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Chinese Auditor Warns "Out Of Control" Chinese Debt Could Spark Bigger Crisis Than US Housing Crash

Tyler Durden's picture


"This could be even bigger than the US housing crisis," warns senior Chinese auditor Chang Ke, as his accounting firm has all but stopped signing off on bond sales by local governments (as we warned most recently here). As the FT reports, Zhang's firm "audited some local government bond issues and found them very dangerous," as they don't have strong debt-servicing abilities. "It is already out of control," he continues, "the only thing you can do is issue new debt to repay the old," he said. "But there will be some day down the line when this can’t go on." With more than 2,800 counties having discovered the investment-vehicle-bond (a way to avoid the prohibition or directly raising debt), Zhang notes that this "frightening" evolution has led to a situation where he puts little faith in the government guarantee, advising that "when the time comes, it won’t be the government that assumes responsibility. It will be the accounting firms and the banks that do."

Via The FT,

A senior Chinese auditor has warned that local government debt is “out of control” and could spark a bigger financial crisis than the US housing market crash.


Zhang Ke said his accounting firm, ShineWing, had all but stopped signing off on bond sales by local governments as a result of his concerns.


“We audited some local government bond issues and found them very dangerous, so we pulled out,” said Mr Zhang, who is also vice-chairman of China’s accounting association. “Most don’t have strong debt servicing abilities. Things could become very serious.”




“It is already out of control,” Mr Zhang said. “A crisis is possible. But since the debt is being rolled over and is long-term, the timing of its explosion is uncertain.”




Local governments are prohibited from directly raising debt, so they have used special purpose vehicles to circumvent these rules, issuing bonds under the vehicles’ names to fund infrastructure projects.


Investment companies owned by local governments sold Rmb283bn of bonds in the first quarter of 2013, more than double the total for the same period last year. Such an increase would normally be expected to boost the economy, but China’s growth unexpectedly slowed to 7.7 per cent in the first quarter of 2013.




“The only thing you can do is issue new debt to repay the old,” he said. “But there will be some day down the line when this can’t go on.”


Mr Zhang added that he grew alarmed when smaller towns and counties discovered that investment vehicle bonds were an easy way to raise financing. “This evolution was quite frightening,” he said. “China has more than 2,800 counties. If every county issued debt, it could lead to a crisis. It could be even bigger than the US housing crisis.”




But Mr Zhang puts little faith in official guarantees, ...: “When the time comes, it won’t be the government that assumes responsibility. It will be the accounting firms and the banks that do.”




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Wed, 04/17/2013 - 20:44 | 3464248 AlphaDawg
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shit hole

Wed, 04/17/2013 - 20:45 | 3464251 FinalCollapse
FinalCollapse's picture

Send them Krugman with $1T platinum coin.

Wed, 04/17/2013 - 20:55 | 3464294 Pure Evil
Pure Evil's picture

Som Ting Wong

Wed, 04/17/2013 - 21:51 | 3464492 TheFourthStooge-ing
TheFourthStooge-ing's picture

Ah, very much the wrongness will corresponded on some thing, and somehow that is very something.

Calling for a worse alternative works wonderfully. Can never hide the current reality, though.

"when the time comes, it won’t be the government that assumes responsibility. It will be the accounting firms and the banks that do."

This sort of outcomes tells somehow very much of incongruity with US houses crashed. US accounting firms, banks, Too Big Too Failings investment financial stuff stand far above when it comes to Ponzi, kicking the can, shifting the blame and so other things. With avoiding penalties of severity these guys managed evasion on even the unlethalest stuff aplombously.

Does not align with stated consequences on Chineses banks and stuff. Leaves trail of non sequiturous droppings.

Wed, 04/17/2013 - 21:57 | 3464533 ACP
ACP's picture
"Today, a Senior Chinese auditor with accounting firm ShineWing, was found floating face down among several dozen dead dogs, chickens and pigs in the Yangtze river..."


Wed, 04/17/2013 - 22:20 | 3464625 nmewn
nmewn's picture

The crustyness of inconsequential people matterings.

Wed, 04/17/2013 - 23:48 | 3464984 OpenThePodBayDoorHAL
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favorite soup at lunchtime Cream of Sum Yung Gai

Thu, 04/18/2013 - 06:54 | 3465504 TwoShortPlanks
TwoShortPlanks's picture

Party on Wayne!

