Over the last 30 years, in terms of the GDP growth rates, China has grown at twice the rate of India.

Over the last 30 years, in terms of the GDP growth rates,

Credit growth in the overall economy declined in 2009 as economic activity stalled.

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

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

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.

They have already been tightening the screws on credit growth for several months, with positive effects.

Credit Where Credit is Due

Even an economy with an overall budget deficit will have a declining government debt GDP ratio if the growth rate of its nominal GDP exceeds that of its debt.

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

In other words, the Fed will use regulatory instruments to control credit growth, risk taking, and leverage.

First, in the last 10 years we have achieved a sustained growth rate of over 5 per cent of our gross domestic product (GDP).

Developing countries' exports grew faster than total world exports, which expanded by 20 per cent.

To be sure, the prolonged rapid increase in Chinese aggregate demand has been fueled by an investment boom, as well as a growing trade surplus.

Consequently, credit growth remains unchecked until an unforeseen event triggers China s Lehman moment.

On the supply side, the growth of the distribution sector is driven by competition, market and trade liberalization, the introduction of new technologies and access to inexpensive credit.

Despite some internal and external constraints, last year we achieved a record 6.27 per cent growth in our gross domestic product.

Rural Credit

Credit

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

So far during the financial crisis and ensuing recession, the US has been incapable of kick starting credit growth, the major transmission mechanism by which monetary expansion feeds through to domestic economic activity.

This is true for the banking system, which has not de leveraged to the satisfaction of either regulators or the markets, thus limiting the scope for credit growth.

Even slowing the economy is hard lacking an efficient financial system, credit growth must be controlled directly through banks.

As a result, the rate of credit growth increased from 14 in September 2008 to 35 a year later, and property prices more than doubled in many cities.

While fiscal revenues are on the rise, they account for only about 6 of China s total assets and their growth rate is slowing.

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

Well, credit is cheap.

In just 10 years, the share of state directed bank lending in China has fallen from 92 of new credit creation to less than half.

But most have suffered from the opposite syndrome excessive reliance on capital inflows, which, by spurring domestic credit and consumption, generate temporary growth.

The Fed has been trying to slow demand growth and cool the housing price bubble to avoid inflation, but carry trade speculators have been easing credit.

In the industrial countries, expansionary budgets, coupled with low interest rates and elevated asset prices, has led to consumption or credit fueled growth, particularly in Anglo Saxon countries.

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

This would enable the PBC to manage domestic demand by allowing interest rates to rise in order to rein in credit growth and deter reckless investment.

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

Credit stopped flowing.

Unfreezing Credit

(a) Credit and security structure

Limited access to credit

13.4 Financial Credit

Credit card, investment account?

Total Nodes

Total Load

Total bill

Total (gross) 6 820 000

Total requirements