Where In The World Is Zhou Xiaochuan? Stratfor Provides Update As 1 Month Chinese Repo Surges By 50%

Tyler Durden's picture

For those seeking an update on today rumor du jour, here is Stratfor with some additional insights, if nothing definitive yet. But before we get into that, we have received the following update from our Chinese media readers across the Pacific: "Here is the link of the Ming Pao report. http://inews.mingpao.com/htm/INews/20100830/gb11502c.htm It says that "China may punish Zhou because China lost $430 billion foreign exchange on its Fannie and Freddie bond investment". It doesn't say anything about U.S. Treasury Bonds. The truth is that many Chinese thought China lost all its investment in Fannie and Freddie after they were delisted from NYSE. It is also wrong because China doesn't invest with their stocks." All in all, seems like lots of confusion pretty much everywhere, although the market is not taking any chances, with China's 1 Month Repo exploding by nearly 50%.

From Stratfor


STRATFOR is continuing to examine unconfirmed rumors that Zhou Xiaochuan, governor of the People's Bank of China, fled China to the United States. The origin of the report has been hard to track, especially due to censorship of websites discussing the rumors, so the unconfirmed rumors remain just that -- unconfirmed. However, if true, these rumors could have significant implications for China and for Sino-U.S. relations.


STRATFOR is continuing to investigate unconfirmed rumors circulating in Chinese media to the effect that Zhou Xiaochuan, governor of the People's Bank of China, has fled China to the United States. At present there is still no confirmation.

The provenance of the rumor has proved hard to track. A report attributed to Hong Kong's Ming Pao newspaper on Aug. 28 said that Zhou might be punished for a large loss on U.S Treasury bonds worth $430 billion, and that the Chinese government might also punish others in the People's Bank of China. The report allegedly originated on an unknown but "major" Chinese discussion forum, and that forum suggested that Zhou had left the country. Ming Pao denied it had published the report Aug. 30, saying others had used Ming Pao's name without permission to distribute the rumor. STRATFOR has not yet been able to track down the original report, most likely because the Chinese government appears to be actively censoring websites discussing the rumors, deleting some web pages and blocking search engine results that involve Zhou's name and words relating to a possible defection. Rumors have continued to circulate on Chinese blogs and web forums, in particular suggesting that Zhou may have defected to the United States. The reports are still posted on the blog of a professor, Liu Bingfu, whose career experience suggests he is a notable, if minor, academic.

Zhou cannot be confirmed to have appeared in public since the rumors began. The official website of the People's Bank of China has reported on Zhou's activities Aug. 30 -- such as attending meetings with officials from Japan and Italy -- in what appears to be unusual coverage, including photos, and may be an attempt to counteract the rumors. The pictures were taken from a distance but do appear to show Zhou, though it cannot be confirmed whether the photos were in fact taken on Aug. 30. Zhou's last televised appearance was on Aug. 26 on CCTV, attending a conference with Chinese Premier Wen Jiabao, and images of the TV appearance also seem to show Zhou. Zhou had attended official events Aug. 10, in which he called for China to continue developing its western regions, and Aug. 3, when he met with his South Korean and Japanese counterparts.

Therefore what STRATFOR has at the moment remains unconfirmed rumors. If the reports are false, it would seem likely that Zhou will make a public appearance soon to dispel them. Otherwise speculation will continue. There are constantly rumors that high-level Chinese officials are in danger of a downfall, especially dealing with economic policymakers amid the economic challenges in recent years -- this year alone, such rumors have touched Wen and top banking regulator Liu Mingkang. Similarly, China has undertaken an extensive drive over the past year targeting corrupt officials, and a variant of the rumors about Zhou suggests he has disappeared from the public spotlight because he is under investigation for corruption.

What makes the rumors about Zhou more interesting, beyond his position as governor of the central bank, is the specific claim that he has defected to the United States. If true, this would have serious ramifications for domestic and foreign perceptions of China's political and financial stability, as well as for U.S.-Chinese relations. Though the rumors may prove false, their emergence alone likely suggests an attempt to detract from Zhou's reputation. This could be related to his economic policies -- while the rumor of a loss of $430 billion related to U.S. Treasury bills is difficult to comprehend without more context, China has recently adjusted its foreign exchange reserve management, or Zhou may have been targeted as part of the factional struggles ahead of leadership transition in 2012. However, it is relatively rare in China for political leaders to be punished for failed policies, and more likely the consequence of scandals, misconduct or political purges.


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MichiganMilitiaMan's picture

Finally, a Black Swan with consequence?

