China’s Credit Crunch
A lot of talk at the World Economic Forum in Davos last week related to growing fears of China succumbing to its enormous credit bubble. Chinese credit now exceeds the entire US and Japanese banking systems combined and has risen from 120% to over 220% of GDP since the GFC. Shadow banking (a large contributor to the GFC) has risen to 30% and many believe it is now out of the Government’s control. The first trigger could be the much talked of and expected default on China Credit Trust Co. this week. It’s ‘only’$500m and will likely be contained by the Government but the signs are ominous. Big strife in China would likely see a double win for Aussie holders of gold as you’d expect the gold price to go up and our dollar sharply decline.