Spanish Situation Worse Than Expected: China Rumored To Inject $13 Billion Directly Into Spanish Banks

Tyler Durden's picture

As if holding $36 billion (€25 billion) in Spanish sovereign debt wasn't enough, China now appears to be going all in as Spain's white knight. Reuters reports that in addition to keep the government solvent, China is now going direct to Spain's troubled banking system. "Chinese investors including the country's
sovereign wealth fund may inject $13 billion into Spanish banks, a
government source said on Wednesday after Spain's premier met financial
authorities in Beijing." Then again, recall that it was Portugal which relied last exclusively on China as a last chance rescuer. Which is why we disagree completely with this statement: ""If this is true it is positive for the market. If CITIC or another Chinese vehicle invests 9 billion euros that would represent around 5 percent of the equity in the Spanish banking system," said a London-based analyst who asked not to be named."  Uh, no. It means that the market, like a good Pavlovian dog,  will now start dumping Spanish paper in expectations of yet another bailout. And the more Spain is forced to buy to preserve it cross-linked investments in the PIIGS, the more dumping. After all such is life in centrally planned bizarro world.

Per Reuters:

There was no immediate comment from Beijing and it was not clear what terms would make the risk attractive to China, which has invested cautiously in overseas financial markets in the last couple of years partly to avoid any criticism it is squandering reserves.

Concerns about delays in recapitalising Spain's ailing savings banks -- heavily exposed to bad loans from a burst property bubble -- have overshadowed the euro zone state's efforts to convince markets it will not need a bailout.

According to official estimates the savings banks -- which are known as cajas and hold about half the deposits in Spain's financial system -- need about 15 billion euros in fresh funding to meet strict new financial targets.

But private estimates go eight times higher than that when taking into account future losses from real estate writedowns.

How does China plan on throwing good money after bad?

Speaking by telephone from Beijing, the Spanish government source told Reuters that Chinese sovereign wealth fund China Investment Corporation was studying an investment of $9 billion, and that private entities might add an additional $4 billion.

China is looking at two possible investment structures, either investing directly in specific cajas, or savings banks, or creating a general fund that the cajas would be able to tap, another Spanish government source told Reuters in Beijing.

What is more troubling is that Spain now needs the implicit bail out by the ECB, China, and let's not forget, petrodollars:

Spain's borrowing costs have soared in the past year and a half due to concerns about its large deficit, but some confidence has returned as Zapatero has cut spending and pursued the consolidation and recapitalisation of the savings banks.

But while Qatar and United Arab Emirates sovereign wealth funds intend to invest 450 million euros in the cajas, private investors who have looked at the books say they will only invest at a steep discount, due to doubts about the scale of overall losses.

So the only question is whose taxpayers end up footing the bill. Alas, we are confident that once the IMF gets involved in the Spanish bailout some time in September, the answer will be, as always, America's.

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jtmo3's picture

Does it really matter what condition they're in? I mean, after all, it's not like it affects anything anyway.

Oh regional Indian's picture

Actually it matters a lot. Spain is the intended target for EU financial destabilization on a mega-scale. No bail-outs can stabilize the property bubble bursting in spain, which is the saeme thing as saying the banking bubble bursting. And via Santander, South America will get a kick in the gut too. So yes, spain is a big deal.

They lie on the Financial axis, going neatly with the war axis..... when it rains in spain, watch the EU and the Euro go...


falak pema's picture


This guy DSK is destined to play a major role in the coming years as arbitrator of NWO deal making between Imperial USA, surrogate EU and ambitious, independent China : Either as IMF chairman or more likely as new french president. Like the chairman of WTO, Pascal Lamy, he is a french social demorcrat trying to get the world off the head-on collision axis of East-West WAR about OIL/Reserve currency/Creditor-debtor 'grand canyon' divide. But he is a diehard globalist, like all social democrats. He believes that the widening apparent gap in ongoing balancing act,  between USA and China, gives a role to EU/India/Brazil as swing players maintaining a desire to avoid monetary/RM asets supply confrontation from going to nuclear stand-off. Saudi future stability becomes key to this global play. Nobody can survive next two decades without having Saudi oil in their supply basket. If push comes to shove there's where the divide of East-West confrontation will appear. On OIL...Sauron's greasy ring...So lets see if IMF's black prince can maneuver world any where else but to the very brink. 33 rd  circle calling!