Wed, 04/17/2013 - 20:58 | 3464302 AlaricBalth
AlaricBalth's picture

China Daily, 17 April 2013 : A suicide was reported today by Beijing authorities. Mr. Zhang Ke of the ShineWing accounting firm was found dead floating in the Yongding River with two self inflicted bullet wounds to the back of the head...

Wed, 04/17/2013 - 21:07 | 3464330 toys for tits
toys for tits's picture

Bill his family for the bullet.

Wed, 04/17/2013 - 21:09 | 3464339 Burt Gummer
Burt Gummer's picture

"A suicided was reported today by Beijing authorities."



Wed, 04/17/2013 - 21:53 | 3464504 Buck Johnson
Buck Johnson's picture

No kidding, it's about to implode in China.  It will be bad.

Thu, 04/18/2013 - 09:47 | 3466103 e-recep
e-recep's picture

there are so many things floating on chinese rivers these days.

Wed, 04/17/2013 - 21:03 | 3464320 nmewn
nmewn's picture

But but but...the financial black hole (that is China) was going to save the world!!! ;-)

Wed, 04/17/2013 - 21:33 | 3464419 Winston Churchill
Winston Churchill's picture

The Chinese 'put back' provision in the servicing agreement will be enforced with T-80 tank's.

Let me guess,US banks set up this scheme, US banks will end up owning it.

If you think this is a Chinese problem, you are wrong.

Isn't globalization great ?

Wed, 04/17/2013 - 21:55 | 3464515 nmewn
nmewn's picture

The T80 will run out of gas before it gets to the

It works like this, if I had an unbelievable amount of debt issuance and I needed to stash it someplace where auditing interest payments & principle could be whatever the two parties agreed on...where would I stick it?

Add to that, excess labor capacity (on the Chinese side) it seems like a win-win "contractually"), for without those idle hands making widgets, they might find other things to do with their hands, that the chi-com dragons would prefer not happen to them ;-)

Wed, 04/17/2013 - 21:08 | 3464331 Banksters
Banksters's picture

Internal memo from Barak Obama:



Wed, 04/17/2013 - 21:18 | 3464369 Pure Evil
Pure Evil's picture

Jared Loughner should be available as soon as his trial is over.

Wed, 04/17/2013 - 22:02 | 3464549 nmewn
nmewn's picture

I'm still trying to figger out why Gabby Gifford's ole man hasn't been charged with attempting to make a strawman gun purchase.

Ohhh, thats was a PC/media gun driven purchase, so that made it ok...still, the line does read something like, are you buying this firearm to transfer to another?

I'm sure it was all approved by the Universal Background checking Holder & David Gregory ;-)

Thu, 04/18/2013 - 06:10 | 3465449 AnAnonymous
AnAnonymous's picture

Internal memo from Barak Obama:


Not even. Barack Hussein Obama managed to kill sons and daughter of America with his plan to re-industrialize America.
He got what he wanted: kill us and a media noisey bomb.

Signed: an American.

Thu, 04/18/2013 - 06:43 | 3465486 TheFourthStooge-ing
TheFourthStooge-ing's picture

Surprising piece of news. Please expand.

Wed, 04/17/2013 - 21:17 | 3464362 kliguy38
kliguy38's picture

Mr Zhang added that he grew alarmed when smaller towns and counties discovered that investment vehicle bonds were an easy way to raise financing. “This evolution was quite frightening,” he said. “China has more than 2,800 counties. If every county issued debt, it could lead to a crisis. It could be even bigger than the US housing crisis.”

 I wonder who taught them this trick.....BWAAAAAAAA.... great job Lloyd


Wed, 04/17/2013 - 20:43 | 3464249 venturen
venturen's picture

Send them Geithner he doesn't have a job.

Wed, 04/17/2013 - 20:44 | 3464253 pragmatic hobo
pragmatic hobo's picture

well ... can only mean one thing ... QE for China.

Wed, 04/17/2013 - 20:48 | 3464274 Bunga Bunga
Bunga Bunga's picture

ghost towns to da moon

Wed, 04/17/2013 - 21:37 | 3464437 disabledvet
disabledvet's picture

do they have a "Chinese Fed"? i was under the impression that the Government just printed the money and gave it to people over there. "the real important people get a lot" of course.

