China Credit Bubble is Maturing

Bejing : Global markets are eyeing over the Greece's debt woes, but the world second biggest economy China's debt situation is not that much different from Greece game.

Chinese banks are also witnessing pain in their books as the balance sheet of  banks are not giving rosy picture because in there off-balance sheet lending, very few facts and a lot of fears is visible.

The amount of Chinese bank credit book has doubled from December 2007 to May 2011, which is the perfect textbook example of a credit bubble in the system.

Despite the fact that the loan growth rate in China has been halved to 15% over the last 2 years, the value of lending extended during that time which is prime concerns for them. 

Total outstanding of Chinese bank loans stood at USD 6,500 per capita in 2010 with respect to GDP per capita of USD 4,400, which is not going to sustain in near future.

There is an overhang though of the excesses those were booked in the previous 2 years on the book of banks. When they mature over the coming 2, 3 years, the will certainly see defaults. In China non-performing loans (NPL), which at 1% of total loans, are bound to increase going forward.

Some analysts are even estimating that this could increase to 6% of loans, 10% of loans, and even 15% of loans within a few years’ time. However as per general consensus NPL of Chinese bank are inching to get double in 3 year.

The worsening situation in China will create big storm in world economy as China is not much transparent and once the bubble will burst will derail the global growth.

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China Allows Overseas Raised Yuan for FDI

Beijing : China, the world's fastest-growing major economy, formalised rules allowing foreign firms to use overseas raised yuan to make investments in the country. This is a measure initiative to boost its currency to internationalize.

According to the China Business News, trial scheme will permit overseas companies to use Chinese currency raised offshore to set up companies, make acquisitions, increase stakes in subsidiaries and provide loans.

According to central bank statement, companies will be banned from investing in certain industries without providing details. The statement appeared to have been removed from the central bank's website on Wednesday.

The statement marks the first time China has issued specific rules on yuan denominated foreign direct investment (FDI) in the country and hope it would encourage wider use of the currency overseas.

"This policy on yuan-denominated foreign direct investment is a significant stride towards making the yuan an international currency," Deutsche Bank economist Ma Jun was quoted saying.

The rules are expected to accelerate the issue of yuan-denominated bonds and other forms of yuan financing in Hong Kong, a semi-autonomous Chinese territory, Ma added.

Investors have started piling yuan in a bid to capitalise on the currency's expected appreciation, but there are limited investment outlets for the cash.

The People's Bank of China will review yuan-denominated foreign investment projects on a case-by-case basis, the report said.

Beijing in recent years has relaxed limits on the convertibility of the yuan in its push for greater use of the currency abroad.

The country has signed currency swap arrangements with several nations and launched trials for yuan trade settlement with a number of mainly Southeast Asian countries.

Yuan-related financial products have also boomed in Hong Kong, which has been acting as a test bed for Beijing's ambitious goal to turn the unit into a global currency.

In 2009, China, second largest economy of the world after U.S., approved using the yuan to settle cross-border trade with Hong Kong and last year it relaxed rules to allow non-financial foreign firms to issue yuan-denominated bonds.

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China Social Unrest Getting Out of Control

Chinese police forces have managed for now to control the social unrest in the southern manufacturing city of Zengcheng after the workers set fire to government buildings and installation over the weekend.

The event is seen as the warning sign as the economist says the discord is more pain for markets than the china’s soaring inflation."I think that any amount of cracking down is going to be a little bit like in Syria," Enzio Von Pfeil, CEO of the Economic Time Bond Fund told on CNBC. "You've put out the flame in one section of the kitchen but then another flame erupts in another section of the kitchen."

The reactions were sparked after a pregnant woman was manhandled to the ground by security force who tried to remove her food stall in Zengcheng, located in Guangdong province of China.

The primary issue is that such minor incident should not led to massive protest, but it happening and happening with mass participation so this is the sign of worry in the region.

The problems such as endemic corruption and the lack of rule of law were heightening concerns amid rising prices, is becoming intolerable, the spread of this news on social networking sites is further propagating the unrest.

Von Pfeil believes the problems are also aggravated by the household registration system, known as Hukou, which provides social benefits only to registered residents of a city and discriminates against migrant workers. "People are getting caught between having migrated to a new job, not getting the job, and then not having the social benefits."

The toe current is gaining momentum and the Middle East issues are further fueling; possibility burst can’t be rule out amid worsening economy in China.

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Ozone layer over Arctic Region Becoming Thiner

 As per the report of UN weather expert’s ozone layer over the Arctic region is in critical stage. The layer that protects Earth from harmful ultraviolet (UV) rays is getting thinner and thinner because of the excessive use of harmful chemicals in day to day life.

In order to protect the ozone depletion, in year 1887 a treaty was signed after notifying a hole over Antarctic to reduce the uses of the chemicals like Halons and Chlorofluorocarbons. But, the harmful chemical which was already released into the atmosphere continued to degrade the protective ozone layer for decades.

The World Meteorological Organization (WMO) has revealed that the region over the Arctic region has registered a 40 per cent loss from the start of winter to the late March,2011, which is 10 per cent more that of 2010. The excessive loss was due to presence of chemicals and excessive cold winter.

The ozone layer is now thinner than ever over the Arctic and it will result in the harmful exposure of UV radiation to the areas of Greenland, Scandinavia and Siberia.

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Basant to take Charge as Chairman of JPSC Controller of Examination of had recommended for reexamination,

Ranchi, July, 1: Former chief secretary of Jharkhand and ex-chairman of Jharkhand State Electricity Board Shiv Basant is all set to take charge as controversial Jharkhand Public Service Commission (JPSC) chairman on Friday. Basant’s request for the voluntary retirement was cleared by the concerned authority last week.

With his appointment JPSC will finally gets a fulltime chairman after Dilip Prasad who was sacked from the prestigious post in April 2010 after his involvement in the recruitment scam.

Shiv Basant appointment has come in the challenging time when the Commission’s image has been dented across the board. JPSC is under severe investigation for irregularity involved in examinations conduct by it.

Top officials in the commission said that already delayed result of the 4th Combined Civil Services would be declared only after Basant takes their guard as chairman. 

Present governing body in the JPSC may be feeling ill-prepared as far as the result of 4th preliminary exam is concerned. 

A section of examinees had raised the question about considerable number of questions repeated that had already being asked in the UPSC PT examination. 

The Controller of Examination of JPSC had recommended for reexamination, Basant’s decision would be extremely crucial in this matter. 

The Jharkhand Government had on May 24 made their mind to appoint Basant as full-fledged chairman of the JPSC. Presently, there are only two members in the JPSC and one of them, Praveez Hassan, is officiating as acting chairman. 

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