Oh regional Indian's picture

Falak, I agree with what you say on an obvious level.

But I see two things a-coming, like a freight train sans brakes.

War and Water (shortages). Water is the new oil and did you know Libya sits on one of the largest, purest fresh water aquifers in the world? Puts a new spin on the regional dynamics, eh? Because at what energy cost does de-salination become ridiculous?

I think oil is dimming, even if not in these maniac's minds. It a bigger play now, a survival play. And DSK is cabal-man, through and through.

And then there is the great re-set, already at work, soon to con-flagerate. The big Abrahamic war of the Judeo-Christian-Islamic "frater"nity-gritty.

And yes, look at that map come alive eh? Spain.... tch...


falak pema's picture

Hum, Libya's fresh water reservoir in Siwa. I'll have to put my water goggles on and dive into libyan sands to verify this new gold mine! Abraham is father of ideological divide like no other. Granted. But to my eternal regret, I feel this is deja vu and should not be on world agenda in a secular western world. But then, when GWB becomes son of Saint Louis who is to tell where the current madness could lead us! Maybe Obama is son of Emperor Titus. Jerusalem destroyed...? or just Gaza? Anything goes as the multiple mirrors now confuse the real with its image. We are in Orson Welles film...the lady from Shanghai...very appropriate title of this day and age! Wasn't she gorgeous!

Harlequin001's picture

Told ya, China creates new money from thin air, uses it to buy a US T Bill and then pledges that as collateral to a European bank for Euros which it then uses to buy Spanish debt. So what if it fails, China simply creates another load of new money, buys another US T Bill and replenishes its collateral to the European bank.

If China only gets 1 cent on the dollar in a Spanish default they've done well, because that 1 cent is callable against a Spanish bank for as long as it takes to be repaid. This needs to stop.

China is creating money from thin air to buy Spanish real estate and other assets from those that have been foreclosed upon. There should be riots.

and by that I mean against our own politicians...

ElvisDog's picture

I disagree. Many people think the Chinese leadership is wise and is following a Machiavelian plan for world domination. I think China is stupid and is throwing money down the Spanish rat hole. Spain is going to need just as much money next year, and the year after that, and the year after that. China is buying a stake in an asset that is certain to depreciate in the future.

Harlequin001's picture

Without credit their sovereign fund is worthless. They have no choice but to bail out Europe, and the US and everyone else.

Now that they need a weaker currency the gloves are off, they create unlimited quantities of new cash and simply stuff it into CIC.

For a s long as there is a race to devalue currency they can literally buy up the entire planet without going anywhere near a US T Bill if they choose.

The only thing that can stop this is a gold standard.


falak pema's picture

Not from thin air : based on its USD reserves, its 9% growth, it's annual trade balance which is very positive. So they have reserve assets they want to get rid off (USD to Euro switch), and access potentially to EU market for their products later on through direct investments in Spain.

Harlequin001's picture

Bernanke is going for a weaker dollar, China wants a weaker Yuan, they can simply create as much money as they need and if markets devalue the Yuan it is to their advantage.

The idea that foreign reserves have any relevance went out the window as soon as the race to devalue currencies relative to each other began. There is no limit or end to this until we have stronger currency ergo we need a gold standard, nothing else will do it.

falak pema's picture

I agree the current currency war is leading to some type of gold standard readjustment. The IMF says the same. But Bernanke won't hear it. So the currency war goes on untill the USD falls and then the basket currency plus gold standard will become necessary. But in much worse macroeconomic conditions for the world as the main current culprit of monetary mayhem : USA,  won't throw in the towel. We will get there. What China does with it's "phony" money buying other "phony" Euro money, selling it's phony USD is of no real issue relative to other "hard assets". It will continue to fuel world inflation.  But it allows everybody to reposition in the waiting game as the currency war will inevitably lead to a collective collapse. All players will then come to the table in the dust of the ruins of USD hegemony. We will be post-2012 elections and the bitter pill will be sold to the plebes all around. China has least to lose in this waiting game...

ivana's picture

+1 looks like that but someone powerful may decide to stop that path and re-ignite financial armageddon ... if they see they are loosing

ElvisDog's picture

China's 9% growth is an illusion based on building empty cities and enormous malls with no customers.

jtmo3's picture

Well, it's not like they're going to kick the can for several more years. It only matters to those who think rationally, not to those that exercise their legs for further work. In the end, this means shit for years to come, if even then. The bias is to continue the status quo for as long as humanly possible, and that's what'll happen here as it has in every other ponzi scheme.

