Will LGIVs Be The 'Straw' To Break China's Credit-Fueled Growth 'Back'?

Tyler Durden's picture


We presented a detailed look into China's credit bubble earlier this week and why serial-extrapolators may well have to adjust their strategy calls sooner rather than later; but the more we look around in the detritus of China's non-centrally-issued datasets, the more concerned we become. To wit, the major issuance of local government investment vehicles (LGIVs) in the last few months to stabilize growth amid falling fiscal revenue growth. The unintended consequence of PBoC-sponsored debt restructurings (as Barclays notes, rolling over debt via the issuance of new products or buyouts by asset management companies) is creating a false sense of security for these instruments, reinforcing the belief of an 'implicit government guarantee'. We tend to agree with Barclays when they conclude that the underestimation of the credit risks in both the trust loans and bond markets could induce excessive risk-taking - and warrants extremely close monitoring.


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Fri, 11/23/2012 - 20:41 | 3007750 Aziz
Aziz's picture

And there I was thinking LGIV was some kind of sexually transmitted infection.

Fri, 11/23/2012 - 20:43 | 3007758 urbanelf
urbanelf's picture

That doesn't mean we're not fucked.

Sat, 11/24/2012 - 01:23 | 3008113 markmotive
markmotive's picture

According to this China is worst of its slowdown.


Sat, 11/24/2012 - 05:54 | 3008196 Non Passaran
Non Passaran's picture

thanks for the pointer man, you are a savior.
I will buy a 3x China long etf first thing Monday morning!

Sat, 11/24/2012 - 08:52 | 3008247 GetZeeGold
GetZeeGold's picture



Is it time to roll out the US CDS.....or should we wait until after Christmas?


Yeah.....I said Christmas....deal with it.

Sat, 11/24/2012 - 09:38 | 3008272 laozi
laozi's picture

Actually, now when I think back, James G Rickards said in the spring that China's economy would pick up speed after this summer. Just by looking at the Iron ore price it looks like the man was correct AGAIN.

Good for us the man is a goldbug too, otherwise I would have to sell my PMs.

Sat, 11/24/2012 - 22:16 | 3009228 obejoyful
obejoyful's picture

China is screwed, total econonmy based on US descretioary spending.   You guys sound like CNBC.

Fri, 11/23/2012 - 22:01 | 3007759 ACP
ACP's picture

Yes, it works by infecting banks to the point where it weakens the country's immune system, allowing any sudden illness to kill the financial system.

Edit: Speaking of China..."Our house...in the middle of the street, our house..."


Fri, 11/23/2012 - 22:39 | 3007946 This just in
This just in's picture

Evictile dysfunction

Fri, 11/23/2012 - 20:52 | 3007777 Lagging Indicator
Lagging Indicator's picture

I thought it was some kind of high-speed train.

Fri, 11/23/2012 - 21:09 | 3007803 tooriskytoinvest
tooriskytoinvest's picture

All Hands On Deck! China flexes naval might amid islands row

Fri, 11/23/2012 - 22:19 | 3007913 Ginsengbull
Ginsengbull's picture

How do you sink a Chinese submarine?


Knock on the hatch.

Fri, 11/23/2012 - 22:43 | 3007954 This just in
This just in's picture

Weigh it down with worthless US treasuries!

Sat, 11/24/2012 - 15:57 | 3008668 Mountainview
Mountainview's picture

The Chinese can always sell some UST to fix their holes...

Sat, 11/24/2012 - 08:59 | 3008251 Jason T
Jason T's picture

China puts out 20 engineers for every engineer we put out.. not to mention they spent $1 trillion more on gross  capital formation than the US in 2011. 

so long american empire ..dollar reserve currency.

Fri, 11/23/2012 - 21:23 | 3007831 Yen Cross
Yen Cross's picture

 Does anyone ,actually believe those "change over #'s"?   I have some [ghost cities] for sale...

  China is internally above 50% on PPi?  I just barfed up a LUNG!

Fri, 11/23/2012 - 21:30 | 3007847 nonclaim
nonclaim's picture

government investment vehicles -> GIV


That's the problem with government investing... GIV and never ask back.

Fri, 11/23/2012 - 21:47 | 3007870 OneTinSoldier66
OneTinSoldier66's picture

Too bad China doesn't have any Gold.

Fri, 11/23/2012 - 22:06 | 3007898 Yen Cross
Yen Cross's picture

China has "1.3 billion Hungry mouths" , Peter Schiff.  Yes I have metals.

