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Chinese Stocks Tumble On Contagion Concerns From First Shadow-Banking Default

Tyler Durden's picture


While manufacturing and services PMIs disappointed, the big problem in big China remains that of an out-of-control credit creation process that is blowing up. As we previously noted, instead of crushing credit creation, the PBOC's liquidity rationing has forced distressed companies into high-interest-cost products in the shadow-banking world. Investors on the other side of "troubled shadow banking products" had assumed that 'someone' would bail them out but this evening Reuters reports that ICBC has confirmed that it will not rescue holders of the "Credit Equals Gold #1 Collective Trust Product", due to mature Jan 31st with $492 million outstanding. The anxiety from contagion concerns of the first shadow-banking default has pushed the Shanghai Composite back near 2,000 for the first time since July - and to its narrowest spread to the S&P 500 in almost 8 years.

The Shanghai Composite is tumbling... to six month lows (and back near 2,000 for the firs time since July)...


and its closest (nominally) to the S&P 500 in almost 8 years...


As we previously noted,

...borrowers are facing rising pressures for loan repayments in an environment of overcapacity and unprofitable investments. Unable to generate cash to service their loans, they have to turn to the shadow-banking sector for credit and avoid default. The result is an explosive growth of the size of the shadow-banking sector (now conservatively estimated to account for 20-30 percent of GDP).


Understandably, the PBOC does not look upon the shadow banking sector favorably. Since shadow-banking sector gets its short-term liquidity mainly through interbanking loans, the PBOC thought that it could put a painful squeeze on this sector through reducing liquidity. Apparently, the PBOC underestimated the effects of its measure. Largely because Chinese borrowers tend to cross-guarantee each other’s debt, squeezing even a relatively small number of borrowers could produce a cascade of default. The reaction in the credit market was thus almost instant and frightening. Borrowers facing imminent default are willing to borrow at any rate while banks with money are unwilling to loan it out no matter how attractive the terms are.


Should this situation continue, China’s real economy would suffer a nasty shock. Chain default would produce a paralyzing effect on economic activities even though there is no run on the banks. Clearly, this is not a prospect the CCP’s top leadership relishes.


So the PBOC's efforts are merely exacerbating the situation for the worst companies... for example... Zhenfu Energy...

As Reuters reports,

Industrial and Commercial Bank of China, the world's largest bank by assets, said on Thursday that it has no plans to use its own money to repay investors in a troubled off-balance-sheet investment product that it helped to market.


ICBC's shares have fallen this week amid speculation that the bank would be forced to help repay investors in a 3 billion yuan ($496.20 million) high-yield investment product issued by China Credit Trust Co Ltd but marketed through ICBC branches. The product is due to mature on Jan. 31.


"Regarding this unsubstantiated rumour, a situation completely does not exist in which ICBC will assume the main responsibility (for the trust product)," an ICBC spokesman told Reuters by phone on Tuesday.


The trust product, called "2010 China Credit / Credit Equals Gold #1 Collective Trust Product", used the funds it raised from wealthy investors in 2010 to make a loan to unlisted coal company Shanxi Zhenfu Energy Group Ltd.


But in May 2012, Zhenfu Energy's vice chairman, Wang Ping Yan, was arrested for accepting deposits without a banking licence.

Which Barclays warns:

In our view, despite the trust issuer, distributor bank and local government perhaps trying to bail out the mining company, the regulators and central government could probably allow the trust product default to happen as:

  1. government appears fairly determined to reform the financial system and cut off the implicit guarantee of financial institutions;
  2. the State Council is reportedly streamlining regulation of shadow banking including trust business; and
  3. the default of trust products could have less social impact than the default of WMPs, bonds and other products sold to the general public or have problematic practices, such as asset-pool investments.

In our view, the default of trust products could trigger some short-term negative impacts on China’s financial sector and the reputation of financial institutions. However, we believe it is positive for the healthy development of financial system in the long run because the default could do the following:

  1. Be a step to reduce the implicit guarantee of financial institutions for investment products. Banks could shift their financial liabilities back to the investors.
  2. Increase the risk awareness of both investors and financial institutions, which could correct the pricing of investment products to more risk-oriented.

Its conclusion is dire: "If the trust product goes into default, we believe it would be the first default to test the financial system."

Here is the product...

And the growth of such products has been enormous as we have explained in great detail previously: at RMB10.1 trillion as of Q3 should the first domino fall, watch out below.

Finally for those who have forgotten, below is a quick schematic of what a WMP looks like:

As Michael Pettis, Jim Chanos, Zero Hedge (numerous times), and now George Soros have explained. Simply put -

"There is an unresolved self-contradiction in China’s current policies: restarting the furnaces also reignites exponential debt growth, which cannot be sustained for much longer than a couple of years."

The "eerie resemblances" - as Soros previously noted - to the US in 2008 have profound consequences for China and the world - nowhere is that more dangerously exposed (just as in the US) than in the Chinese shadow banking sector as explained above.


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Thu, 01/16/2014 - 23:10 | 4339926 knukles
knukles's picture


It's the weather

Buy moar!
It's just the fear of silly shit like tapered poops and shadow people making 'em nervous
Buy moar!
Dick Whazzo from Numbnuts Bank, HK says the Buy moar!
Buy moar!
Little Becky of the Orthodontia (Anybody but me notice she got her teeth fixed a short while after I started ragging her, right here in River City?) says it's just Conspiracy Theorists on that Tyler Durden site that don't know what they're talking about!
Buy moar!
Change the start date on the chart and it'll look fucking awesome!
Buy moar!
I'm getting myself talked into it!
Buy moar!
Just plain fucking Buy moar!

