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Chinese Banks Stop Lending Due To Liquidity Freeze
If one thought the schizophrenic lies out of Europe between 2010 and 2013 were bad enough (the bulk of which it now appears were orchestrated by Mario Draghi), here comes China, a country which already has a "credibility" issue so to say, which has no choice but to lie as blatantly as possible in order to preserve some semblance of stability. The reason: as first forecast here months ago, and as has subsequently materialized, the credit/liquidity collapse in the country that lives and breathes on credit creation (the bulk of which is created in the shadow banking system) is rippling through the banking sector and causing unprecedented fallout for a financial industry that is already starved for every marginal yuan (and in a Keynesian "credit=growth" world, the economic crush is just waiting beyond the next corner).
Not unexpectedly following news that various retail and online banking services had been impaired in the early part of the week at China's biggest banks, now Caixin reports that banks are simply shutting lending to both businesses and individuals.
From Caixin:
A number of banks have temporarily halted lending to businesses and individuals apparently due to mounting pressure from liquidity shortages.
They include some branches of Bank of China (BOC) and Industrial and Commercial Bank of China (ICBC), sources from the two banks said.
The bank was already having a hard time keeping up with deposit-to-loan ratio requirements even before the liquidity shortages hit, not to mention executives' recent determination to sort out the bank's liquidity management and control loans.
BOC plans to resume lending on July 15, he said.
As for ICBC branches, the amount of loans they can make is routinely capped under a monthly limit set by headquarters, a source from the bank's Shenzhen branch said. It was not unusual for branch banks to reach lending quotas before the end of month, he said. What was rare, however, was that headquarters had cut down on the quotas to make room for its own operations.
"All of our loans have been put on hold," the source said, "There may be some credit line when it comes to July, but it will definitely be used up in a few days."
* * *
The tightened liquidity, which started about June 6, has affected the interbank market, stock market, government bond underwriting and securities refinancing operations.
On June 23, ICBC customers had trouble using its online, counter and ATM services. This included making withdrawals and paying bills. The same thing happened to BOC users a day later.
The two banks responded by saying the disruptions were caused by system upgrades. However, users of China's Twitter-like weibo services were not convinced the problems were unrelated to the banks' liquidity situations.
A source from Agricultural Bank of China said there was no need to worry about large banks.
Luckily in China sources never lie. And neither does the PBOC, which recently said liquidity is ample, and that banks "are fine." In the meantime, anyone needing a loan to engage in business, and grow the Chinese economy at its just as laughable 7%... come back tomorrow.
And anyway, it's not the loan halt that is an issue for banks. It is when they have to do the same to deposits. The good news at least for now, is that the Chinese population hasn't figured out that as the PBOC undergoes an ad hoc $1 trillion deleveraging, a like amount of deposits will be impaired. But just like Russians in Cyprus, they will. Eventually.
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I don't understand why you're upset, also you didn't teach me anything.
If the premise of the article is found to be true however, and it's implications after verification take the course they should, then it's a pretty big deal..
What do you think would happen if banks couldn't get overnight loans to cover immediate needs? Is that the commentary that you think is lacking?
If so, then please feel free to provide it yourself, you know, continue your esteemed tutelage.
For starters, your user name references scatological humour.
Can't they lend mung beans instead?
I believe Lehman would sound a little like Rehman if said by a person from China. Coincidence I think not. Wake me up when their 6 largest banks own 70% of all their mortgages. We all know at some point in the not so distant future there will be only 1 bank
I believe Lehman would sound a little like Rehman if said by a person from China. Coincidence I think not. Wake me up when their 6 largest banks own 70% of all their mortgages. We all know at some point in the not so distant future there will be only 1 bank
This is happening by design. The chinese government wants to purposedly slow the rate of growth of credit to slow down economic growth. It's that or the rest of the world leaders will loose control of their populations and war may become a reality. So CHINA IS SLOWING ON PURPOSE! No idea what the agenda is with distorting things or taking them out of context. Also gold lines are normal at the time of the year they showed them... it always happen... its part of the culture...
Don't know why people gave you those up arrows but
1) There's nothing special about this time of year. A shop was selling gold slightly below price (promotion, probably with certain time and per-customer limits)
2) The central government is trying to get the financial industry under control, but if the banks are smart like they are, they could lend even less that they are allowed to. What a nice way to get local government officials get on that phone with Beijing...
3) What distorting? Unfortunately China is screwed even more than the US.
This might be their "Lehman moment" of course when spoken by the Chinese it comes out "Rehman".
How's your Chinese by the way? Mastered the nine tones yet?
Nee how, Ah!
The Bernank picked a bad week to quit drinking.
And sniffing glue.
