China s GDP growth, which relies heavily on credit, will take a hit.

During this period, credit expanded rapidly as a share of GDP, reaching more than 300 at the peak.

Consequently, maintaining high GDP growth rates requires an ever increasing volume of credit and a continuously growing money supply.

As of this year, 1 of GDP growth is consistent with more than 3.5 of credit growth.

Since 2008, banking sector credit growth in China has been among the fastest in the world, far outpacing GDP growth, and China s total debt has risen from 130 of GDP to 220 of GDP.

Credit Where Credit is Due

In the US, total private credit grew from around 70 of GDP in 1945 to well over 200 in 2008.

Rural Credit

Credit

Banks and credit card companies have become much more cautious about extending credit.

The three small Baltic EU members provide an alternative model they had developed current account deficits of over 20 of GDP during the credit boom, and over the last three years have experienced double digit GDP contractions.

The supply of credit, in other words, resulted from the demand for credit.

As a result, China s credit GDP ratio rose by 40 percentage points in 2008 2011, with most of the lending directed toward large scale investment by state owned enterprises (SOEs).

Credit histories cannot be shared, because a credit bureau is just getting started.

Credit risk is best hedged through diversification across uncorrelated credits.

Credit stopped flowing.

Unfreezing Credit

(a) Credit and security structure

Limited access to credit

Germany s Secret Credit Addiction

Consider also the credit markets.

The third tool is credit policy.

Fueled by massive credit growth (equivalent to 30 of GDP from 2008 to 2012), the Chinese economy has taken on a level of financial leverage that is the highest among emerging markets.

Each crisis hit economy had increased its financial leverage the ratio of domestic credit to GDP by 30 percentage points over five years shortly before their credit bubbles popped.

China s Credit Overdose

Credit and financing mechanisms (bilateral, regional, internal)

c. Provision of credit for small businesses

Ignorance of banking procedures and loan conditions

(Hayekians object to this, arguing that, because the crisis was caused by excessive credit, it cannot be overcome with more.)

Clarifying ultimate responsibility for credit quality and risk would also reduce intermediation costs by eliminating the need to resort to informal channels, such as credit guarantee and trust companies.

Credit Default Swaps on Trial

China s credit binge is turning into a bust.

Banking failure caused a credit crunch.

Off season farming credit for market gardening and produce.

Non cash transactions may also be made by means of credit cards.

General regulations referred to in article 95 of the General Act on Credit Organizations and Related Activities applicable to auxiliary credit institutions

As mentioned earlier, the comprehensive reform includes the following instruments Credit Institutions Act Act on Savings and Loan Associations Act on the Retirement Savings System Federal Act on Guarantee Institutions General Act on Mutual Insurance Institutions and Companies Securities Market Act Act on Investment Firms and General Act on Credit Organizations and Related Activities.

It has shifted its focus from the price of credit to influencing the credit cycle s quantity dimension through the liquidity injections that quantitative easing requires.

Consumers have better access to credit.

Otherwise, credit will not flow and growth will not resume.

The disruption, particularly to credit, would be profound.

1994 1998 Rossiyskiy Kredit Bank, Director of the Department of Credit Management

b) Establishment of cooperatives for savings and loan services

Today, seven out of ten post secondary students graduate with debt, with the total volume exceeding debt from credit cards and auto loans combined. Moreover, student loans constitute 45 of federally owned financial assets.

Furthermore, the PBC uses unconventional instruments from time to time, such as credit ceilings or credit quotas imposed on commercial banks.