Careless Whisper's picture

nah, he's just having lunch exactly where you would expect him to:




Ripped Chunk's picture

Great Ad. What did they pay you to post it here?

JLee2027's picture

Great website. No directions or any idea where the restaurant is located.

walküre's picture

about time the cracks start to appear.

dryam's picture

Confusion bitches!

kathy.chamberlin@gmail.com's picture

confucius bitches† get it, china and all.

Rusty Shorts's picture

"He who will not economize will have to agonize."


Confucius bitchez.

Spitzer's picture

This is just anchorman humor but "confusion bitches" just made me laugh my ass off.


ColonelCooper's picture

The man who taught me nearly everything I know about business used to use a phrase once in a while that I was reminded of when I read that comment:  "Where there's confusion there's opportunity." 

Usually it was used to explain why our competition was running things so  blatantly fucked up.  Every once in a while it explained why we were.

Ragnarok's picture

Financials selling off...

Pladizow's picture

Ping ching ta ting tow repo BITCHES!

Greyzone's picture

Let's stop and think about this. What if this is deliberate warfare? China sacrifices a pawn to expose (indirectly) that China is massively short USTs and that the recent rally was just a covering rally. What happens to USTs in the aftermath? What if China is really short USTs?

I wouldn't count on this being as obvious as some people seem to believe.

aurum's picture

thats an interesting thought. short treasuries.....they are already withholding REE's, loading up on commodities, telling their people to by PM's.....what would we do if they had all the pieces in place to suddenly and fully pull the rug on the treasuries? nuke them? we dont have enough troops for combat...if the oil nations, russia, and china collaberated against us what would we do?

Spalding_Smailes's picture

We could place a 150% tariff on everything made in China. Tell the American people we are going to bringing manufacturing home. Jobs building the new plants & retooling ect, a boom for all Americans.

aurum's picture

i am looking beyond a tariff imposition. they (China) will have obviously thought well through that possibility in the hypothetical chess game when it finally comes down.......us manufacture? and what will we do in the interim period to build the necessary infrastrucure with a worthless dollar while heavily addicted to foreign oil?.not so fast...our nat gas would help but we are nowhere near ready for any type serious of oil/nat gas swap.

SheepDog-One's picture

Sure, a boom for all americans to bring back all our manufacturing....and that would take how long to start? 30 years minimum? Took 30 years to transfer it all overseas after all.

Lux Fiat's picture

Had a conversation with someone who worked in the manufacturing space a few months back.  I had been of the opinion that the US would be looking at a 10-20 year time frame to rebuild industries moved overseas in the event of a (further) significant drop in the USD.  Sort of taking the "it didn't happen overnight and it won't turn around overnight" approach.  He surprised me by saying that it would be a much faster process, with a lot of it back in 2-3 years.  Any thoughts/opinions from those who are actually in the manufacturing area would be interesting.

I guess one could consider that a possible silver lining to Greyzone's unsettling, but very interesting, comments.

aurum's picture

i'd like to know how he determined that time frame and if he truly considered the ramifications of a defacto bankrupt nation trying to pull off the infrastructure rebuild.....i think it would take a lot longer than that....look around now and how slow things move...shit it takes months upon months to repair existing roads let alone building an entirely new infrastructure from the ground up..one that ends an addiction to oil...i personally dont buy 2-3 years..i am in to the 10-20 camp.

Lux Fiat's picture

His thinking centered on two beliefs.  1) Scarcity and prices of imports would rapidly create the opportunity to make large profits on some manufactured goods.  Those who had hard wealth or access to materials would build factories, etc. to take advantage of the outsized profits to be made, at least in the shorter term.  Depending on the level of trade barriers, exports could be highly profitable.  2) Gov't reprioritization - thought was that there still would be some form of central and state gov't around and that they would make reestablishment of domestic manufacturing capacity a priority.  Sort of akin to what happened during WWII.  It's amazing what can be accomplished in a relatively short amount of time when regulations get kicked to the curb, and complete, unrelenting focus is on getting it done fast, versus making sure that every disadvantaged and connected group gets it's piece of the pie.  He felt that in the aftermath of a currency crisis, as a nation we would have a relatively quick mind-shift as to what is truly important, especially in a "just-in-time" environment where we won't have 6 months to dither while burning off existing inventory.

As you mentioned, energy would be a/the major problem, and would likely be rationed until nuclear and other truly viable ( i.e. cost-effective sources vs political boondoggles) could come online.  Even then, don't think energy prolifigacy would ever return in a manner similar to today.

Re natural resources - his take is that our national parks are full of them.  As an avid camper, not a comforting thought, but when things get dicey, what's nice to have versus a must have can get redefined in pretty short order.

