China Cash Squeeze Seen Creating Vietnam-Size Credit Hole - Bloomberg

China Cash Squeeze Seen Creating Vietnam-Size Credit Hole - Bloomberg: "“The liquidity crunch has increased downside risks,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Group Plc in Hong Kong, who estimates it will reduce aggregate credit by 1.8 trillion yuan this year. “As long as policy makers cushion the impact through fiscal and exchange-rate measures, the damage to the economy could be quite modest.”"

“Although the country is talking about reform, reform, reform, I think at this point of time probably the country will still focus on growth,” said Jimmy Zhu, an economist at brokerage FXPrimus Ltd. in Singapore. “The credit crunch should have a very short life.” He estimates a 200 billion yuan cut in aggregate financing from the cash squeeze.

Inflation and trade indicators may show pickups for June. The consumer price index probably rose 2.5 percent from a year earlier, according to the median estimate of 31 economists surveyed by Bloomberg News, up from 2.1 percent in May.

Gains in exports may have accelerated to 3.9 percent from a year earlier last month after collapsing to 1 percent in May following a crackdown on fake invoices that inflated January-April data. Imports probably rose 6.2 percent from a year earlier, after a 0.3 percent drop in May.

Export data are “likely to be under continued pressures” as authorities try to stop over-reporting of figures, Goldman Sachs Group Inc. economists including Yu Song in Beijing said in a July 4 report. Gains in imports “will likely face separate pressures from weak domestic demand growth,” they wrote.

To contact Bloomberg News staff for this story: Kevin Hamlin in Beijing atkhamlin@bloomberg.net; Ailing Tan in Singapore at atan193@bloomberg.net

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