China loosened $107 billion for loans by reducing the amount of reserves banks are required hold on deposit in the central bank. The intent was to warm up the economic climate by encouraging spending and business development.
Since the announcement on Tuesday, both Citi and Goldman Sachs have announced their intent to sell their approximate 20% interest in Chinese banks. Instead of stimulating growth, this news increased fear which is leading to public hording of yuan in case things get worse.
One area taking advantage of the new cash flow is land developers. Property has been purchased and plans drawn up for residential, business, and recreational development. The hitch: Chinese yuans and the jobs and subsequent consumer spending to be created are all off-shore; primarily Malaysia.
The road to growth development seems to have a fork in it. One branch leads to off-shore prosperity while the other circles back into more debt and devaluation of the yuan.
Anyone know where the exit ramp is? Apparently not the G-20. Gosh, has it already been two days since they met in Shanghai?
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