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MENDOZA IN THE NEWS

China’s Credit Crunch is Spooking Global Investors

by Matt Egan
Publication: FOX Business

June 24, 2013


The following is an excerpt from a FOX Business article that quotes Finance Professor Jeff Bergstrand about the manufacturing slowdown in China. To read the entire article visit: China’s Credit Crunch is Spooking Global Investors


U.S. investors have been paralyzed by concerns about the Federal Reserve turning off the easy-money spigot, but Wall Street has started this week fretting about another central bank: China’s.

The credit crunch in China was brought to the forefront by the Shanghai Composite plummeting 5.3% overnight into bear-market territory after the People’s Bank of China refused to loosen monetary policy in response to country’s worsening liquidity squeeze.
After watching China’s total credit explode from $9 trillion in 2008 to about $23 trillion today, the new government in Beijing now seems ready to ease off the stimulus gas pedal.

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Yet the tighter policy also comes on top of recent indicators revealing activity in the Chinese manufacturing sector shrank in June to a nine-month low.

“It’s quite startling that manufacturing actually contracted. The banking system is exacerbating the slowdown,” said Jeffrey Bergstrand, a finance professor at the University of Notre Dame.