10 thoughts on “Even china is at it-bet our banks are exposed”

• notyethomeless says:

  January 14, 2011 at 2:08 pm

  Can I just clarify for everyone that the article talks about 1.5 TRILLION debt, not billion. It id a big deal.

• str 2007 says:

  January 14, 2011 at 2:11 pm

  I’m sorry (perhaps I’ve become price conditioned) but I really can’t see $1.5 billion having too much of an effect on China can you ?

  Little England bailed out £200 odd billion.

  Although maybe this is the tip of the Iceberg. They’ve been very busy in China over the last 15 years or so and no doubt made alot of money, but it appears they’ve been spending it even faster.

  I wonder how secret China is, can they get away with printing their way out of any problems as we in the West have done ?

• taffee says:

  January 14, 2011 at 2:13 pm

  sorry yes TRILLION…have these investment vehicles packages the debt to banks across the world…..yes!

• mark wadsworth says:

  January 14, 2011 at 2:36 pm

  Taff, the article says: “Yin said these debts will ultimately have to be written off by Chinese banks and Beijing.”

  So it’s all just numbers on bits of paper.

  Government makes up figure for what land is worth (ps, land is not an ‘asset’ it is a ‘private benefit arising under a social contract’) and government owned bank then SPV a bit of paper with numbers on it, and the SPV gives it to the local council, and the local council tears that bit of paper up into smaller bits and pays its employees, contractors etc, and then these people spend it on goods produced in government owned factories etc and the money disappears again.

  It’s like any transfer between government departments, it is not real money, it is only real money when it goes into the system (i.e. via taxation) and when it comes out again (as wages or bribes or whatever).

  See also QE – two departments of HM Treasury just swap bits of paper – DMO gives bit of paper (called a ‘government bond’) to commercial banks, and comm banks take the bit of paper to BoE and swap it for an electronic balance. So the comm banks cancels itself out (after creaming off 0.5% profit) and the BoE ends up holding a bit of paper issued by the DMO, which as far as I know might as well be in different offices in the same floor of the same building. After five or ten years, the BoE send a courier up the corridor bearing the bond, hand it back to DMO,who then tear it up and chuck it onto the blazing fire.

• icarus says:

  January 14, 2011 at 5:32 pm

  There was that $600bn fiscal stimulus in 2009 in addition to these loans. Some estimates are that 50% of the loans went into fuelling equity and property bubbles. Most of the rest went to state companies (often controlled by powerful political families, who use their borrowing power to take over private companies) and government-backed infrastructure, mainly rail, roads and airports. US figures show 238m paasenger vehicles and 75,000km of high-speed roads. In a few years China is planned to have 180,000 high speed roads and currently has just 38m passenger vehices. Airport construction is just as crazy. The town of Jiaxing is building a new airport despite being within 30 mins drive of three major airports. This explains the surge in demand for steel, cement etc.

  The private SME sector, which provides 75% of urban jobs, has been left out of this borrowing binge and millions of its employees are returning to their villages (a lot of the govt infrastructure projects are not very labour-intensive). Wages in this sector have dropped significantly and those who can are hoping to bribe their way into government jobs. Official figures showing rising wages and consumption are rubbage – they’re heavily weighted towards govt jobs, procurement and incomes, so forget about that business of domestic consumption compensating for reductions in exports.

  I’d be wary of statements about BRIC economies pulling the world out of recession.

• taffee says:

  January 14, 2011 at 6:31 pm

  I also believe tyhey have built whole cities with no-one living in them…..this is so ridiculous to say these countries are the powerhouses of the world economy.

  All economics has gone out the window and no-one seems that bothered,yet all this money that does not exist and jobs created where there should be none is what got us in the mess we are in now

  These sort of policies are sheer madness and must have some dire consequences imo,

• miken says:

  January 14, 2011 at 7:05 pm

  All debts can be written off or inflated away. The question is who will lose out the most? In my opinion it will be the middle earners who lose out most unless they do something about it. Problem is they are not as likely to riot like the students for fear they lose everything they worked so hard for.

• str 2007 says:

  January 14, 2011 at 8:22 pm

  Apologies, yes 1 trillion is a slightly bigger problem.

  I get the feeling it’s a FUBAR to the extent that mass printing will be the only option.

  The west have been laughing at China buying up our debt which we’ve been paying back with freshly printed money, perhaps China will have the last laugh when we realise they’ve been playingvthe sane game on a much bigger scale.

• taffee says:

  January 14, 2011 at 10:04 pm

  bit like kings and queens really….countries using land as collatorall…..get into power…issue debt….live life of reilly….retire

• landofconfusion says:

  January 16, 2011 at 9:30 am

  4. mark wadsworth said…
  “land is not an ‘asset’ it is a ‘private benefit arising under a social contract”

  MW, could you expand this a bit as I don’t quite understand. Obviously no one has signed this “social contract” so where does this term (or concept) come from?

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