What the Communist Party Meeting Means for Banks

11/12/2013 11:00 am EST


Jim Jubak

Founder and Editor, JubakPicks.com

There's finally some good news coming out of the banking industry in China, even though the timing's pretty convenient, writes MoneyShow's Jim Jubak, also of Jubak's Picks.

Good news and more good news on China's economy.

Industrial output up more than expected. Inflation lower than forecast. Total new loans by China's banks less than expected. Retail sales up.

I just wish all this good news wasn't so clearly correlated with the meeting of the Communist Party's Central Committee that began on November 9 and is scheduled to end today, November 12.

Even the least cynical among us has to admit that it's very convenient that the data look so good, just as the country's leaders are meeting to decide economic and financial policy.

A little more detail on this good news? Sure.

Industrial output climbed by a year over year 10.3%. That was above the 10% estimate by economists surveyed by Bloomberg. Industrial output has shown a 10% annual rate of growth for each of the last three months.

Inflation in October rose by a less than forecast 3.2%.

Total new loans for the month came in at 506 billion yuan. That was below the 580-yuan level projected by economists. The People's Bank has been trying to damp lending in order to head off an asset bubble in real estate, and, in order to keep inflation under control. Aggregate financing totaled 856.4 billion yuan, well below September's total of 787 billion yuan. Encouragingly, for the central bank's efforts to rein in the shadow banking sector, trust loans, a category associated with shadow banking, fell to just 40 billion yuan, the lowest total since July 2012.

I think the bias in official numbers toward data supportive of government policy is likely to run strong into 2014, as officials gradually announce the policies decided upon by this meeting of the central committee.

Full disclosure: I don't own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. The fund did not own shares of any stock mentioned in this post as of the end of June. For a full list of the stocks in the fund as of the end of June see the fund's portfolio here.

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