2014-02-18

Trusts Fundraising Plunges 50%, But No Worries, Total Credit Up; P2P Lending Also Saw Growth Slow, But Copper Imports Are Up

Chinese loan growth surged in January, but the trust market contracted sharply. Interest rate spreads on financial products are widening as investors look for safety and shorter duration. Meanwhile, the P2P industry saw small growth in turnover, where interest rates will shock payday lenders. Copper and iron ore imports are up in order to serve as collateral for loans.

The majority opinion is that things are going well, but it looks more like the wheels are coming off. Of course, the wheels always look as though they're coming off to some extent and they've always bounced back before. All I can be sure of is that things will not be going well later this year if current trends continue and no other lending outlet arises to service the riskiest end of the market.

Here's confirmation from the PBOC that trust fundraising was down 50% y-o-y in January, in case you were wondering. Still, the mainstream media is completely sanguine about the collapse in the trust industry.

China Record Credit Growth Boosts Outlook for Economy

New trust loans issued in January were 106.8 billion yuan, the PBOC said, down from 210.8 billion yuan a year ago.

“There could be a demand issue here,” said ANZ’s Liu. “Investors have been hearing scary stories about trust loans so maybe they are finally starting to realize the risks in this sector.”
No worries! China loan growth is way up, so a sector showing -50% growth is just a blip. That is what sentiment will do. The statement by the analyst is key though because investors are the lenders. If investors don't want to buy the riskiest products anymore, someone has to step in and throw money into a black hole—and the banks aren't stupid. Someone has to think up a new way to fool investors, investors have to become fearless again, or there is going to be fallout.

From Shadow PBOC:

I posted a similar chart yesterday showing total credit in the U.S. grew even though the subprime mortgage and housing market were contracting. The above chart is what has "everyone" but those pesky bears in a good mood about China, but by the time this chart turns down, China will already be well into a serious financial crisis.

Then there's the copper and iron ore imports.

Chinese imports herald renewed copper market tension
It's entirely possible that imports were inflated by the timing of the Lunar New Year holidays at the start of February. It's also a highly moot point as to whether China's renewed hunger for copper is being driven by manufacturing demand or financing demand.

What's not in doubt, though, is that this accelerated flow of metal into the country is sucking the rest of the world dry.
Total devastation for miners and commodity exporters looms if this copper buying was driven by the credit bubble.

Credit not steel, China's new use of iron ore props up demand
Chinese steel mills and traders are buying more iron ore to use as collateral to secure loans, helping imports and stocks of the raw material defy expectations for a slowdown in demand by the world's biggest consumer.

The increasing use of iron ore for financing explains why China is maintaining its voracious appetite even as a slowing economy threatens to curb demand for steel.
I am short the industrial metals and I'm staying short until this plays itself out. If China goes through a recession along with a credit crisis, the industrial metals are going to do what oil did in the late 1990s, when the various currency defaults and economic crises in emerging markets took crude oil below $10 a barrel.

As for P2P lending, here's another negative opinion: Good times are over for China's peer-to-peer lending platforms
According to the private survey stated above, 74 P2P companies have found it difficult to continue business due to cash crunches and owners suddenly shutting operations. Total investor losses for these companies are expected to be 1.2 billion yuan.

Another survey pointed out that of the nearly 1,000 P2P companies in China, 58 went under in the October-December period of 2013, and 80-90% of the country's P2P companies might go bust, mostly due to a lack of credit management know-how by their owners.

Here's data from January and rates for the full year. P2P lenders are still getting more than 20% per annum for short-term loans, although for loans longer than one-year the rate drops to 10%. This is a much smaller market though, turnover in the entire P2P lending industry was 11.1 billion yuan in January, up less than 1% over December, but still up 50% from the average seen in the second half of 2013.

Also, interest rates are limited to 24%, four times the benchmark rate, but lenders are able to get around it by paying bonuses. Average total rates in several provinces are well above 24%, even as high as 30% and have reached above 40% at times.

January P2P networks nationwide lending large data (a): 21.98% pa
 Editor's note: the era of big data, understand the data, using the data, I believe the data, with the data speak, this article is dedicated to you in January 2014 Grand National P2P net loan data. Comprehensive, timely, objective and accurate P2P net loan large national data, the lack of standards in the current field of P2P lending network environment, the evaluation and selection of people to determine the direction of future trends and the community to understand and evaluate P2P net loan industry, improve P2P net loan transaction efficiency, the formation of the real market interest rates, there are helpful; For private lending from the chaos and barbarism to the orderly growth and development, sustained prosperity, promote the role; development of relevant industries for government policies, market regulation and development planning , a useful reference.

