Support the Wall Street Examiner! Choose your level of support to receive a free proprietary report as my thanks. Click the button below to see your options. Become a Patron!

We Just Found a Major Stock Market Crash Indicator in China

This is a syndicated repost courtesy of Money Morning - We Make Investing Profitable. To view original, click here. Reposted with permission.

We’ve been warning readers all year about the impact China’s ballooning debt could have on global markets.

Liquidity moves markets!

Follow the money. Find the profits! 

And today we just found a major newstock market crash warning sign in China’s debt figures…

Data released today (Tuesday) by the People’s Bank of China shows “total social financing” – the broadest measure of credit lending from both traditional and non-traditional sources – surged last month. The figure rose by 1.72 trillion yuan. That was well above the expected increase of 1.39 trillion yuan.

That was also well above the 1.47 trillion yuan level in August.

China’s total outstanding social financing now sits at 151.51 trillion yuan. That’s a 12.5% year-over-year (YOY) increase.

New bank lending also surpassed forecasts, coming in at 1.22 trillion yuan. That was higher than the 1 trillion yuan expected. August’s total was 948.7 billion.

Outstanding bank loans rose by 13% year over year. In the first nine months of 2016, total bank lending increased to 10.96 trillion yuan.

Profit Alert: The Subprime Auto Loan Market Is About to Collapse – Here’s How to Profit

Household loans, which are mostly used to finance property purchases, accounted for 46% of total loans. That was up from 39% in the first half of the year.

China’s mushrooming debt has many fearing a stock market crash. And according to Money Morning Global Credit Strategist Michael E. Lewitt, China is creating a massive bubble…

China’s Debt Could Create the Next Stock Market Crash

Lewitt has been warning about China’s growing debt and the chance of a stock market crash for months.

In February, Lewitt explained that much of China’s $30 trillion debt was invested in unproductive assets such as “ghost cities and ghost factories that can never produce the income necessary to service or repay these obligations.”

Lewitt also said China is experiencing “the biggest debt bubble in recorded history – a bubble that will pop like every other bubble in economic history. China is not immune from the laws of economics just because it claims to operate by different rules.”

The amount of debt in China has increased 300% since 2007. Shadow banking and real estate are the two biggest reasons why, according to global consultancy McKinsey & Co. The firm also says China’s debt as a share of GDP has outgrown both the United States and Germany.

Chinese debt started growing far faster than GDP in 2011. And the biggest problem is that the faster the debt accumulates, the harder it is for China to pay off.

The key question now is how efficiently China can manage its mountain of debt as the global economy continues to slow.

Last month, the IMF warned that the global economy is at risk of stalling without urgent action to revive trade and investment levels.

Tomorrow, China reports quarterly GDP growth. Any disappointing numbers in the report could send Chinese markets tanking.

Economic growth in China is projected to have grown 6.7% in Q3. That would match the previous two GDP reports released earlier in the year. But that would also be down from China’s 2015 GDP growth rate of 6.9%. And that was its weakest annual pace in 25 years.

Unfortunately, China’s slowing growth comes at a time when credit expansion is happening at a record pace.

Economists caution that when you have the kind of colossal credit expansion that China has had over the last several years, history shows financial turbulence follows.

That’s why fears are rising that we’re heading toward a 2016 stock market crash.

China’s situation looks like a ticking time bomb. Plus China’s fragile bond market appears ready to implode. Many are skeptical the introduction of a new government policy to reorganize debt-to-equity conversions will work. The move is aimed at reducing China’s swelling corporate debt.

While the stock market crash warning signs continue to mount, now is not the time to panic. In fact, investors can protect themselves from intensifying stock market crash flash signals with our complete guide on surviving, and profiting from, a stock market crash…

To get full access to all Money Morning content, click here

About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.

Disclaimer: © 2016 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.

 

The post We Just Found a Major Stock Market Crash Indicator in China appeared first on Money Morning – We Make Investing Profitable.

Wall Street Examiner Disclosure:Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. I may receive promotional consideration on a contingent basis, when paid subscriptions result. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. No endorsement of third party content is either expressed or implied by posting the content. Do your own due diligence when considering the offerings of information providers.

Try Lee Adler's Technical Trader risk free for 90 days! Follow the money. Find the profits!

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.