The stock markets had a bad day, with the SSE Composite dropping 2.1% to close at 2741.7. Part of the reason for the decline was concern that a roughly $1 billion upcoming share sale by China South Locomotive and Rolling Stock Corp. will draw a lot of liquidity from the market (stock sales tend to be vastly oversubscribed, with investors required to put up 100% of the bid amount in cash in their stock accounts), but the decline was hastened late in the day when reports came in of a terrible attack on a police station in Xinjiang province that left 16 policemen dead.
Here in Beijing security has become so intrusive (although sometimes it is hard to see how some of the “security” measures can have any impact on actual security) that even my Chinese friends are complaining that they feel like outsiders in their own neighborhoods, and I suspect that the Xinjiang attack will only make things worse. Still, traffic is certainly better, and except for today the past few days have seen an improvement in the air quality. The town is slowly starting to fill up with tourists, and areas like Houhai (the lakes north of the Forbidden City) have a real lively atmosphere. If we aren’t completely prohibited from drinking, dancing and arguing about sports this may turn out to be a fun couple of weeks.
But the rest of China continues without the distraction of living in an Olympic city. Yesterday’s Bloomberg had an interesting article in which they quote the Wen Wei Po newspaper as saying that, according to “lenders and market watchers it didn’t identify”, the total amount of underground lending in China exceeds RMB 10 trillion. I don’t know how accurate this number is, but I think total loans in the system are RMB 29-30 trillion, so this suggests that loans in the informal banking sector are roughly equal to 33% of loans in the formal banking sector. A UIBE professor last year suggested that they were equal to around 25%, so assuming they are not simply quoting each other, the numbers are consistent.
Finally, and in contrast to the panicked reports of a sharp slowdown in China leading to a surge in unemployment, an article in People’s Daily reports that, at least officially anyway, Chinese unemployment is down: “China’s registered urban and township unemployment rate stood at four percent in the first half, down 0.2 percentage point from the same period last year, the Ministry of Human Resources and Social Security (MHRSS) said on Thursday.” I don’t think anyone really believes that these numbers represent the actual urban jobless rate (I hear estimates that are two times or more as high), but the trend in the official unemployment number suggests that for all the talk of bankruptcies among southern exporters, it is not necessarily leading to rising unemployment. Actually I have long argued that it is higher demand for workers that is the real culprit behind the declining fortunes of some of China’s exporters.