       First, in January P2P networks nationwide mortgage rates BASIC
       According to information provided by the first net loans, in January 2014 the national average composite P2P net loan interest rate of 21.98%, the consolidated annual interest rate, excluding the second mark (entertainment standard), the subject of various awards including the borrower. These awards converted into an average interest rate of 4.58 percent.That is a national award-free P2P average consolidated net loan interest rate of 17.4%, also i.e. contract P2P networks nationwide lending platform average interest rate of the loan.

      Second, in January the National P2P net loan rate dynamic data       (a) compared with the base period
According to information provided by the first net loans, in January 2014 the national average composite P2P net loan interest rate 21.98%, the previous month (December 2013) 21.76%, up 0.22 percentage points; compared with the previous year (May 2013 to December) 25.06%, down 3.08 percentage points; compared to the base period (2013 April 26-May 31) 23.53%, down 1.55 percentage points (see Table 1).
       Table 1:
January 2014 National P2P net loan interest rate
January
Last month
Last year
Base period
The previous month
Compared to last year
Compared to the base period
21.98%
21.76%
25.06%
23.53%
0.22%
-3.08%
-1.55%

       (B) comparing rates of each month
According to information provided by the first net loans, from May 2013 to January 2014, the national average composite P2P net loan interest rate of 24.66%. Rate from the beginning of May 2013, month by month, the highest in September, and then decreased month by month, the lowest in December, January 2014 and a slight increase (see Table 2).
       Schedule 2:
May 2013 to January 2014 National P2P net loan interest rate
Month
APR
The previous month
Compared to the base period
May 2013
23.87%
----
0.34%
June 2013
25.05%
1.18%
1.52%
July 2013
26.18%
1.13%
2.65%
August 2013
26.42%
0.24%
2.89%
September 2013
27.50%
1.08%
3.97%
October 2013
26.24%
-1.26%
2.71%
November 2013
23.69%
-2.55%
0.16%
December 2013
21.76%
-1.93%
-1.77%
January 2014
21.98%
0.22%
-1.55%
Average
24.66%
----
1.13%
          
        Third, in January the National P2P net loan interest rate structure data       (a) by the deadline, and marked species
       1, the first net lending data show that in January 2014 the national average composite P2P net loan interest rate 21.98%, according to loan term are classified as: 23.57% within 1 month, 1 - 3 months 27.17%, 3 - 6 months, 23.76%, six months - more than 1 year 18.41%, 1 year 10.24%; marked by borrowing species classified as: ordinary standard 22.64%; net standard 13.89% (see Table 3).
       Schedule 3:
January 2014 National P2P net loan interest rate (according to the duration and standard types)

Complex
1 month
3 months
6 months
1 year
Over 1 year
Complex
21.98
23.57
27.17
23.76
18.41
10.24
Normal Standard
22.64
24.31
27.21
23.77
18.41
10.24
Net mark
13.89
13.98
13.92
12.06
18.46
----
Note: refers to the average composite interest rate in%
       2, according to information provided by the first net loans, from May 2013 to January 2014 the national average composite P2P net loan interest rate 24.66%, according to loan term are classified as: 25.71% within 1 month, 1 - 3 months 28.99%, 3 - 6 months 23.38%, six months - more than 1 year 19.39%, 1 year 10.75%; marked by borrowing species classified as: ordinary standard 25.54%; net standard 12.06% (see Table 4 ).
       Schedule 4:
May 2013 to January 2014 National P2P net loan interest rate (by duration and standard types)

Complex
1 month
3 months
6 months
1 year
Over 1 year
Complex
24.66
25.71
28.99
23.38
19.39
10.75
Normal Standard
25.54
27.58
29
23.43
19.4
10.75
Net mark
12.06
12.05
16.01
9.44
13.02
3.09
Note: refers to the average composite interest rate in%

       (B) the time
       1, the first net lending data show that in January 2014 the national average composite P2P net loan interest rate 21.98%, classified by time: weekdays 21.68% legal, statutory holidays, weekends 23.42% (see Table 5).
       Schedule 5
January 2014 National P2P net loan interest rates (by time)

Complex
Days
Holidays, weekends
The average interest rate
21.98%
21.68%
23.42%
Note: refers to the average composite interest rate
       2, according to information provided by the first net loans, from May 2013 to January 2014 the national average P2P net loan interest rate of 24.66% comprehensive, chronological categories: weekdays 24.17% of statutory holidays, weekends 26.48% (see attached Table 6).
       Schedule 6
May 2013 to January 2014 National P2P net loan interest rates (by time)

Complex
Days
Holidays, weekends
The average interest rate
24.66%
24.17%
26.48%
Note: refers to the average composite interest rate.