The market is weird... copper is not falling apart but kold is... So some parties must be getting liquidity. HOwever some must be struggling to see another day...
http://www.imf.org/External/Pubs/FT/AA/index.htm#art4
If there is a payment made in gold, (IMF accepts gold as payment), the lower the price is, the more gold they collect. Price goes up, and voila, they cashed in. Nothing's as it seems. This is their movie, and we are in it.
Selective institutionalised confiscation. I get it...
Seems like maybe our Chinese cousins have learned how to milk this foo dog too.
The learning. Dont buy gold with leverage. And thinking of it... anyhing else either.
yup. imho leverage might make your portfolio look splendid... until it crushes you
I repeatedly stated in here (check my history) that gold and silver will continue to decline based on TA. Go ahead and laugh at TA but it is the only thing that works with instruments that are NOT completely controlled by a central bank. Obviously Bernanke has no desire to artificially prop up the price of gold/silver so therefore the instruments do indeed trade where the charts are telling you is the most likely outcome. Downtrend since the fall of 2011 still intact and the prudent course of action is to wait for a proper base to form prior to buying.
The charts do work for things like ES and EURUSD pretty damn well on the UPSIDE but it gets dicey when they are declining because the charts can't always predict if/when/why/how some cocksucker central banker will intervene either literally or verbally. the pattern has been that just when it looks like their will be a freefall you get BOOM BOOM a violent move to the upside. this may be changing now with this taper stuff so we'll see.
eventually the spider goes below 666 but with so much central banker cocaine distribution along with free hookers i have no fucking clue when it will happen.
HKD backed by the US Federal reserve. Hong Kong let's Snowden go free, ah yes. The alibi.
China should borrow from OPEC at tasty 2% interest rates from their Central Bankers.
US taxpayers can't comp the excessive QE. Sorry! OPEC has money since the US can't drill domestically thanks to some now dead hedge fund turd.
Dear World, it's called BASIC MATH. IF someone is struggling to pay the bills, it's horribly beyond rude- it's actually rape of a financial kind to stick us with debt that we didn't incur.
Suck it up, deal with it.
Geebus, I know there are smart people in China. Why didn't the cream rise to the top?
How can people read this horse shit? The truth is right here in living color on Z/H. It's not rocket science to dig deeper than a headline from a shill organization like Bloomberg.
U.S. Stock Futures Rise as China’s Cash Crunch Eases - Bloomberg
Lots of people betting on the greater fool; is my guess.
If the shill financila media tells a lie, those who know it's a lie will go with it to make money off the idiots. Like most scams: amway, herbalife, beanie babies; interested parties think they are the smartest person in the whole game.
Put more simply, the financial media just needs their audience to think they are smarter than everyone else.
Sometimes I think the Financial MSM has a big magic hat full of fortune cookies. They just pull a cookie out and print what it says as a "Headline".
Good post by the way.
OK. It seems everybody here is bullshting here. Let me get the info clear for everyone from China as a Chinese.
PBOC is literally threatening the four major banks at the moment.
That's a political fight between new leaders group and the rest of local governments.
PBOC does not care if any rubbish banks bankrupt because the savers would be compensated by the state by law. However, these mother fucking bankers would be put into jail because of that.
There's a rumour in China, since March, there have been already 300 bankers, hedge fund managers and officials arrested or fired from the four major banks
President Xi says that the BIG CLEAN UP of the System is coming. And China can tolerate low GDP growth if he wants to push forward the reform
That would mean a big clean up of the system by PBOC. So wait for more four major banks crying wolfs...these parasites and proxy members of Wall St. would get their final days counting
well somebody make a fucking move already. No more talky talky.
Maybe the new leaders are the Manhattan Candidates in place.
"well somebody make a fucking move already. No more talky talky."
Well shut the fuck up then.
Oh, right, you're on a schedule...
Regards.
@bullshit
You make a better armchair quarterback. Get back to it and fuck off already.
warm regards and best wishes
Stop feeding the troll Fonz. That's exactly what he wants.
thanks
Gee, I wish western Bankers knew they would be jailed or shot for scamming.
Over here, they make you Fed Head.
Thanks for the comment. Yes, chop the fucking bankers heads off and get on with it.
so that was the advice Obama gave him when they met in Palm Springs
You're chinese? You could speed things up by spreading true rumors.
Waaaaaaait a minute! This is NOT the way things are suppozz'd ta be...........
The economic engine of the future - China.
So China is fucked too.
But guess what? Markets are up 1%.
Bad is great again!!!!
All the gold that China could want is being summarily dumped, but the irony is that they just handed western banks what they wanted. Western banks would be remiss if they did not recognize the buying opportunity in the bullion markets presented to them, especially since central banks are waffling over Quantitative Easing.
