China

China's push to get consumers to open their wallets more and refocus the economy on domestic consumption is stalling, contributing to lower growth in the second quarter and forecasts of even slower momentum ahead, The Wall Street Journal reported. A slew of data released on Monday showed that disposable income growth for urban households slowed to 6.5% in the first half compared with a year ago, down from 9.7% growth in the first half of 2012 and below the growth rate of the economy as a whole.

China’s credit crunch in June spurred hundreds of millions of households and companies to divert a record share of their savings into wealth-management products, known as WMPs. The amount of such investments surged eightfold from 2009 to 8.2 trillion yuan as of the end of March, according to government data. That’s almost the size of the Australian economy. Fitch Ratings put the amount even higher in May, at 13 trillion yuan, Bloomberg reported.

China's reform-minded leaders are more willing than ever to raise the pain threshold for the economy to push through long-term reforms, despite a protracted slowdown that has sparked calls for looser monetary policy, Reuters reported in an analysis. Grim trade data for June last week fanned market talk of fresh steps to support an economy heading for its weakest growth this year in more than two decades.

China's leaders are struggling not only to calm markets and redirect China's economy, but to address rumors that have sprung up in the absence of clear communication, interviews and internal documents show. The People's Bank of China instigated the cash shortages that catapulted Chinese interest rates to nosebleed highs over the past two weeks because the central bank felt it had no alternative amid what it saw as out-of-control credit growth, according to an internal document reviewed by The Wall Street Journal.

China-based solar panel maker Suntech Power Holdings Co Ltd, whose main unit is in insolvency proceedings, said it had struck a deal with a majority of its bondholders to defer payment on a $541 million loan until Aug. 30, the third time the company has reached such an agreement, Reuters reported. Suntech defaulted on a principal payment on the 3 percent convertible notes on March 15, prompting the company's Chinese lenders to drag its main manufacturing unit into insolvency proceedings.

It is official: the Chinese central bank does not want to trigger its own credit crisis, the Financial Times reported. After two weeks of starving the financial system of cash and telling banks to clean up their own mess, the People’s Bank of China struck a much more emollient tone on Tuesday. In a volte-face that bore more than a passing resemblance to Mario Draghi’s “unlimited” bond-buying pledge last year at the European Central Bank, the Chinese central bank promised to provide liquidity support to any financial institution strapped for cash.

Canada's biggest securities regulator accused Ernst & Young LLP of failing to properly audit the financial statements of Zungui Haixi Corp. ahead of the Chinese shoe maker completing a 39.8 million Canadian dollar ($38.1 million) initial public offering in 2009 and listing its shares on the junior Canadian TSX Venture Exchange. The allegations come after the Ontario Securities Commission in December alleged the big accounting firm failed to adequately audit the financial statements of Sino-Forest Corp. between 2007 and 2010.

China’s financial system is in the throes of a cash squeeze as the government tries to restructure the economy and punish speculators, with interbank lending rates spiking on Thursday and bank-to-bank borrowing nearly stalled, the International Herald Tribune reported. China’s interbank and money market rates have soared over the last two weeks, and banks and other financial institutions are afraid of lending to one another. Without that lending, an economy can quickly stultify. Those in need of short-term cash, or liquidity, must pay dearly or risk default.

A record seven million students will graduate from universities and colleges across China in the coming weeks, but their job prospects appear bleak — the latest sign of a troubled Chinese economy, the International Herald Tribune reported. Businesses say they are swamped with job applications but have few positions to offer as economic growth has begun to falter. Twitter-like microblogging sites in China are full of laments from graduates with dim prospects.

New rules to reduce risk in China’s financial sector and clamp down on illegal capital flows last month took some of the heat out of what had been a torrid year for borrowing, The Wall Street Journal China Real Time blog reported. But amid worries that a slowdown in lending could be risky as the economy also slows, some are asking why lending had been so strong to begin with.