Tuesday, March 18, 2014

China the Great Wall of Fall

The next big fall of the global economic credit might go to China where bubbles are created and have been transformed into financial time bombs. Couple of key findings about the economy would raise the browsers of the global economy. The biggest threat would be do the Asian economy since china holds a substantial position in this regard.  Remember that we are just in the initial phase of the Great Collapse.But there is nothing to worry much since China would use the tax payers money to replenish the defaults.
  • Government owned private organizations bond defaults have started happening in China.
  • Shanghai Chaori Solar Energy & Science Technology missed a $12.7 million interest payment on a bond.
  • A few days after the Shanghai Chaori default, a second company, Baoding Tianwei Baobian Electric Co., saw its bonds suspended from trading and its shares fall by the daily limit.
  •  Well a $14.7 million default is tiny in a $9.4 trillion economy and moreover the company in financial straits, is government-owned, so it's not likely to default. Taxpayers money would be paid to revive the books.
  • According to  Thomson Reuters analysis of 945 Chinese companies showed total debt soared by more than 260% to 4.74 trillion yuan ($777.3 billion) in the last five years.
  • The country's corporate debt hit a record $12 trillion at the end of last year, Standard & Poor's estimated, equivalent to 120 percent of gross domestic product. And as the figure accelerates in coming years, it is being  expected that a high level of restructuring and defaults as companies sell assets and undertake mergers in a bid to pay their debts.
  • China’s trust assets surged 46 percent in 2013 to a record 10.9 trillion yuan ($1.8 trillion), underscoring investor interest in products that pay more than bank deposits even as default risks mount.
  •     Haitong Securities, China’s second-largest brokerage, estimates that 5.3 trillion yuan of trust products will come due this year.
  •        About 20 billion yuan of trust products had repayment difficulties in 2012, accounting for 0.27 percent of the industry’s assets at that time according to  the China Trustee Association.
  • China averted its first trust default in at least a decade last month as investors in a 3 billion-yuan high-yield product issued by China Credit Trust Co. were bailed out days before it matured. About 5.3 trillion yuan of trust products will be due this year, up from 3.5 trillion yuan in 2013.
  • But china has already made provisions for this asset bubble by using the tax payers money with 9.06 billion yuan of reserves.
  • This means that even if there is deliberate default then government would replenish them. What a majestic style of financial weapons being used to exploit resources.
  • Well the prime reason behind the growth of this segment is that the trusts offer wealth-management products that channel money from well-to-do Chinese investors to higher-risk businesses that banks normally won't lend to. They've become popular because they offer yields of 9% to 11%.


·         But the mergers would be within the economic powers and less opportunity for the global economy.Above all these the biggest threat is from the trust assets which have been built over the last 5 years. Well before you derive any conclusion from the same get it granted that China might be able to surpass the burden but the real game is that how long they can continue.

In my research I have identified the industries of the issuers, the regions where their businesses are located and the maturity dates of the products. Also the companies who are involved in this game.
Well we are just in the initial phase of an Asian Collapse replicating the western economies. The only difference between US recession and Asian Collapse would be the change of location of the two states.

Written By Indraneel Kripabindu Sen Gupta

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