Author Topic: China's banking problem  (Read 3565 times)

Offline bigbear

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China's banking problem
« on: September 19, 2016, 08:09:32 AM »
http://www.telegraph.co.uk/business/2016/09/18/bis-flashes-red-alert-for-a-banking-crisis-in-china/

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Outstanding loans have reached $28 trillion, as much as the commercial banking systems of the US and Japan combined. The scale is enough to threaten a worldwide shock if China ever loses control.
  -- Wow.  I wonder how much of this is to keep people employed and 'happy' with the Chinese power structure?  And how much this plays into the war games in the South China Sea?

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The BIS said there are ample reasons to worry about the health of world’s financial system. Zero interest rates and bond purchases by central banks have left markets acutely sensitive to the slightest shift in monetary policy, or even a hint of a shift.
  --  Economics is becoming less and less about financial literacy, but political game theory... 

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Bond yields in the major economies normally track the growth rate of nominal GDP, but they are now far lower. Roughly $10 trillion is trading at negative rates, and this has spread into corporate debt. This historical anomaly is underpinning richly-valued stock markets at time when profit growth has collapsed.
  -- The long-term bond rates are traditionally used as a benchmark for projecting growth rates by many institutions/investors.  But because the bond rates are not floating (per se), then the risks are not being properly accounted for. 

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The concern is that banks are displaying a highly defensive reflex, and could pull back abruptly as they did during the Lehman crisis once they smell fear. “The banking sector may become an amplifier of shocks rather than an absorber of shocks,” said Hyun Song Shin, the BIS's research chief.
  -- Leverage and hedging will do that.

endurance

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Re: China's banking problem
« Reply #1 on: September 19, 2016, 09:11:52 AM »
What could possibly go wrong? :o

Offline David in MN

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Re: China's banking problem
« Reply #2 on: September 19, 2016, 09:28:36 AM »
The Chinese political leadership (I must make this distinction because it is NOT the people or the culture) has found out that there are ways to manipulate economic data. Things like "growth" or "GDP" have built in their assumption that things are done rationally. When the Chinese build a bridge in the middle of nowhere or an empty city it counts the same as if this construction were needed.

Their "growth at any cost" model has left them far over-leveraged. The easy money world we live in has encouraged this farther. It's all cooked books. How  else do you explain a country exploding in growth without enough women (the effect of one child laws)?

Just amazing that an individual needs money to be wealthy but a nation can become wealthy by building a deserted copy of Paris.

Offline bigbear

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Re: China's banking problem
« Reply #3 on: September 19, 2016, 11:03:12 AM »
How  else do you explain a country exploding in growth without enough women (the effect of one child laws)?

An aging population of single men...  To quote Endurance:

What could possibly go wrong? :o

endurance

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Re: China's banking problem
« Reply #4 on: September 19, 2016, 12:46:31 PM »
An aging population of single men...  To quote Endurance:
It'll be interesting to see. If you look at violent crime rates in the US, they aren't the highest where there's the fewest women, proportionately. Otherwise Alaska and Wyoming would be the homicide capitals of the US.

Offline jerseyboy

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Re: China's banking problem
« Reply #5 on: September 19, 2016, 05:37:29 PM »
The Chinese political leadership (I must make this distinction because it is NOT the people or the culture) has found out that there are ways to manipulate economic data. Things like "growth" or "GDP" have built in their assumption that things are done rationally. When the Chinese build a bridge in the middle of nowhere or an empty city it counts the same as if this construction were needed.

Their "growth at any cost" model has left them far over-leveraged. The easy money world we live in has encouraged this farther. It's all cooked books. How  else do you explain a country exploding in growth without enough women (the effect of one child laws)?

Just amazing that an individual needs money to be wealthy but a nation can become wealthy by building a deserted copy of Paris.

Here is an article about the ghost towns. This one actually optimistically states that most of the cities will be filled. But if even one fails, what a waste.

I remember being shocked when I first read about these a few years ago.

http://www.forbes.com/sites/kenrapoza/2015/07/20/what-will-become-of-chinas-ghost-cities/#4b29a0b6751b

Jerseyboy

Offline Carl

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Re: China's banking problem
« Reply #6 on: September 20, 2016, 04:34:16 AM »
China will POP the bubble on their and our's banking systems during 2017 as we (the US) are too tied to China's stock and banking systems.

Offline bigbear

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Re: China's banking problem
« Reply #7 on: September 27, 2016, 11:44:16 AM »
http://economictimes.indiatimes.com/news/international/business/china-slowdown-biggest-threat-to-global-economy-former-imf-chief-economist-ken-rogoff/articleshow/54526273.cms

Ken Rogoff (former IMF chief) is raising more red flags for the Chinese economy and (more importantly?) their political situation.

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China's economy is slowing down much more than the official figures show and a calamitous "hard landing" of the world's second largest economy is the greatest threat to global economy, former IMF chief economist Ken Rogoff has said.

 "China is going through a big political revolution. And I think the economy is slowing down much more than the official figures show," Rogoff told BBC, raising concerns over Chinese economy's continued slowdown.

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Last week, the Bank of International Settlements - the global think-tank for central banks - said that China's credit to GDP "gap" - which analyses the amount of debt in an economy relative to annual growth - stood at 30.1 per cent, increasing fears that its economic boom was based on an unstable credit bubble.

 The figure was described as "very high by international standards" by the Financial Policy Committee of the Bank of England, which will now test British banks' exposure to a Chinese slowdown, the BBC report said.

He has some things to say about Trump/Clinton and helicopter money too...

Offline chad

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Re: China's banking problem
« Reply #8 on: September 27, 2016, 12:21:27 PM »
I read somewhere that China's hanjin shipping company went bankrupt,I'll dig and see if I can find it again.

Offline chad

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Re: China's banking problem
« Reply #9 on: September 27, 2016, 12:56:18 PM »