Sat, 11/24/2012 - 05:43 | 3008194 Non Passaran
Non Passaran's picture

no 1 producer in the world, no?
plus have a shitload of bonds that can be converted into gold

Fri, 11/23/2012 - 21:49 | 3007871 disabledvet
disabledvet's picture

how does a society that is still for the most part stuck in the Middle Ages have a housing bubble in the first place? I mean "that's a lot of peasants bro."

Fri, 11/23/2012 - 22:14 | 3007908 alentia
alentia's picture

The same housing bubble they have in Moscow, Russia in the same "middle ages". Where as average family (shitty) appartment cost x 200 yearly average salary. The price is sustained by oil price. This bubble is not to burst any time soon, though.

Sat, 11/24/2012 - 09:21 | 3008265 laozi
laozi's picture

Do you know that in the height of the Japanese bubble (1980), real estate in central Tokyo were priced 100 times Manhattan.

Have you seen 100x Manhattan prices in Shanghai yet? No you have not.

I am just telling you how crazy it CAN be, when a country gets hyped up. Not sure it will get this far with China though.

Fri, 11/23/2012 - 21:53 | 3007877 steve from virginia
steve from virginia's picture


Rest assured, when the time comes the Chinese establishment will roll out MORE acronymic 'products' in order to bail out holders of LGIV bonds.


As long as the suckers keep buying ... keep selling!

Fri, 11/23/2012 - 22:19 | 3007914 alentia
alentia's picture

Absolutely agree. China fiscal policies are politically driven in most of the cases. Who cares about "other people's money" when party's (politburo) prestige is at stake.

Fri, 11/23/2012 - 22:36 | 3007904 Yen Cross
Yen Cross's picture

 China can't contain "North Korean" refugees?   Shit, the United States gives them Drivers Licenses!

 I'll go into exports tomorrow!

   China is moving massive Over night swaps on their banks, to avoid INFLATION!

Fri, 11/23/2012 - 23:09 | 3007985 Caviar Emptor
Caviar Emptor's picture

China elite merely immitating Western elites (in 3 simple steps): Step 1-Print money Step 2-Hand Joe Public rope to hang himself in the form of irresponsible loans using printed cash Step 3-Watch bubbles grow Step 4-Stop irresponsible loans and watch bubbles burst: Joe Public goes into eternal debt servitude, or bankruptcy with even longer debt servitude, suicide or jail. 

Sat, 11/24/2012 - 00:24 | 3008071 Youri Carma
Youri Carma's picture
ICBC exec: Asset securitization to boost capital
18 November 2012
, Beijing (MarketWatch)

-- ICBC Vice President says asset securitization can help banks achieve Basel III capital ratios

-- China is restarting asset securitization after a three-year hiatus

-- PBOC adviser says securitization can reduce system risks

Sat, 11/24/2012 - 00:42 | 3008079 Yen Cross
Yen Cross's picture

 Beautifull.  Keep it simple!  China is "destitute"!

Sat, 11/24/2012 - 02:50 | 3008150 Yen Cross
Yen Cross's picture

 Tyler I used both my Ice Cream  [4.0] android phones on Z/H site... Those annoying pop up ads?  They make my 1.2 GHZ  quad core processors skip!

  Please, no popups on smart phones Tyler... FUCK old navy! back to tried and true( sat com)...

  Shit man! How much adverts. do ya need?

Sat, 11/24/2012 - 03:00 | 3008160 CPL
CPL's picture

Root your phone and do what you would do to a browser?

Sat, 11/24/2012 - 06:21 | 3008206 laomei
laomei's picture

Ya, seriously... I didn't even know that there were ads here until someone mentioned it.  

Sat, 11/24/2012 - 09:49 | 3008279 Strelok
Strelok's picture

Yep, Adblock ftw.

Sat, 11/24/2012 - 09:49 | 3008277 John Snow
John Snow's picture

Tyler, I'd pay for ad free content

Sat, 11/24/2012 - 10:55 | 3008314 BurningFuld
BurningFuld's picture

Firefox + Adblock = There are ads on the internet???

Sat, 11/24/2012 - 10:41 | 3008300 falak pema
falak pema's picture

grasping for straws, you can't see the scarescrow on WS; its big bad Ben.

Where is Al PAcino?

Mon, 11/26/2012 - 00:50 | 3010707 chump666
chump666's picture

What an awful f*cked up country.


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