Green Leader's picture

That's  exactly why Spain has been turned into almost a desert with chemtrails and geoengineering in preparation for the big blow. This has been going on for several years now.

When Spain goes, Europe goes.


MK ultra's picture

Chemtrails are a load of bunk. You've been sucking on Alex Jones too long. When the green extreme tree hugging dirt worshipers can't argue using facts they come up with crap like this.

Green Leader's picture

1) I happen to live in an area under heavy attack, I don't need that Alex Jones Psy-ops site to teach me anything.


2) I am an environmentalist of the Torah, not a tree hugger.

Harlequin001's picture

Europe is not going to go. China is happy with a weaker currency which means that sovereign funds are now a whole new ball game.

CIC can bail them all out, it's just that Europe then ends up in debt to China for borrowing money that is not real.

It's treason perpetrated against the Spanish people by their own government, pure and simple.

falak pema's picture

The Oligarchy wins the people lose. Quite right. Except now, more and more, the Oligarchy is Chinese fat cats and not US fat cats. That's the change in NWO mix. It galls the hell out of TPTB in DC and WS. But what choice to they have anyway? Their money is shill and their trade balance is steep uphill!

Harlequin001's picture

Quite right, and it doesn't matter whether the money is real or not is still has to be repaid. There is the treason perpetrated against the people by governments through fiat money.

i-dog's picture

"more and more, the Oligarchy is Chinese fat cats and not US fat cats"

"The Oligarchy" are neither Chinese nor US fat cats ... they are very old European family bloodlines that long pre-date the founding of the US. The fat cats are simply hangers-on with contacts that enable them to amass paper wealth while the oligarchs are working to separate objectives (population reduction and a return to global feudalism).

The oligarchs don't actually need money -- because they "own" the critical assets: your ass and the land it is sitting on. They can make a few extra hundred billion peasant dollars any time they like (as they have been doing for many hundreds of years) through the collection of "indulgences" from the fat cats who do the actual dirty work of drug trafficking, slave trading, war profiteering and financial shenanigans.

Oh regional Indian's picture

Very nice i-dog. A straight cut to the chase. The hidden hand. 

Can you imagine being a fly on the wall of a Battenberg strategy session?



falak pema's picture

all bloodlines comes to an end. But the oligarchical mantra never dies. That's the bottom line. Don't chase this on a hereditary basis, rather on a sociological basis. A good 'top of the heap' strategy will always find new leaders, irrespective of 'bloodline'.

FeralSerf's picture

Spain and the rest of the EU's insolvent countries are destined to become Chinese colonies.  It's much cheaper, quickier and potentially more successful for China to acquire colonial possessions with their soon-to-be worthless USDs than build up a military to accomplish the same as America has attempted to do the last 100 years.

In the bigger picture, China becomes the saviour that all the PIIGS and some of the others that aren't classified as such (Belgium and France come to mind) are looking for, and China gets a place to sell their manufactured goods that it has no internal use for.   China must also keep all those Chinese peasants at work 60 hrs. or so per week at starvation wages.  Idle hands, devil's workshop and all that jazz.  The alternatives are too frightening for the commisars to contemplate.  It's only (paper) money.

The Anglo-American Axis of Evil is due for replacement.  Don't expect them to die quietly or non-radioactively, though.

ElvisDog's picture

Oh really. You think that Euros accustomed to a life of relative government-funded ease are going to quietly take being exploited by a country half a world away populated by people of a different race who speak a language that is incomprehensible to them? Europeans have a long history of xenophobia. And exploited they will be. There would no reason for China to do what you suggest unless they were profiting significantly for their effort. What you write may be the Chinese leadership's plan, but I don't think the people in their prospective colonies will sit still for it.

FeralSerf's picture

If properly indoctrinated the colonials won't know what hit them.  The sheep will happily believe that their Chinese friends/masters are just enslaving them out the goodness of their hearts, just like the Anglo-Americans did previously.  The few that bleet will be written off as kooks.

It's all in creating the necessary perceptions and owning the media, politicians and bankers.  The technology for this sales job has been honed to perfection in the last 50 years.

Reptil's picture


nailed it. Expect Peking Duck on the spanish costas from now on.

