(Dow Jones)--China Construction Bank Corp. (0939.HK) said Thursday that Singapore state investment firm Temasek Holdings Pte. Ltd. will take up Bank of America Corp.'s (BAC) entire entitlement in CCB's rights issue, confirming an earlier comment made by a Temasek spokesperson to Dow Jones Newswires.
According to the article, CCB had announced in April of its intention to raise up to USD 11 billion to shore up its capital base, which had deteriorated due to a government-directed lending boom. From what I can remember, this lending boom was part of the multi-bullion Yuan monetary stimulus that the central government had implemented to artificially shore up economic growth in the mainland during the recent financial crisis. For its efforts, China was widely regarded as the 'saviour' of the world economy after all the developed economies tanked.
From an Austrian School perspective, we know that a government-mandated credit boom usually lead to malinvestments as borrowers recklessly invest in projects that are unprofitable without cheap money. This is typically followed by a credit bust and loan defaults.
While the CCB is prudent in shoring up its balance sheet, it does look to me like Singapore is indirectly paying for China's monetary stimulus.
No comments:
Post a Comment