       (C) the loan interest rate of the provinces and cities P2P networks
       1, the first net lending data show that in January 2014 the national average composite P2P net loan interest rate is the lowest of the top three: Liaoning Province, 13.02%, 13.50%, Shanghai, Hebei Province, 14.36% (see Table 7).
       Schedule 7:
January 2014 provinces and cities nationwide P2P net loan interest rate
No.
Province
The average interest rate
Lower than the national (-), high
1
Liaoning Province
13.02%
-8.95%
2
Shanghai
13.50%
-8.48%
3
Hebei Province
14.36%
-7.62%
4
Shaanxi Province
18.14%
-3.83%
5
Guangdong Province
20.75%
-1.23%
6
Henan
21.89%
-0.09%
7
Beijing
22.22%
0.24%
8
Guangxi
22.38%
0.40%
9
Hubei Province
23.39%
1.42%
10
Zhejiang Province
23.77%
1.79%
11
Jiangsu Province
25.67%
3.69%
12
Guizhou Province
26.04%
4.06%
13
Hunan Province
26.60%
4.62%
14
Shandong Province
26.71%
4.73%
15
Yunnan
27.39%
5.41%
16
Chongqing
27.56%
5.59%
17
Shanxi
28.02%
6.04%
18
Jiangxi
29.40%
7.43%
19
Sichuan Province
29.52%
7.54%
20
Tianjin
31.18%
9.20%
21
Fujian Province
31.21%
9.23%
22
Gansu Province
32.47%
10.49%
23
Anhui
32.83%
10.85%

Nationwide
21.98%
----

       2, the first net lending data show that from May 2013 to January 2014 the national average composite P2P net loan interest rate is the lowest of the top three: Liaoning Province, 13.62%, 15.88%, Shanghai, Yunnan 21.69% (see Schedule 8).
       Schedule 8:
May 2013 to January 2014 provinces and cities nationwide P2P net loan interest rate
No.
Province
The average interest rate
Lower than the national (-), high
1
Liaoning Province
13.62%
-11.04%
2
Shanghai
15.88%
-8.77%
3
Yunnan
21.69%
-2.96%
4
Guangxi
21.89%
-2.76%
5
Hebei Province
21.98%
-2.67%
6
Shaanxi Province
22.25%
-2.40%
7
Guangdong Province
22.32%
-2.33%
8
Beijing
23.35%
-1.31%
9
Zhejiang Province
25.00%
0.34%
10
Henan
25.55%
0.89%
11
Tianjin
25.83%
1.18%
12
Chongqing
26.24%
1.58%
13
Gansu Province
28.95%
4.29%
14
Sichuan Province
28.99%
4.33%
15
Jiangsu Province
29.18%
4.52%
16
Fujian Province
29.81%
5.15%
17
Hunan Province
30.01%
5.35%
18
Shandong Province
30.24%
5.59%
19
Guizhou Province
31.51%
6.85%
20
Shanxi
31.72%
7.06%
21
Hubei Province
32.13%
7.47%
22
Jiangxi
34.37%
9.72%
23
Anhui
43.66%
19.00%
24
Inner Mongolia
48.70%
24.04%

Nationwide
24.66%
----

       Four, P2P net loan interest rates have been the mainstream of society movements in interest rates have a representative
       P2P net loan interest rate movements already have the mainstream of society representative, helps form the real market interest rates.
Bank interest rate market is still a relatively distant goal, the current bank interest rates is not the market rate. Traditional private lending interest rates, market interest rates is not entirely, a large geographical, kinship, kinship, popularity factor.
       P2P net loan rate is the real market interest rates. P2P network-prime market, sunshine, standardization, mass, effective solution to the problem of asymmetric information private lending, making loans more transparent public relations.
       With formal financial institutions lending rate is different, P2P net loan rate between strangers (including incentives) is completely self-regulation by the market, when the shortage of funds, higher interest rates; while weak demand, lower interest rates, which can be said to form the invisible the interest rate market prototype.
More importantly, if this private financial market interest rate mechanism, as the bank deposit and lending rates by reference to appropriate float for promoting market-oriented reform of interest rates far-reaching.
       Of course, P2P net loan financing for the real economy is still far amount to anything, P2P net loan interest rates is not enough to impact the formation of non-market interest rates banks become market interest in the true sense. Only P2P net loan financing is large enough, complemented by a sound legal system, improve the credit rating system and risk assessment mechanisms, market-oriented interest rate formation mechanism have to speak. In this sense, promote the development of P2P net loan market, there Forced interest rate market role.

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