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12 Aug 2013
China quietly launching unofficial stimulus. Flying under mainstream media's radar? - SCMP
FXstreet.com (Barcelona) - One out of the three main catalyst of the Australian Dollar weakness since losing parity back in early June was attributed to the fact of China showing worrying signs of a slowdown.
Investors and traders, amid the lack of reactive response by the Chinese government to stimulate the economy through more radical measures (such as the 4 trillion yuan stimulus packages from the post GFC era back in 2008), have been piling on the crowded Aussie short trade, with the latest joiners to the party getting burnt out last week. The FXstreet.com Asian Team covered earlier on the week the risks of getting short the Aussie.
Another key development supporting the Aussie at present, other than growing talk of the RBA easing cycle coming to an end, is the fact that China is actually 'unofficially' providing stimulus packages through commercial banks in order to buoy the economy.
As reported by George Chen at the South China Morning Post: "The mainland government is quietly offering financial stimulus to key cities and provinces to help them maintain local economic growth." The kicker here is that since the stimulus is provided through loans to a Chinese main banking institution, it goes easily unnoticed by the mainstream media.
The South China Morning Post also reports on an internal government memo, saying that Agbank would support "the constructions of key international tourism and resort projects in Shanghai, in particular the Disneyland project" adding that the bank would also "play an active role in the construction of Shanghai's free-trade zone".
When contacted by the South China Morning Post, Agbank confirmed the signing of an "all-aspect strategic co-operation" agreement with Shanghai, although declined to provide details on the deal.
According to Chen: "Government and banking industry sources familiar with the situation told the South China Morning Post that Agricultural Bank of China (Agbank), one of the big four state lenders, signed an agreement with the city government last week to provide loan credit worth 250 billion yuan (HK$314 billion) - equivalent to about 12.5% of Shanghai's GDP for last year."
The unnamed sources, who as Chen reports, "declined to be named due to the highly sensitive nature of the matter", confirmed that the central government in Beijing is still weighing on a wide range of possibilities, including "unofficial economic stimulus" to provide economic back-up to cities like Shanghai if necessary. The sources added that other major Chinese banks may follow suit by being approved sizeable loans to support provinces like Guangdong, hurt by a sharp reduction in exports.
Investors and traders, amid the lack of reactive response by the Chinese government to stimulate the economy through more radical measures (such as the 4 trillion yuan stimulus packages from the post GFC era back in 2008), have been piling on the crowded Aussie short trade, with the latest joiners to the party getting burnt out last week. The FXstreet.com Asian Team covered earlier on the week the risks of getting short the Aussie.
Another key development supporting the Aussie at present, other than growing talk of the RBA easing cycle coming to an end, is the fact that China is actually 'unofficially' providing stimulus packages through commercial banks in order to buoy the economy.
As reported by George Chen at the South China Morning Post: "The mainland government is quietly offering financial stimulus to key cities and provinces to help them maintain local economic growth." The kicker here is that since the stimulus is provided through loans to a Chinese main banking institution, it goes easily unnoticed by the mainstream media.
The South China Morning Post also reports on an internal government memo, saying that Agbank would support "the constructions of key international tourism and resort projects in Shanghai, in particular the Disneyland project" adding that the bank would also "play an active role in the construction of Shanghai's free-trade zone".
When contacted by the South China Morning Post, Agbank confirmed the signing of an "all-aspect strategic co-operation" agreement with Shanghai, although declined to provide details on the deal.
According to Chen: "Government and banking industry sources familiar with the situation told the South China Morning Post that Agricultural Bank of China (Agbank), one of the big four state lenders, signed an agreement with the city government last week to provide loan credit worth 250 billion yuan (HK$314 billion) - equivalent to about 12.5% of Shanghai's GDP for last year."
The unnamed sources, who as Chen reports, "declined to be named due to the highly sensitive nature of the matter", confirmed that the central government in Beijing is still weighing on a wide range of possibilities, including "unofficial economic stimulus" to provide economic back-up to cities like Shanghai if necessary. The sources added that other major Chinese banks may follow suit by being approved sizeable loans to support provinces like Guangdong, hurt by a sharp reduction in exports.