Read more at China Bubble and China's Shark Loan Ponzi Finance
In act of desperation, China's Government has asked its state owned insurance companies to help save the real estate
China's banks are technically bankrupt, and they survive only because everybody knows that the Chinese government (like every government in world) will try everything to save the banks. A collapse in the countries banking system will trigger a collapse of the regime as well.
If Ordinary Chinese will realize the risk and change their mind after a real estate bubble crash, a huge bank run will bring this “paper tiger” on its knees. The real estate market is the life line of the Chinese regime and its command economy.
The real estate market is hanging on the brink of collapse, and over extended banks can not expand lending at an accelerating pace since run away inflation will cause massive social unrest. So what is the next card up in their sleeve?
In August, a new insurance regulation was enacted to set the new upper limit for insurance investment in real estate to 5%.That can be read as a direct order from Beijing that now it is the insurance companies’s turn to save China's construction based economic system
.Following the order, China life insurance announced that it will lend 10 billion to Chong Qing city to develop real estate for the poor. And many Chinese know: those so called public free rent houses are often occupied by the relatives of government officials, since the distribution procedure of public low rent houses is anything but transparent. In China, the rule of connection always is stronger then the rule of law.
China life insurance Company, Zhejiang branch won a 2.6 billion land auction to build another commercial office building in Hangzhou. That will add another vacant office building to the land of concrete and steel.
In the past, the government used banks and SOE's in other industries to pump cheap credit indirectly into the real estate market. Now it has ordered insurance companies to keep the bubble float at the cost of the safety of the insurance of hundreds of millions of Chinese
Read the full stories HERE and HERE
You state that "China's banks are technically bankrupt"
ReplyDeleteFirstly, this is factually incorrect:
http://in.reuters.com/article/idINIndia-50640220100805
http://www.businessinsider.com/china-stress-test-60-percent-real-estate-hit-2010-8
if the Banks were insolvent, then what purpose could be served by stress-testing their portfolios to ensure solvency?
Secondly, whatever the facts, if investors perceive the Banks to be insolvent, how come ICBC is now the largest bank in the world in terms of market capitalisation (i.e share price) and Agricultural Bank of China last month completed the largest ever IPO - including an international tranche which was oversubscribed 14 times? Are you suggesting that all these investors are mugs and that you alone know the truth?
Again and again and again your analysis is shown to be ill-informed, biased and misguided. Wake up and smell the coffee
Does it not trouble you that these articles from the China Daily directly contradict your storyline? Try reading the 7th paragraph - translated here by Google
ReplyDeletehttp://tinyurl.com/2fophgn
>> In addition, the approach proposed "three no's" requirement that does not allow investment in residential property class, do not allow direct investment in commercial real estate, not allowed to participate in real estate development. <<
Again and again and again you are shown to be a liar and a charlatan, intent on promoting a biased and ill-informed viewpoint in direct contradiction of the facts. Have you no shame?
Regarding the banks- I think China's banks are insolvent. And I am not the only one.(Mish also thinks so, as does hugh hendry and many other)
ReplyDeleteIt is a well known fact that the mainstream media thinks their banks are fine.
They thought that also about American banks and even Icelandic banks. The purpose of this site is to write stories about events BEFORE they reach the mainstream news, so of course the mainstream news sources will say all is good.
By the way, I also think European banks and American banks are insolvent. And I also believe that in Canada, Australia, India and Israel banks will be insolvent one the housing bubble bursts. So it is not that I have something against China per se. I just think the global economy is in very bad shape.
If you read other posts that have nothing to do with China(like the ones about Greece), you will see that I am not a great fan of governments in general, since they always screw things up.
Regarding the article- I also gave an example of how they are actually acting. It is an interpretation of the orders from the governments. And the ACTIONS prove my case. Of course the way the Chinese media presents the facts is not in line with what happens(as is the case in the west) That is what you net the internet for- to get the real story.
Did you ever read in a mainstream media source that the FED is to blame for the financial crisis of 2008? No. But the facts are there. All you need is to make(or read an honest interpretation.
Do you have any idea of what the word "Insolvency" means?
ReplyDeleteBanks are only inherently unstable in the same way that vehicles travelling at 160 km/h or planes flying are doomed to crash. In fact, plane crashes and vehicle accidents are rare events because there are in-built control mechanisms; did you ever wonder why Ferraris' have massive brakes? HINT - it's not to make them go slower, its so that they can be driven faster whilst still being relatively safe. It's the same with Banks and the stress tests and other control mechanisms which the regulators apply.
A bank balance sheet is fundamentally a maturity transformation ladder - short term deposits (liabilities) are transformed into long term loans (assets); the difference in value between the two sides of the balance sheet is the capital. A firm is only insolvent if the value of it's liabilities exceed its assets, or if it is unable to pay its liabilities as they fall due. Neither is the case with Chinese banks
You are once again talking utter, ill-informed and highly emotional nonsense. You have also been revealed as having fabricated and falsified statements to try to support your absurd and bigoted viewpoint. I therefore ask you once again - HAVE YOU NO SHAME?
As of 19th August, apparently not.......
ReplyDeleteGood work zhanglan
ReplyDelete