Thu, 04/18/2013 - 04:29 | 3465384 qmhedging
qmhedging's picture

C Fed = PBOC


Wed, 04/17/2013 - 22:31 | 3464681 Radical Marijuana
Radical Marijuana's picture

"China Accounts For Nearly Half Of World's New Money Supply"
Wed, 04/17/2013 - 20:45 | 3464258 Martial
Martial's picture

"But there will be some day down the line when this can’t go on."

Tomorrow works just fine for me.

Wed, 04/17/2013 - 20:46 | 3464260 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

Ruh-roh.  whoda thunk it

Wed, 04/17/2013 - 20:47 | 3464268 newengland
newengland's picture

I like the Chinese very much. The Politburo, not so much.

Get in position: buy physical gold and silver. 

Wed, 04/17/2013 - 20:49 | 3464271 fonzannoon
fonzannoon's picture

When it becomes serious you have to tell the truth.

First Europe tries to cause a bank run, now china tries to spark a housing crash. Gold comes crashing down out of nowhere....

Wed, 04/17/2013 - 20:49 | 3464272 ebworthen
ebworthen's picture

Oh no!  China housing crash!

No more buy U.S. Treasuries!

Will they buy Japanese and Italian bonds, or just force more children and old ladies to work for $1.00 an hour?

God save those poor people over there, but if they don't revolt against their overlords, what can you do? 

Speaking of which, we face a similar situation in the U.S., though it is plastered over with Red, White, and Blue paper mache.

Wed, 04/17/2013 - 20:53 | 3464286 newengland
newengland's picture

Silly comment, under the current circumstances.

Tianamen Square, as one example.

Wed, 04/17/2013 - 20:58 | 3464305 ebworthen
ebworthen's picture

Which was absolutely crushed.

God bless the educated forward thinking that were in Tianemen Square.

The majority of Chinese citizens are trapped in the 19th century, completely obedient to TPTB.

Their homes and farms are leveled for a Happy Meal toy factory, and they can do nothing about it.  When they fight they are killed and/or beaten and removed from land owned by their families for 500 years or more.

They have no rights, they have no recourse to protect their rights.  At least we can still buy firearms arms and call our government and leaders worthless pieces of shit.

Fill in the blanks, you aren't making much sense here.

Wed, 04/17/2013 - 21:17 | 3464356 nmewn
nmewn's picture

"The majority of Chinese citizens are trapped in the 19th century, completely obedient to TPTB."

Absolutely correct.

Because they don't know or have some inkling of knowing, TPTB cut off access to knowledge of the outside. A guy at work has a "child" over in Shanghai. The first thing that happened was a work around so that free (that is, uncensored/uninhibited) communications could be set up back to the states.

Its slowly crumbling...and the politburo knows it...they're just grabbing all they can before the collapse.

Thats the funny thing about human nature, from the powerful to the powerless...its always self interest, all things being equal ;-)

Wed, 04/17/2013 - 22:07 | 3464570 nmewn
nmewn's picture

Well, at least they haven't gone full retard, their corporate tax rates are low enough for investment ;-)

Thu, 04/18/2013 - 01:32 | 3465193 Spinelli
Spinelli's picture

Sorry to correct you nmewn ;-]

But "absalutely correct" is erronous or at best a HUGE GIANT FUCKING understatement.

I am now living in China and will be for a yr and WOW! I knew what it would be like, but actually speaking to them still left me shell shocked.

The avg chinese person makes the american sheep look like Neo fighting the Matrix!!! They are utterly brainwashed. You cannot have a conversation about politics, economics, history.... or anything.

As a programmer the best analogy I can give is that it's like talking to a program, they repeat EXACTLY what they are programmed to repeat.

Honestly it makes me want to cry....

Thu, 04/18/2013 - 07:06 | 3465515 nmewn
nmewn's picture

Well, the majority may be brainwashed but those pigs floating through Shanghai had to come from somewhere. Human nature being what it is, its my understanding they came from "illegal" pig farms.

That is, pig farmers seeking profit over compliance with state mandated market limits on their production, which drives down costs to consumers.

