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...price agreed on last year with Rio Tinto. But with the negotiations stretching long past their original June 30 deadline, steadily climbing prices for iron ore have steelmakers sweating. "Clearly the Chinese insistence that the price be cut further no longer can be sustained," says Jim Lennon, a Macquarie Bank analyst, who notes that talks "have gotten increasingly acrimonious...
...false alarm. Rumors had swept the trading floor that China was going to tighten money supply. That night, the central bank reaffirmed its loose monetary policy that is meant to support economic growth and pledged to refrain from imposing loan quotas to control bank lending. The next day, the Chinese banks that were said to be cutting back on credit denied they would do so. On July 31, the Shanghai index rebounded 2.7%, the biggest rise in two months; China stocks in July rose 15%, the largest monthly gain since 2007. (See pictures of China's infrastructure boom...
Investors are skittish because China's 7.1% second-quarter GDP expansion was due in part to a burst of bank lending, which was up 31% in May and 34% in June from year-ago levels. To date, cumulative loans outstanding have topped $1.1 trillion, far higher than the government's $735 billion target for the year. Most of the money is aimed at funding infrastructure projects under Beijing's two-year, $585 billion stimulus package. But according to government researchers, about $170 billion in bank loans were channeled into the stock market from January to May, which partly explains...
True, the bulk of bank lending is going to things like roads, bridges and high-speed-train lines that, in theory, should stimulate economic activity and enhance productivity for years to come. But some high-profile works such as the $10.7 billion Hong Kong-Macau-Zhuhai Bridge have been criticized as unnecessary vanity projects, while others are said to be wastefully duplicative - some 300 km of the Shanghai-Nanjing Intercity Railway and the Shanghai-Beijing Express Railway, for example, are overlapping routes. Some local governments have also been discovered to be faking documentation and even entire projects. (See pictures...
Read "Why Your Bank Is Broke...