Too true. So where is gold going to be by Friday? When some hummer starts singing the 'buy' song the price will bounce like a super ball. $1239 looking like a buy proposition? Timing, timing...
You just have to ask yourself whether Operation Twist is really THAT successful, especially since the S&P topped out in May. Since the advent of a 'new' Operation Twist, there were two more QE announcements. Operation Twist could not have achieved its intended goals, and is likely to have failed. The real test will come during a concomittant sell-off in bonds and stocks, at the short end of the yield curve.
Operation Twist was meant to raise yields at the short end, but what has happened in the end was rates kept declining. There's a lot being called into question this last week.
I can't argue with you. The timing question is always the timing question. Once a few 'dead ducks' have flown through my choices, I've become less confident in the selection process. Used to be easier. Maybe because I was younger and more brazen, maybe because QE 1 thru QE whatever began clouding the waters. Like trying to scuba in an ocean of milk.
I think that this month will prove to be the end of a 21-month cycle in gold prices, much as it had previously. Only we happen to see it at the bottom of a correction, rather than just after a top in prices. ETFs are probably the ones that will come under fire, since they had not hedged appropriately. One ETF that I can see will collapse is probably DUST.
Looking forward, I think the implication is that final highs for a gold bull market will not be in the guise of a massive blow-off, but a mere rolling over so people will have to reduce their expectations somewhat. The gains came in the first 9.5 years. The bull market in gold prices have further to go, but the unrestricted effluent attesting to the contrary is hard to wade through.
Thanks! I think you gave some sage advice there. I appreciate you.
I have a good friend who manages a sizable factory in Shenzhen - a well financed operation that nevertheless operates on a bank line of credit to finance its orders. For the past 6 months they have had to progressively stall their customers, stringing out delivery times, because the bank kept finding various ways to delay their next draw on their line of credit. Customers, especially the smaller ones, were getting increasingly antsy, couldn't understand, thought they were being screwed around because big customers were getting preferential treatment. These are all export customers BTW. Ten days ago my friend's bank suspended their line of credit indefinitely. So sorry, no explanation. Oh yes, you are an excellent customer of the bank. Always pay on time, plenty of collateral in your business, order sheet looks very good. So sorry.
Last week my friend & his management went to their investors to try to sell additional equity to raise operating capital. Nobody was buying. This weekend they made the decision - furlough all the employees, shut down the lines, and turn off the lights. They are now in a wait-and-see mode. Their customers are obviously melting away. My friend is already making plans to come back to the states - he doesn't think his factory will re-open, mostly because all around him the same thing is happening, "like a rolling blackout" as he describes it.
Wouldn't be from TN, would he? I was in Shenzhen in the '90's - they were building an entire city all at once, it seemed. Never saw anything like it in my life. At night, during the day, all the time. Like ants. People living' a dozen together in mini-warehouse homes sharing the beds in shifts. At night it was like a nightmare. Freaky.
Shenzhen is definitely an interesting place. I like the football stadium-sized counterfeit mall there.
wouldn't happen if they had a centrally planned economy like we do
Yes, China should go communist like the USSA.
Capitalism and Free Markets are evil.
Free markets are where you go to outsource your need for cheap labor and resources. Let other countries deal with environmental issues, and working class union shutdowns, and the vagaries of the business cycle. the US is a paragon of civility.
Tyler, regarding your "If one thought the schizophrenic lies out of Europe between 2010 and 2013 were bad enough (the bulk of which it now appears were orchestrated by Mario Draghi)" - fine (though your "orchestrated by Draghi is debatable - the emphasis should be on "appeared")
But what would you have done instead? crashed the thing? go down in flames? for what? the greater glory of the USD complex, the FED and the megabanks behind it?
plenty of lies, yes. but what about the lies coming from NY and London on the same matters? imho they were a couple of magnitudes higher. and way better planned, including what the Squid did with several sovereign books
in fact you know (and wrote a lot about it) that our guys in the eurozone were generally bad at this lying, and were hinting strongly that they were doing "for the markets". And those who listened here knew what they were talking about. I have yet failed to hear something like "when the matter is serious, we have to lie" from an Anglo-American politician, for example. Do you care to explain why? Better, more honest politicians?
so the Chinese are probably lying, at the moment. and imho most probably will find a way out of this thing. it's not their game, btw. in fact, they'd be probably the one nation on this planet most eager to switch to honest money, if you think about. if they were only allowed to. meanwhile their hard work is used to keep the USD complex up, and so they are still supporting the current "50% of global military spending by one country" status quo. think about that, too
assuming there's a difference between boilerplate and lying. Official US dollar policy (boilerplate) is for a strong dollar, unofficial policy is Beggar Thy Neighbor. btu what are you going to do when everyone is ready to accomodate you. so you try to strike some balance. (good analogy to the wimpish response of the obama hope and change agenda, who found out corrupt bankes outnumbered the other kind, and so he joined them. So we have the cleanest dirty shirt money can buy.