They may not realize it or call it something else but there is no denying what it is, its capitalism in this example ;-)

Thu, 04/18/2013 - 05:21 | 3465410 Notarocketscientist
Notarocketscientist's picture

Ya well if you turned over the farm to the animals I dare say the situation would be even worse.   Everyone wants to live like a rock star these days but nobody wants to work for it.  Unfortunately that extends right through society and includes govt reps and corporations

So what's the solution? 

Wed, 04/17/2013 - 20:50 | 3464278 Smiley
Smiley's picture

I love it when people get bludgeoned with reality till they are quivering heaps of shit.

Wed, 04/17/2013 - 20:51 | 3464282 reader2010
reader2010's picture

Obviously they feel pissed at JPY devaluation and want to talk down RMB value first.

Wed, 04/17/2013 - 20:52 | 3464285 fonzannoon
fonzannoon's picture

reading this shit can really make you go insane

"U.S. Treasury Secretary Jack Lew warned his partners in the Group of 20 on Wednesday against the perils of "beggar thy neighbor" currency devaluations, picking out China for special mention, while noting that Japan was also on Washington's radar screen."

Wed, 04/17/2013 - 20:56 | 3464292 newengland
newengland's picture

Fed up ;-) 

The race to debase is on.

Wed, 04/17/2013 - 22:33 | 3464690 Radical Marijuana
Radical Marijuana's picture

It is impossible to go insane enough to be able to understand how insane it is!

Wed, 04/17/2013 - 20:57 | 3464300 rp1
rp1's picture

Japan has the new global reserve currency, because they have the most savings.  China can crash or inflate, and they can CHOOSE TO CRASH or suffer HYPERINFLATION.


Wed, 04/17/2013 - 21:18 | 3464371 I_Am_
I_Am_'s picture

Hmmm.... spend my savings on gold...... but that boat leak is serious

Wed, 04/17/2013 - 21:24 | 3464386 rp1
rp1's picture

Own gold if you're afraid of hyperinflation in your country.  Every country around the world EXCEPT JAPAN must now CHOOSE TO CRASH or HYPERINFLATE.  And thankfully, they're choosing crash.

Wed, 04/17/2013 - 21:09 | 3464336 knicks3005
knicks3005's picture

LMAO@ the "broken china."

Wed, 04/17/2013 - 21:09 | 3464342 toys for tits
toys for tits's picture

How many central bankers does it take to fuck up the world's economy?









All of them.

Wed, 04/17/2013 - 21:22 | 3464379 rp1
rp1's picture

Politicians fucked it up.  Central bankers kept it going.  Japanese citizens VOTED to fix it.  The RESULT is that all global prices will be reset and all speculative gains will be purged.  A NEW BULL MARKET AWAITS THE WORLD.

Wed, 04/17/2013 - 21:12 | 3464345 Ineverslice
Ineverslice's picture


PMs diving again.

Wed, 04/17/2013 - 22:26 | 3464666 nmewn
nmewn's picture

They're going to need moar paper.

We should be exhorting them Forward into the abyss ;-)

Wed, 04/17/2013 - 21:15 | 3464348 rogeliokh
rogeliokh's picture

And What is this PM Attack means now? It's NY Globex ??? FUcking crooks, Who is pushing buttons now?

Wed, 04/17/2013 - 21:17 | 3464360 Harry Dong
Harry Dong's picture

sell! sell! sell!

(and somewhere else Buy! Buy! Buy!)

it's fun watching this in real time

Wed, 04/17/2013 - 21:23 | 3464374 rogeliokh
rogeliokh's picture

I watched many currencies intervention, JPY, CHF and so on, this is exactly how it looks like.

Why would Central Banks wanna devaluate their own Gold resourses ?

Just release GOLD to the people for FREE and forget about it. Why bother knoking down

price daily..?

Wed, 04/17/2013 - 21:16 | 3464364 Spectre
Spectre's picture

In other news, Bejing is reporting a coming press release concerning the death of that auditor and a new Q/E program whereby $65 Trillion Yuan will be used to fight off the coming struggle.