I don't know if he is right, but he's not an idiot either.  However, from my viewpoint, his scenario is largely dependent on US citizens pulling together in the face of adversity - again, ala WWII.  If that doesn't materialize, then a lot of things start going out the window.

SheepDog-One's picture

Sure, a boom for all americans to bring back all our manufacturing....and that would take how long to start? 30 years minimum? Took 30 years to transfer it all overseas after all.

SheepDog-One's picture

Sure, a boom for all americans to bring back all our manufacturing....and that would take how long to start? 30 years minimum? Took 30 years to transfer it all overseas after all.

SheepDog-One's picture

Sure, a boom for all americans to bring back all our manufacturing....and that would take how long to start? 30 years minimum? Took 30 years to transfer it all overseas after all.

redpill's picture

If true, this has black swan event written all over it

Caviar Emptor's picture

Things are not as they seem. There's lots going on behind the scenes concerning exchange rates, dollar debt, contradictory central bank policies and, yes, SDR. 

The longer the crisis drags, the more the problems percolate to the surface. Even the mighty mountain backdrop of Jackson Hole couldn't inspire confidence. 

Just as easily as they can say Zhou "lost us money", they can mean "you owe us".

cougar_w's picture

A while back, the US Congress was debating whether to label China a currency manipulator and merchantilist trader. On the very eve of meaningful actions, China reports that for the first time in years they had a trade deficit with the US. They could have made the numbers up on the spot, nobody has any idea what their balance of trade really is.

All the same, nothing happened in Congress that day. Everyone avoided a difficult action motivated as much by politics as anything else. Sigh of relief.

Fast forward to today. Rumors from China that something big is amiss. This, on the Monday after BB says "QE2 to infinity". Well now, we wonder what the Chinese thought of all that talk. Maybe come Monday morning we're finding out. If the Chairman of the PBoC "takes one for the team" even symbolically then it might signal a conflict between them and the FED and their fake-it-til-we-make-it policies.

It's Kabuki theater. You pay less attention to the players and more attention to the movements. After a bit, it's not as retarded as it seems.

firstdivision's picture

Holy shit, I was actually right.  I need to screen shot my post in the original thread, as to this does not happen to me often

Incubus's picture

430 billion is nothing these days.  Ben wipes his arse with that much after taking a dump. 


oh... nvm that stuff is actually coming out of his ass, he doesn't wipe, it seems.

geminiRX's picture

That would almost pay off the entire Canadian national debt.

Mentaliusanything's picture

I beg to disagree. 430 Billion is a bastard to cover. If true, somethings going to get a smack down.

Bubble Ben would love to have it as QE Lite

unwashedmass's picture


black, black swan.

carbonmutant's picture

Somebody has been unloading Goldman shares in the pits all afternoon...

TOS traders have been riding it down.

Leo Kolivakis's picture

Too much drama for me! Robo, what do you think?

Careless Whisper's picture

oh i love that drama


big banks and retail... anyone see a bid today?


kathy.chamberlin@gmail.com's picture

massage bitchez!

what was she massaging, i couldn't tell?

hey, why doesn't anybody answer. is this what massages consist of. ? really, why no answers, do they rub out the men? is that legal?

akenathon's picture

if this is true expect Gold to at least triple...

MayIMommaDogFace2theBananaPatch's picture

Well, for a portion of a minute, anyway...

Quinvarius's picture

If he has not left yet, he should.  They will probably kill him just to make sure anyway.

J.B. Books's picture

Gee, and I worry about my $2,600 house payment. 400+billion loss..

What if the Fed was on the other side of the trade...? And what if the Fed (using the power of the Fed) just screwed the Bank of China to the tune of 400+ billion...

LOL...  that's a nervous laugh btw..!

J.B. Books.


Caviar Emptor's picture

Not a chance. Central banks don't trade. They hold to maturity for the interest. 

Chartist's picture

I hear you....I worry about my $2200/month health insurance payment...

Hank Scorpio's picture

21st Century Franz Ferdinand? 

Sudden Debt's picture

they were delisted from NYSE



Did I miss something? My goldfish are called Fannie and Freddy! WHAT THE HELL DID THEY DO WRONG!!!







Miles Kendig's picture

See what happens when chasing the dragon leads to an inability to roll over...

Bearster's picture

It makes more sense that they lost on Fannie and Freddie. Given that UST's are rallying big time, it's hard to see how they could have lost unless they tried to day trade.

In which case I don't see how this is news for US markets.  For China, perhaps this is a big news item.