SHANGHAI: New economic analyses of China provide further indication that the nation's supercharged economy is beginning to slow, and warn that soaring inflation, rising labor costs and mounting local government debt threaten to weaken growth even more.
Several economists in China have recently lowered their growth forecasts for this year and next year to about 8.5 per cent, down from earlier forecasts of 9 per cent to 10 per cent, while also warning about the possibility of a sharp rise in nonperforming loans at the nation's big state-owned banks.
On Monday, for instance, Credit Suisse said data recently released by the Chinese central bank showed that credit in China had expanded at "alarming levels," far more than previous government estimates suggested. Credit Suisse downgraded its profit forecasts for Chinese companies and state-owned banks, as it warned of slowing growth for the overall economy.
The reports come at a time of heightened concern about slower growth in other parts of the world, including the United States, Europe and Japan.
Since the financial crisis, China has been the world's leading growth engine. But for much of the past year, China has been trying to rein in overly aggressive bank lending as a way to tame soaring inflation and property prices.
Those tightening measures have not only weakened growth in China, analysts say, but have also begun to expose a host of other problems in the nation's financial system.
While few analysts expect China's growth to slow to below 8 per cent in the next year, they still paint a troubling picture. The Chinese stock market has been in a slump for much of the last two years, the property market looks weaker and inflation is running at a 34-month high.
Analysts said exports have begun to show signs of weakness in recent weeks. Credit Suisse said Monday that China's export growth could be flat in the coming months, partly because of weaker demand in the United States and Europe.
Credit Suisse's new figures also indicate that off-balance-sheet lending, much of which took place outside the banking system, pumped a large amount of additional credit into the financial system last year. As a result, Credit Suisse downgraded its ratings of Chinese companies and the big state-controlled banks, and warned of a possible rise in bad loans.
Vincent Chan, the head of China research at Credit Suisse, said that the nation's economy might avoid a "hard landing" but that growth over the next year was likely to be less robust.
"The market consensus is for a soft landing and two or three quarters of slowing down, then a growth rebound," Chan said in a telephone interview Monday. But, he said, "we're saying that after that, the growth may not re-accelerate and the indebtedness may be more serious."
Earlier this month, Wang Tao, the chief economist in China at UBS, said China's economy was still strong but warned that over the next few years, loans to local government investment companies could result in as much as $460 billion in nonperforming loans.
Although Beijing used state-run banks to bolster growth after the financial crisis hit in late 2008, the central government is ordering them to help rein in growth.
Chinese banks have already raised interest rates and set aside larger reserves. The government is expected to announced additional measures in the coming months.
Several economists in China have recently lowered their growth forecasts for this year and next year to about 8.5 per cent, down from earlier forecasts of 9 per cent to 10 per cent, while also warning about the possibility of a sharp rise in nonperforming loans at the nation's big state-owned banks.
On Monday, for instance, Credit Suisse said data recently released by the Chinese central bank showed that credit in China had expanded at "alarming levels," far more than previous government estimates suggested. Credit Suisse downgraded its profit forecasts for Chinese companies and state-owned banks, as it warned of slowing growth for the overall economy.
The reports come at a time of heightened concern about slower growth in other parts of the world, including the United States, Europe and Japan.
Since the financial crisis, China has been the world's leading growth engine. But for much of the past year, China has been trying to rein in overly aggressive bank lending as a way to tame soaring inflation and property prices.
Those tightening measures have not only weakened growth in China, analysts say, but have also begun to expose a host of other problems in the nation's financial system.
While few analysts expect China's growth to slow to below 8 per cent in the next year, they still paint a troubling picture. The Chinese stock market has been in a slump for much of the last two years, the property market looks weaker and inflation is running at a 34-month high.
Analysts said exports have begun to show signs of weakness in recent weeks. Credit Suisse said Monday that China's export growth could be flat in the coming months, partly because of weaker demand in the United States and Europe.
Credit Suisse's new figures also indicate that off-balance-sheet lending, much of which took place outside the banking system, pumped a large amount of additional credit into the financial system last year. As a result, Credit Suisse downgraded its ratings of Chinese companies and the big state-controlled banks, and warned of a possible rise in bad loans.
Vincent Chan, the head of China research at Credit Suisse, said that the nation's economy might avoid a "hard landing" but that growth over the next year was likely to be less robust.
"The market consensus is for a soft landing and two or three quarters of slowing down, then a growth rebound," Chan said in a telephone interview Monday. But, he said, "we're saying that after that, the growth may not re-accelerate and the indebtedness may be more serious."
Earlier this month, Wang Tao, the chief economist in China at UBS, said China's economy was still strong but warned that over the next few years, loans to local government investment companies could result in as much as $460 billion in nonperforming loans.
Although Beijing used state-run banks to bolster growth after the financial crisis hit in late 2008, the central government is ordering them to help rein in growth.
Chinese banks have already raised interest rates and set aside larger reserves. The government is expected to announced additional measures in the coming months.
