Skip to comments.The Chinese Banking System Is Seriously At Risk
Posted on 07/27/2010 10:51:03 AM PDT by SeekAndFind
A couple of weeks ago, I published a column outlining my doubts about the health of Chinas banking system in the lead-up to the Agricultural Bank of China (AgBank)s IPO. Given the lackluster performance of that share launch despite the considerable political capital Beijing mobilized behind making it a success it seems I was hardly alone in my concerns.
Now some concrete data is starting to emerge regarding the potential size of the problems that may be lurking on Chinas bank balance sheets in particular, the losses that may be incurred from risky stimulus loans made to development entities (known by some as LGFVs, or Local Government Financial Vehicles) sponsored and supposedly guaranteed by provincial and local governments. Earlier this year, Chinas central government nullified those guarantees, noting that local authorities often lacked the financial wherewithall to stand behind them. The China Banking Regulatory Commission (CBRC), which had previously been touting such loans as safer-than-safe, launched an internal study to get some handle on just how big a problem they have on their hands.
According to analysts at Bank of America-Merrill Lynch (BoA-ML), as well as a report published today by Bloomberg, inside sources at the CBRC say the study has been concluded and some findings reached. According to them, at the end of this June, LGFV loans amounted to RMB 7.7 trillion (US$1.1 trillion), or 16.2% of all loans in the banking system. (Rough estimates Ive heard had placed LGFV loans at 40% of all of new loans made last year and this year, which may still be possible, but there is nothing in the new data to confirm it).
(Excerpt) Read more at businessinsider.com ...
No s***. How much do we owe them? The chinese know we are too big to fail though. it will cause systemic failure and all that.
The US debt is just another one of their worries... this article is talking about what’s happening WITHIN China itself.
Add the possibility of a US default and this becomes double trouble.
Keep telling yourself that. The truth is, NOTHING is too big to fail. They probably said the same thing about Rome during that era.