $44.28 0.00%

Markets

DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
NASDAQ 4,963.5270 -24.3630 -0.49%

Partners Compare Online Brokers

Free Reports

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