OK, since the Internet earthquake crisis is locking me out of many offshore news services, not to mention my own blog, we’ll stick with Xinhua for a while today and see if I get lucky posting this stuff – strategically done in one big post. This is the first time I’ve been able to actually get on all week. Let’s hope this will all be over soon, and we can pretend it was just a bad dream.

First off, the bond market. This lovely headline, “Record number of bonds issued in China this year,” says very little. Turns out that a majority of bonds issued were from the central bank and were necessary because of all the excess currency floating around out there.

Because China has a large amount of forex coming in from its current account surplus, it doles out huge amounts of RMB in exchange. This would mean a tremendous increase in the amount of RMB in circulation if the central bank did not practice sterilization, in short selling bonds and soaking up excess liquidity.

So the increase in central bank bonds out there this year is not necessarily a good thing; instead of signaling a healthy bond market, it could be a sign of a worsening financial imbalance.

One more thing. Only 6.77 percent of the bonds issued were from private enterprises. This number has gone up recently, among State-owned enterprises, but this is still a tiny amount. The country needs a real bond market, and this number will have to go up much higher before we can say significant progress is being made.

Second, the bull market.  I recall writing some time ago that some analysts were worried that a rebounding stock market might work to the detriment of the domestic banking industry. The banks are already worried about foreign competition, and with a hot stock market, there would be even more investment choices out there for individuals.

Well, it looks like it might actually happen. Deposits have apparently slowed this year, and there are two popular explanations. One, the fervent hope of many economists around the world, is that China’s savings rate will fall, domestic consumption will rise, and that China’s current account deficit will shrink. Lots of people in the U.S. are praying for this to happen. Two, funds that would have gone to deposits are being used to buy stock instead. There are differing opinions on this right now, particularly since the slow growth in deposits for November represents only one month of slowdown, hardly a trend. Something to keep in mind for 2007, however.

Third, this is my favorite ‘unnecessarily obvious’ headline of the day (so far): “Ministry says China’s service trade still lags behind goods trade.” And it is still light during the daytime, too. The contents of the story are not so interesting, but in the interest of full disclosure, here it is.