Harlequin001's picture

Expect the media to tell us how the Chinese are doing us a favour by buying up all our assets with non existent money, and then expect them to rant about how we must repay them...

tired1's picture

Quite a few Chinese restaurants there already. And like in most places where they are 'foreigners' they stay out of sight. They just work and save their money.

OliverTwist's picture

Spain and the rest of the EU's insolvent countries are destined to become Chinese colonies.  It's much cheaper, quickier and potentially more successful for China to acquire colonial possessions with their soon-to-be worthless USDs than build up a military to accomplish the same as America has attempted to do the last 100 years.


After you acquire colonial possessions though, is precisely the point where it starts to get expensive to protect your "national" interests which became international.

CPL's picture

The answer to failure is to print more money.  Just think of it as a POMO injection abroad.

Thomas's picture

China really has embraced capitalism: they are acting like complete dumb shits.

EscapeKey's picture

No, they're not. They know exactly what they're doing.

They know the capital will never be returned, what they buy is political influence - historically, the main weapon of the US.

Ray1968's picture

Yes, they have learned well. The student has become the master.

Careless Whisper's picture

oh really. i want you to close your eyes and imagine what shanghai looks like. ok. are you ready? here it is:


ihedgemyhedges's picture

You sure that's not Detroit???????

ElvisDog's picture

That's not even a real picture. It's a cartoon rendition of Shanghai. It reminds me of the cover pictures on Oprah's magazine.

Careless Whisper's picture

i know it's hard to believe, but dewd it's real. here's wikipedia - same


Sudden Debt's picture



It’s quite chocking because only 37% of the American still believe that Capitalism is the best economic system and most people tend to like the socialist system. This number is down from 80% in the US in 2002.


When GlobeScan began tracking views in 2002, four in five Americans (80%) saw the free market as the best economic system for the future—the highest level of support among tracking countries. Support started to fall away in the following years and recovered slightly after the financial crisis in 2007/8, but has plummeted since 2009, falling 15 points in a year so that fewer than three in five (59%) now see free market capitalism as the best system for the future.

GlobeScan Chairman Doug Miller commented: “America is the last place we would have expected to see such a sharp drop in trust in the free enterprise system. This is not good news for business.”

The results mean that a number of the world’s major emerging economies have now matched or overtaken the USA in their enthusiasm for the free market. The Chinese and Brazilians, 67 per cent of whom regard the free market system as the best on offer, are now more positive about capitalism than Americans, while enthusiasm in India now equals that in the USA, with 59 per cent rating the free market as the best system for the future.

Among the 20 countries polled in both 2009 and 2010, an average of 54 per cent today rate the free market economy as the best economic system, unchanged from 2009.

Americans with incomes below $20,000 were particularly likely to have lost faith in the free market over the past year, with their support dropping from 76 per cent to 44 per cent between 2009 and 2010. American women have also become much less positive, with 52 per cent backing the free market in 2010, down from 73 per cent in 2009.




The second chocker is that MORE PEOPLE IN CHINA BELIEVE THE FREEMARKET principle then in the US!





ZakuKommander's picture

Incorrect.  They are gaining the ability to control the fluctuation of the Euro, and hence the dollar, and hence the markets.  Subtle, nuanced and clever.

nobusiness's picture

This is a rounding error compared to what the US owes China

hedgeless_horseman's picture

It means that the market, like a good Pavlovian dog,  will now start dumping Spanish paper in expectations of yet another bailout.

Where there are Chinese firefighters there is usually a (currency) fire.

Cdad's picture


So Europe is going under now...or at least 30% of its economy, and...

...over at the BlowHorn [CNBC] E. Burnett and M. Haines have been deeply involved in a conversation about whether cosmetic surgery is necessary to maintain a strong career.

Also, and OT, after being lied to about JPM qtrly earnings, now we discover that we were lied to [by the Street] about increases in dividends.

Well, you can see why the VIX is falling, and stocks are rising on virtually no shares traded whatever...because after all, aren't you encouraged?

Hello cosmic bunny hole...with your RSI hitting infinity....twice today!

SheepDog-One's picture

Hey Erin, go for it and up the B cup to a D!

ElvisDog's picture

Well, Mark Haines has determined that a massive comb-over is necessary for his career.

vote_libertarian_party's picture

clink..clink....clink  (kicking the can down the road)