the Chinese have been pretty good at telegraphing their intentions (i really don't think they've very good at the game)
thanks for that reminder: when Ben Bernanke talks to US students, he gets roaring applause. meanwhile the only place on earth where Timmah was greeted with laughter when he took out the Strong Dollar boilerplate out was... China
the Chinese are good at long games. like control of stocks. but the Master of the Universe are good at short games, like the control of flows
another reason why the gold price is where it is and who currently owns - or is going to own - a lot of it
Good pts, Ghordius. Same shit, different language, similar outcomes. Fact of the NWO and globalization is we've all become - at least in an investment way of looking at things - the same tribe.
the only problem with that global village analogy is there is no uniformity among tribes, uniformity is the description of a mechanized society. the US is the dominant tribe in the NWO.
a small correction: the AngloSphere is the dominant cultural tribe of the "NWO"
the daughter of the Chinese PM studying at an US Ivy League university belongs to the very first tier of the "empire", for example, the same one where you find the Australian Murdoch
meanwhile a badly educated US "redneck" that never learned to talk PC (and so starts rants about "cheesepopes" and such) might end eventually approaching the last tier - where you find the slave labourers (for example in some US prisons and some Chinese factories)
And which end do you aspire to, little slave-man?
you are so cute. where do you think I am? where are you?
This is all about a ReValuation of Currencies. The only question, IMHO, is who maves first?:
The EastBloc or WestBloc
If its the EastBloc it would look something like this: All the EastBloc countries (130+ nations) would simultaneously, same day, same exact time, would PEG their Currency at the Current Exchange Rate, to China's Yuan/renmimbi.
China's Yuan would ReValue @ about 1.5 to $1.00/US (One US Dollar)
There would be absolutely No effect, no change, between the EastBloc countries making this ReValuation, as far as Trade goes. Both The People and Countries Benefit. The People via Purchasing Power and the Country via the ability to Buy Any Commodity at a much Lower price....this would cause Commodity Prices to adjust quickly
OT.. Dave Matthews was outstanding last night. If he is in your neck of the woods, Stimulate the economy and check him out
Couldn't make it to the island. Gave both tickets to my sister and said the same thing. He rocked! Sux I missed it.
How's the health Cpt? Hope you are feeling better....
The PROC has a history of purging and cleansing the system. It's not pretty but it gets the job done. If any country has a chance to clean up their act it's China. This is getting really interesting.
Heck.. I was only off by 24 hrs. Refer to my yesterday post. Now it gets real. Price discovery is gunna ba a bitch. Either way they revalue, it will effect the whole market IMHO..
This will be a great time to buy "junk bonds". Screw the banks.
By holding back the easy credit, is China showing itself to be a responsible monetary guardian - capable of issuing a reserve currency?
No, because their bond markets are garbage. China will not be able to prevent hyperinflation.
Unless China makes renminbi fully convertible into gold.
only a corrupt central authority would run a responsible monetary policy, because they could be sure they would make money and stay in power, either way. u.s. does not yet have a central authority, and is not sufficently corrupt, but will be after their irresponsible monetary policy collapses. and so we move closer to central authority and corruption in incremental steps, relative to the outcome, the moment when a responsible monetary policy becomes inevitable.
Its amazes me how many people down here in Oz were of the opinion that the Chinese miracle 10% + growth story would last another 20+ yrs.A command economy with out of control corruption top to bottom...that spends more on internal security than external defence.Where in hell has commonsense gone in this world.
Same here in the U.S. If you questioned the China growth assumption, people took you to be an idiot who had obviously not done his homework.
On a more mundane note, what happens to all that copper used to collateralize these loans? Assuming that it was not re-lent to infinity and beyond, if the banks seize the collateral, just who is going to buy it from them and at what price? There just might not be too big a demand for it from the construction market at that point in time. Their copper collateral may be carried now at "market value"....but its ultimate liquidating value is (as they say on the menu) "price subject to market conditions".
It is a bit reminiscent of the big glaring mistake made by LTC's team of Nobel economists...it is the rhino in the room: the banks took copper as collateral without thinking through that, come the day they might need to seize that asset, it would also be worth far less because the economic developments leading up to that seizure would also kill the demand for that asset. (For those younger folks here, LTC used foreign bonds to hedge bonds....these Nobel prize winning geniuses failed to see that there just might be a worldwide drop happening simultaneously in bonds).
"A source from Agricultural Bank of China said there was no need to worry about large banks."
....no need for comment here.......