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To: pganini
The problem is that the Chinese bank have nonperforming loans. The Kunlun Credit Co-operative in Golmud (and other financial institutions) went down the drain last year. http://english.people.com.cn/200507/05/eng20050705_194104.html

and http://www.moneyweek.com/file/2868/bam-chinabanks.html

I do not think that they will just pay as you mentioned. The result would be world wide chaos, when they liquidate their holdings. It has to be a managed landing, but I am not sure that it will be a soft.
26 posted on 01/12/2006 9:23:11 AM PST by AdmSmith
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To: AdmSmith

You fail to realize that the Chinese banks that have nonperforming loans are PUBLIC companies, their debt is reflected in the PUBLIC debt section.

My point is that the debt picture in China is not as bad as it seems - it's bad, but the same picture can be painted of US public debt which is mostly a government thing, same goes with CHina. The bad loans come from teh state owned banks -- the private banks are in much better shape because they scrutinize the lender a lot more. Anyway, China has enough resources to pay the debt back in a flash if it needs to.

They'll slowly reduce the debt of the state companies -- either turning them insolvent or letting private companies buy them out. The only time I see them selling USD and US treasuries on a massive scale is if US gets involved with a Taiwan issue, they'll do that as an "economic" repercussion.

Anyway, i don't think it's as pressing as what all the analysts are saying, because they all miss the big picture that China has enough foreign reserves to handle any type of financial issue. Their strategy of allowing their citizens to buy foreign treausries is paying off - you can go into any banks in China and pick ANY currency you want to put your money (I don't find the same in the US), and naturally most of their citizens put their savings in the dollar.


27 posted on 01/12/2006 9:44:48 AM PST by pganini
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