Small Chinese Company Tells Goldman To Take A Hike, Refuses To Pay $80 Million In Derivative Losses

Tyler Durden's picture

It appears that even after thoroughly dominating the US legislative, judicial and executive branches, the long tentacles of the squid have been no better than the Mongolian hordes at overcoming the Chinese Wall (which is ironic seeking how easy it is to ignore the same construct internally between the firm's prop and flow traders...and yes, we will be posting our response to Goldman shortly, we have not forgotten). In the meantime, half a world away, a small Chinese power generator, Shenzhen Nanshan Power, is blatantly refusing to honor contracts with Goldman Subsidiary J. Aron for $80 million in derivative losses, and it appears that China itself has decided to stand behind the small company.

Reuters reports:

Shenzhen Nanshan Power (000037.SZ) (200037.SZ) said in a
statement that it received several notices from J. Aron &
Company, a trading subsidiary of Goldman Sachs (GS.N), for at
least $79.96 million as compensation for terminating oil option

"We will not accept the demand by J. Aron for all the
losses and related interests," said Nanshan, in line with the
stance it took last December.

"We will try our best to negotiate with J. Aron and resolve
the dispute peacefully...but the possibility of using a lawsuit
can not be ruled out when talks fail," it added.

"J. Aron told us in one notice that if we do not pay the
money, they will reserve the right to launch a lawsuit and will
not send us any further notice."

The State Assets Supervision and Administration Commission
said in September that it would back state-owned companies in
any legal action against the foreign banks that sold them oil
derivatives, which resulted in losses when oil prices dived
late last year. [ID:nPEK14474]

A Beijing-based Goldman Sachs corporate communication
official declined to comment.

Not sure what Hank Paulson's former firm would comment: alas the Chinese communist party still has to be filled with Goldman alumni. That being said, this is precisely the track that Goldman has been focusing on for the past few years. At this point, the firm realizes all too well that dominating power politics in China in the near futures is far more critical than complete control over D.C., as there is little the world's most important company can do domestically in the context of taxpayer capital transfer without a full fledged revolution.

h/t Sean

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Dr. Richard Head's picture

Perhaps Goldman simply countered this loss by purchasing loads of Fannie and Freedie during the week of December 21 right before Congress gave the blank Xmas check to Fannie and Freddie? 

God sees all you know.

bugs_'s picture

If you don't honor your gambling losses, people won't gamble with you anymore.

Ned Zeppelin's picture

In a legitimate casino or game, of course.  But if GS is selling, you are in a three card monte street game that is wholly rigged.  You have the right to walk if the other guy is a thief and is trying to pick your pocket.  The Chinese already figured that out, and announced that in September. GS just figures it will push until it meets resistance, then give up in a huff. Of course, only after the Federal Reserve and/or Treasury reimburses GS for its loss. 

Anonymous's picture

'"then give up in a huff. Of course, only after the Federal Reserve and/or Treasury reimburses GS for its loss."


Hephasteus's picture

Forget making them whole. Borg de borg de borg them like a swedish chef.

Anonymous's picture

bugs, whom are you fuggin kiddin? Golbitch busted at the table a long time ago and the house shook down the ladies at the slot machines and made up some chits on the fly so Golbitch could stay at the table til they tilted the shoe their way. About the dummest comment ever.

Steak's picture

Its blissfully satisfying to see this story.  Goldman is so entrenched here that in the example you provide, were Goldman the gambler and the US taxpayer the bookie, the gambler can stick the bookie with mountains of losses and the bookie will keep fronting money.

However China is too big and important for Goldman to do anything but whatever the Chinese demand.  So the shoe is on the other foot there.  China can stiff Goldman to the moon, lay on extra taxes, demand virgin sacrifices, and whatnot.  Goldman will comply because they HAVE to be in China.

It just shows how far down we've slipped.  The good ol US of A invented "no...fuck YOU" in all its forms, but it seems this is yet another thing we started and the Chinese now do better.

Careless Whisper's picture

If a contract is based on fraud it is not enforceable. Just wondering when this would enter into the arena of a crime? Anyone?

Let's remember that GoldmanSachs is a hedge fund.

