Pesek on Asia: India's Bad Loans
Good morning. Here's my take on some of the stories driving the debate in politics, finance and social issues across Asia today. And Happy New Year to one and all -- I will be back online Jan. 3:
India's bad debt warning
Reserve Bank of India Governor Raghuram Rajan has had a good 2013. Since taking the helm in September, he's halted the rupee's record plunge and dispelled the sense of panic coursing through Mumbai. But as 2014 approaches, risks are rising anew as the central bank sounds the alarm about bad loans. Profitability of lenders, as measured by return on equity, fell to 10.2 percent as of Sept. 30, the lowest in at least five years. And looking forward, "all major risk dimensions captured in the banking stability indicator show increase in vulnerabilities in the banking sector,” the central bank said in report today. It will be a very busy 2014 for Rajan & Co.
Japan's next provocation: textbooks
Even as a tit-for-tat between Beijing and Tokyo over Shinzo Abe's Yasukuni Shrine visit intensifies, the prime minister is readying another grenade to toss into Asian geopolitics. This one involves a fresh effort to whitewash school textbooks of anything Abe and his nationalistic ilk find objectionable. Chinese and South Koreans are still seething over Abe's Dec. 26 jaunt to a shrine that honors 14 Class-A war criminals among Japan's war dead. This new history-beautification push is sure to raise blood pressures in Asia to whole new levels in 2014.
Yen's drop could raise hackles, too
Asia has been remarkably tolerant of the yen's 20 percent drop over the last 13 months. Some of it can be explained by the sense that if Asia's second-biggest economy roars to life, the end (faster Asian growth) justifies the means (a weaker yen). But there are ominous signs that patience is running thin; China's National Development and Reform Commission is among those speaking out. Will Asia see a return to the currency wars in 2014? While that's anyone's guess, Japanese officials shouldn't expect a free pass to devalue their way to growth.
A new breed of Chinese loan shark
As central bank Governor Zhou Xiaochuan does battle with China's vast shadow banking industry, a new breed of lender is ready to fill the void: loan sharks. It hardly sounds original -- the shylock industry is arguably the world's second oldest. But this Wall Street Journal piece details just how many tiers of dodgy lenders exist in Asia's largest economy, complicating efforts to cool credit growth. Bottom line, if Zhou thinks conventional tools can rein in this borrowing bubble, he's as deluded as those thinking they can easily pay back loans carrying 40 percent interest or more.
Asia's somber year in words
Linguists aren’t known for their economic-analysis skills, but here's a telling roundup of five Asian economies and their Chinese characters of the year, one that speaks to the collective anxiety of the masses. They are: the characters for "house" in China (a likely reference to real estate bubbles); "fake" in Taiwan (after a year of political scandals and toxic food scandals); "haze" in Singapore (thanks, Indonesia!); "inflation" in Malaysia (amid surging property costs); and "circle" in Japan (which could mean the 2020 Olympics or where the nation's politics is going). There you have it -- Asia's somber 2013 in five words.
(William Pesek is a Bloomberg View columnist. Follow him on Twitter.)