Wed, 04/17/2013 - 21:29 | 3464392 rogeliokh
rogeliokh's picture

Nothing is going on other than PM's f*cking intervention again.. FX is quiet no news. I was curious why is the f*ck Mines dive 7-10% at the end of the day while GOLD barely moved? That the answer now.. .GOV CASINO..

Wed, 04/17/2013 - 21:21 | 3464378 LasVegasDave
LasVegasDave's picture

Any way to blame the Yids for this one?

C'mon boys, dig deep into those pea brains

Wed, 04/17/2013 - 22:29 | 3464675 nmewn
nmewn's picture


Wed, 04/17/2013 - 23:33 | 3464873 Radical Marijuana
Radical Marijuana's picture

LasVegasDave, CHINA was forced to adopt the Western debt engine system after steam engine gun boats sailed up the Yangtze River, and were able to blow everything out of the water:

"... unequal treaties imposed on China by Great Britain after the Opium Wars ... "

The industrial revolution that began with Steam Engines was matched by the Debt Engines which were developed at the same time:

Neolithic civilization went right around and the world, and back. Contemporary China is the result of the West going East, until the East went West. China has been forced by the Western advances in science and technology to embrace our style of social insanities. They have adopted those to the point where they have become even more insane than the previous others were.

One indication of that is that China now makes more "money" out of nothing than we do:

With respect to your question, it is really not who they are, but what they do! The Anglo-American (Zionist) banksters drive through the paradoxes from too much of their kind of "success," leading to others copying their systems, and attempting to do that better than they did.

Those, in the past, and somewhat still in the present, who may have been the best at being dishonest, and backing that up with violence, and thus, were able to operate as the top carnivores in the human systems are like prize fighters. No matter how good they are, for however long, there always eventually comes along somebody better.

Like artists inspire other artists, organized crime gangs inspire other organized crime gangs. Since all aspects of culture are integrated, and tend to work better the more so they are, those who are the best at force backed frauds tend to inspire others to emulate what they had accomplished.

Paradoxically, the Westernization and modernization of China has resulted in them destroying themselves too, even more so than we already have. No group of human beings have a complete monopoly on robbery and murder. Those who were relatively the best at operating those systems in the past do not necessarily always stay that way. Rather, they tend to eventually be superseded by someone else.

The paradoxical ways that the Western triumphs of too much success from being the best at dishonesty, backed by violence, are now moving East, are similar to so many other things! The transnational banksters are a new hybridization of the top carnivore functions in the human ecology, and a new hybridization of the dominant organized crime gangs.

Anyway, the relevant point to your question is that it is misleading, and relatively useless, to worry about "who" rather "what." There does not have to be a genetic continuity, for the methods of organized crime to be imitated, to the point where those imitating them become even better at that ... which then drives them to become even more insane and self-destructive than we were!

China is now playing through, in ways which are quicker, and on a larger scale, the systems of social insanities, due to triumphant force backed frauds, in ways which are surpassing what the West previously did.

The Anglo-American (Zionist) empire has been a great inspiration to all the other organized crime gangs around the world to up their own game.

Too bad, so sad, that the only possible ways to survive through this would be to up that game by a quantum leap, through radical paradigm shifts, in both the basic sciences, and political science, that gave rise to the Steam Engine and the Debt Engine systems, that have been able to conquer the whole world, and thereby, force everyone else to embrace similar financial frauds, done even better, in order to hold their own.

What the whole world "needs" is more and better science and technology continued to be applied, which requires radical paradigm changes in militarism, to operate better murder systems, doing death controls, so that the money system debt controls that they back up could be transformed, through a sufficiently scientific revolution.

Thu, 04/18/2013 - 00:00 | 3465014 LasVegasDave
LasVegasDave's picture

A thoughtful response.  Kudos.

But China is a nuclear armed power.

And life is about choices.  There's lots of water under the Yangtze bridges since the Opium wars.

When I look at china I see fascism, with preferred cronies getting rich (much like the U.S.)

Dont see how you could blame the Yids or Anglo American Zionism.  Really, its just the rapacious quality of human nature.

But what the hell, Im sure a rational argument can be made for blaming the Jews, and for hunting them down.

Scapegoating is something that all societies are hard wired for, so I guess the chinks can learn to hate the Yids too.