Anonymous's picture

If a contract is based on fraud it is not enforceable.

KevinB's picture

It just shows how far down we've slipped.

Yep, it's a day or two early, but years from now, we might pick New Year's 2010 as the date that China surpassed the US as the most powerful country in the world.

Anonymous's picture

So true at the end of the day Goldman will swallow the
trade no point in aggrevating their biggest client they
just want to bark a little to prove to everyone else they still have teeth. Speaking of slipped USA lost it's numero uno status as global exporter to China this year according to WTO.A tiger never changes it's stripes particularly ifit
is of the Asian variety when it has the upperhand in the global game. Since when is drug smuggling punishable by death

Anonymous's picture

"If you don't honor your gambling losses, people won't gamble with you anymore."

Really? What if somebody else guaranteed they'd make you whole on any unpaid losses?

Anonymous's picture

answer this question bugs. who is holding the cards on this deal? the squid or the Chicoms? What are they going to do to the Chinese? What exactly? Threaten to not sell them some more high risk triple A MBS bonds with high yields? Ha ha .

Anonymous's picture

"If you don't honor your gambling losses, people won't gamble with you anymore."....

That's a bunch of crap. Millions of U.S. citizens gambled and lossed on housing, refused to pay, called themselves 'victims', and ...were given more money, a tax credit, and a mortgage re-write by Uncle Sam so they could get back out there and start spending.

This is the new 'douchebag chic'...refuse to pay a debt, have no honor, and call it cool.... an attitude of an entitled twenty something who wants the whole world on a platter from the results of a rigorous thirty hour work week.

bokapita's picture

In which case the world would be a greatly better place.

Anonymous's picture

Do you think anybody will gamble with (buy from or sell to) GS anymore, after seeing the AAA rated toxic instruments they have been selling around for the last three years?

Anonymous's picture

"If you don't honor your gambling losses, people won't gamble with you anymore."

Um, Goldman Sachs went bust when AIG went bust, and GS's response was to get the US taxpayer to prop up AIG, instead of accept the loss of buying insurance from a company that was obviously not able to provide it.

Who wants to play with Goldman Sachs anyhow? It's a completely crooked game with them. GS itself is bankrupt, just as much as Fannie Mae was back in 2004.

China does care about Goldman Sachs. They are not an investment company, they are a mafia.

Anonymous's picture

If you owe Goldman Sachs a thousand dollars, that's your problem. If you owe Goldman Sachs 80 million dollars...that's their problem.

Sqworl's picture

UK citizen execution in China today should send a strong message to the rest of the world..just saying...

chinaguy's picture

Try getting caught smuggling nine pounds of Herion into any Asia country & see how you end up. Execution might be a blessing

PolishHammer's picture

the message is that the UK is finished, they are a completely insignificant little country, with a glorious imperial past.  China dont give a shit.

order6102's picture

+555... same true to US of A... China don't give a shit. FREE TIBET! MOTHER FUUUCKERS!

Anonymous's picture

Perhaps they're just getting a little payback for the two opium wars brought on by the brits.

Hephasteus's picture

People who use drugs to control deserve NO leniancy whatsoever. There is no defense. Doesn't matter if your crazy, stupid, regretful anything. You get caught smuggling highly addictive drugs you should be put to sleep.

delacroix's picture

who's gonna come down on the cia afghan heroin operation?

Hephasteus's picture

LOL someone junked the entire comment section.

I will. Offer to sell me heroin. See what happens.


ED's picture

Lordy lordy. What aint addictive these days? Gambling (stocks), oil, free money, fast food, faster women, fastest vid-games, commenting on blogs?

The guy was executed because he could be. Others are too big to fail.

Anonymous's picture

Oh, come on. Do you actually believe the British request for "clemency" was anything more than just for publicity? Do you really think the British government gives a crap about a single drug-dealing citizen by the name of Akmal Shaikh whose only defense was that he was mentally ill? I would even think that China would like this execution to be as public as possible.

