Debt, shadow finance bedevil China’s economy
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Excluding Finance, total earnings for the remainder of S&P 500 companies that have reported would be down -2.8% from the year-earlier period. Finance reclaims its leadership role in the S&P 500, contributing more earnings to the indexs total than Technology this year for the first time since the 2008 crisis. The sector is expected to account for 19.2% of total S&P 500 earnings in 2013 compared to Technologys 18%. Technology earnings remain weak, with total earnings for the 78.5% of the sectors market cap that have reported results down -11.3% on +1.6% higher revenues.
Weak Earnings Growth Outside Finance
Moodys Investors Service calculated this year that Chinas shadow banking sector could be as large as 29 trillion yuan (Dh17.2 trillion), or 55 per cent of GDP at the end of last year. The term refers to loans and investment products sometimes issued by legitimate banks and financial institutions, as well as private deals between individuals or companies, that have arisen as a way of getting around strict banking rules. Such a non-transparent, less regulated form of credit extension can stoke asset bubbles and may pose risks to financial stability, as highlighted in recent years, Moodys said, referring to US and European banks sub-prime lending woes that triggered the 2007-2009 global financial crisis. China began taking steps to free up its lumbering, Soviet-style command economy in the late 1970s. Decades of stunning growth, rising trade and foreign investment resulted, pulling some half a billion people out of poverty.