Thu, 04/18/2013 - 03:52 | 3465358 Mr. Hudson
Mr. Hudson's picture

The Chinese pegged their currency to the tribes' fiat currency (the U.S. dollar). Tribe members on Wall Street sold the Chinese the goyim's toxic mortgage securities, and China has never quite recovered.


Thu, 04/18/2013 - 06:12 | 3465454 AnAnonymous
AnAnonymous's picture

Even more waters passed under the 'american' bridges since 1776,July,4th.

So if life is a matter of choice, well, one can state that 'americans' were certainly not coerced into 'americanism' and what consequences followed.

Contrary to some others...

Thu, 04/18/2013 - 06:26 | 3465466 Bearwagon
Bearwagon's picture

Didn't I already tell you to get lost?! Don't think that you will not be called out on your bullshit, just because TheFourthStooge-ing is still asleep.

Thu, 04/18/2013 - 07:01 | 3465509 TheFourthStooge-ing
TheFourthStooge-ing's picture

AnAnonymous gives more of the same tired Chinese citizenism propagandations. His strained logics are just endless repeations, uniformously ridiculous.

These are tough days for propagandists. The reality is so quickly adverse to them they need to be on deck 24/24 to dress reality so it conforms to their propaganda.

Thu, 04/18/2013 - 05:14 | 3465406 Notarocketscientist
Notarocketscientist's picture

All terrorism eminates from Israeli's illegal actions in Palestine - ask this Israeli who has turn on his country

Wed, 04/17/2013 - 21:22 | 3464381 Downtoolong
Downtoolong's picture

"when the time comes, it won’t be the government that assumes responsibility. It will be the accounting firms and the banks that do."

In the U.S. it's neither. What's the matter, don't they have rogue traders in China?

Wed, 04/17/2013 - 21:24 | 3464390 Goldilocks
Goldilocks's picture

Kanye West - All Falls Down ft. Syleena Johnson (4:05)

Wed, 04/17/2013 - 21:36 | 3464416 rogeliokh
rogeliokh's picture

"G20 Draft: Committed to avoid competitive devaluations."

I get it, no intervention: Just print all together and keep Gold under the carpet, thanks,

G20 crooks translated ok..

Wed, 04/17/2013 - 21:47 | 3464478 bondman1
bondman1's picture

Looks like they've really taken to that reserve currency thing!

Wed, 04/17/2013 - 21:58 | 3464532 They Tried to S...
They Tried to Steal My Gold's picture

In the spirit of previous Apple upgrades:


I have now raised my 2015 Gold Target from $5,000 to $10,000....

Wed, 04/17/2013 - 23:37 | 3464964 yogibear
yogibear's picture

Yuan is flash paper. Gives a nice show and then disappears.

Thu, 04/18/2013 - 00:55 | 3465138 Joe A
Joe A's picture

Let them eat rice, oh wait...

Want some lead with that?

Thu, 04/18/2013 - 03:44 | 3465349 CHX
CHX's picture

P.O.N.Z.I. everywhere. When the bond market bubble bursts, it's all over, and the end game is on. Prepare accordingly, good luck to all.

Thu, 04/18/2013 - 05:33 | 3465416 Davalicious
Davalicious's picture

This could be like 911 time a hundred. 

Thu, 04/18/2013 - 05:53 | 3465428 Edward Fiatski
Edward Fiatski's picture

Evelyn Rothschild on China & One World Currency -

Pump und Dump. :)

Thu, 04/18/2013 - 06:04 | 3465444 q99x2
q99x2's picture

No one needs Chinese junk. The fertilizer plant that blew up probably installed valves made in China. Fuck China.

Thu, 04/18/2013 - 09:23 | 3465986 Pumpkin
Pumpkin's picture

I have always been perplexed by people's facination of the Chinese economy.  "Free" democratic, and "republican" governments lie through their teeth about important economic indicators.  What does one expect from a communist government within a culture that strives to please?  Now paired with the rot and lies of the western world economies, I am surprised things have lasted as long as they have.

Thu, 04/18/2013 - 16:47 | 3467993 Mad Muppet
Mad Muppet's picture

It's my fondest wish to see that shithole of a country collapse and die. I've spent enough time there to know they're my least favorite people on Earth. Pakistan was a paradise after being in China. Here's to a very hard landing! Prost!

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