Anonymous's picture

Before the execution Philip Alston the special
rapporteur to the UN on extrajudicial executions said it
"would be a major step backwards for China" to
execute a mentally ill man. The issue is some silly
theory out there about human rights. Clearly if you
were the said executed drug dealer your take on
the matter would have been entirely different as you
stare down the barrel of a gun. Furthermore, what publicity
are the British after that you allude to? That's just
a plain stupid comment.

PolishHammer's picture

No, I dont think it's for publicity.  How could this be any good for UK government to be losing face this way.  It was pathetic really and the chinese got Gordon Brown humiliated again.

Anonymous's picture

Yep. I think we learned that in 1956.

Anonymous's picture

yes its true. The Rothschilds used the Brits until they didn't need them anymore and then the sun did set on the British empire. After them, they used the United States. Now it is coming time for them to blow us off. So it is happening. Perhaps the next play area will be China. So it goes.

Anonymous's picture

China destroyed both its bourgeois and its upper classes long ago. China is a CCP dictatorship. Not happening. This is the end of the line for the rothschilds as well, they are too corrupt to admit it. This is the fall of western civilization as a whole.

Ripped Chunk's picture

Because of 4k grams of smack?  What happens if you are caught chewing gum on line...............


Oh yes, agreed, UK done

chinaguy's picture

No bro, 4,030 grams of heroin - 8.9 pounds

Ripped Chunk's picture

What I said, 4 k grams (as in 4,000) of smack. 

The rest of us need to party you know. And putting someone to death for drug smuggling is pretty stone age.

Internet Tough Guy's picture

How many people will 8 pounds of heroin kill? Selling that to kids is pretty stone age.

Steak's picture

I think the Chinese prosecutor said it was enough to kill over 50K people

Ripped Chunk's picture

Who says kids are the only one's buying it.

You obviously support the "war on drugs"

Another giant pissing away of taxpayer dollars.

(By the way, they are showing "Reefer Madness" on IFC lately. You would probably want to watch and take notes)


chinaguy's picture

Ever lived in SE Asia? You & Toto might wake up & realize you aren't in Kansas anymore.

Anonymous's picture

It's in China's culture to see drugs especially bad. They lost against the Japs because everyone was stoned and they never want this to happen again.

Chinese people have different values and to properly understand them, you have to go there at least once.

#1: They also have rules, they are just different than ours
#2: Their rules are not better or worse. You can't govern a 1.3billion people country the same way you govern a 300millions one.

It also apply to business. Dealing with Asian, you think they want to rip you off, offering 10x the price for something. They actually quite enjoy dealing prices; it's like a game and is fun for both parties. If you're offended, you're not playing by their rules and will indeed not play nice with you.

Anonymous's picture

And so, let me get this straight as China violates
international law we are supposed to default going
forward to "they have different rules than the rest of the
world?" Does this default rule apply to everything played out on the global stage? Clearly your remark demonstrates
an attitude of with so many of us whats a million or two
here and there? Wasn't it Russia or was it China that
coined the famous phrase one is a tragedy a million
is a statistic.

Missing_Link's picture

Dude.  America violates international law here and there as well.  I say this as a conservative and a patriot, not to pick on the US.

As for that quote about the death of millions, that was Josef Stalin.  Are you REALLY going to compare the 1 billion present-day Chinese to  ...  the single most murderous dictator of all time (yes, bloodier than Hitler)  ...  who happened to be RUSSIAN?


Anonymous's picture

Actually I believe drug smugglers in the U.S. can get the death penalty if the amount is large enough.

This is an old article, but it talks about Newt Gingrich lobbying for expanding the drug crimes punishible by death. The death penalty in the US was enacted in 94 and as far as I know has not been changed or repealed.

Ripped Chunk's picture

Ahh yes! Newt.  One of our greatest congressional leaders.

All these guys have watche "Traffic" and the like way too many times.


Anonymous's picture

"putting someone to death for drug smuggling is stone age..."
You'd have a hard time of convincing the late Barry Seal of that!

percolator's picture

I just wish China would execute bankers rather than a drug smugglers.

chinaguy's picture

China does execute bankers. White collar crime in china is often resolved by execution. None of this 6 months of "country club" jails and then onto the lecture circuit.  Michael Milken and Henry Blodget would both have been executed if they'd tried that nonsense in China (barring proper connections that is LOL)