Thu, 01/16/2014 - 23:13 | 4339948 NoDebt
NoDebt's picture

That's the spirit!

Thu, 01/16/2014 - 23:48 | 4340012 flacon
flacon's picture

So... you are saying we should buy shares of SPY then? /sarc

Thu, 01/16/2014 - 23:51 | 4340022 Ness.
Ness.'s picture

/sarc not necessary at this stage.



Fri, 01/17/2014 - 00:29 | 4340081 Obchelli
Obchelli's picture

And S&P and nasdaq futures are up after INTC miss... Kind of shows market will never ever drop

Fri, 01/17/2014 - 00:53 | 4340113 Four chan
Four chan's picture

im long h1n1 thanks china.

Fri, 01/17/2014 - 01:15 | 4340136 Son of Loki
Son of Loki's picture

Vely Burrish!

Fri, 01/17/2014 - 01:29 | 4340142 TruthInSunshine
TruthInSunshine's picture

China & Japan are in a race & it will be interesting to see whose economy breaks first...or breaks more deeply sooner, with the manifestations of such breakage so pronounced that the media and government officials can no longer plausibly deny them.

Fri, 01/17/2014 - 02:34 | 4340198 Squid-puppets a...
Squid-puppets a-go-go's picture

if this drop of Ice9 in the financial ocean does the trick, the freeze will spread far beyong the seas between china and japan

Fri, 01/17/2014 - 03:38 | 4340219 Fish Gone Bad
Fish Gone Bad's picture

Here is how it is resolved:  The Fed gives them a buttload of money.

Can't happen?  shhhhheeesh!  Now how would anyone know?  As long as they can play hide the broken condom, they will.  Eventually someone finds out though...


Google: cafepress cursing fish

Fri, 01/17/2014 - 03:53 | 4340224 Popo
Popo's picture

China isn't nearly as fucked as Britain.

(This is a new doc that just came out:   "The End of Britain")

Fri, 01/17/2014 - 06:48 | 4340299 Obchelli
Obchelli's picture

Aaaand S&P levitated 7 more points on INTC miss unthinkable if this was a real market

Fri, 01/17/2014 - 07:23 | 4340325 negative rates
negative rates's picture

If you like your July in January, you can keep your July in January. Or you can simply move to Austrialia.

Fri, 01/17/2014 - 10:06 | 4340580 kralizec
kralizec's picture

Risk recycling...hardly a new idea...anybody see how the US housing market gets played by the banks?

Fri, 01/17/2014 - 22:13 | 4343019 Buck Johnson
Buck Johnson's picture

Your spot on, spot on.  It is a race to see which will break soon.  When it does break the other will follow along with the rest of the world.

Fri, 01/17/2014 - 02:26 | 4340194 qmhedging
qmhedging's picture

chicken game,the Gov won't let default happen

Fri, 01/17/2014 - 08:06 | 4340342 TheRideNeverEnds
TheRideNeverEnds's picture

Exactly, and now in the pre-market the usual suspects are set to gap up several percent on the open as the broad market gaps open to all time higher new new new highs. 


There is point where this becomes ridiculous and we have clearly passed it.... 

Thu, 01/16/2014 - 23:55 | 4340028 SMG
SMG's picture

One of these days something will make this obscene fantasy most people are living come back to reality.  Maybe this is it, maybe not.

It could have happened in 1987, 2000, 2007 etc..., but it still hasen't happened yet.

I wonder when............

Fri, 01/17/2014 - 04:29 | 4340248 FreedomGuy
FreedomGuy's picture

"He who exits first, exits best".

Fri, 01/17/2014 - 00:17 | 4340067 KennyW
KennyW's picture

Damn, that's funny!

Thu, 01/16/2014 - 23:05 | 4339927 Yen Cross
Yen Cross's picture

    Since we're on the topic of Asia, these numbers don't bode well for Abenomics .



International Transactions in Securities data from Japan’s Ministry of Finance, for the week ended January 10

  • Japan Buying Foreign Bonds Y -740.6bn (previous week was Y -448.2B)
  • Japan Buying Foreign Stocks Y 157.3bn (previous week was Y -9.4B)
  • Foreign Buying Japan Bonds Y -743.3bn (previous week was  Y -225.4B)
  • Foreign Buying Japan Stocks Y -219.1bn (previous week was  Y 68.2B)
Fri, 01/17/2014 - 00:28 | 4340079 Jim in MN
Jim in MN's picture

What do you think of the latest Koizumi attack?

According to sources, Koizumi, a former LDP president, was the one who brought another former prime minister, Morihiro Hosokawa, out of retirement based on their shared view that Japan should become a nuclear-free country.

“You should run in the Tokyo gubernatorial election,” Koizumi told Hosokawa in late December.

On Jan. 14, Hosokawa, with Koizumi at his side, announced his candidacy for the Feb. 9 Tokyo gubernatorial election. Both retired politicians vowed to challenge Abe’s policies of promoting the restart of idled nuclear reactors and exports of nuclear power technologies.

Fri, 01/17/2014 - 07:22 | 4340324 Septicus Maximus
Septicus Maximus's picture

The "oyabun" (Mori) thinks Koizumi's gambit was dirty and low.  You can bet he'll be calling in a lot of favors to use against Hosokawa, should it come to that.  

I think more pressing is the SDF's readiness to fight off the Chinese.  If China's economy tanks, as the above piece suggests is nearly a cerntainty, you can be sure the chicoms make a stab at the islands, either the Philippines' or Japan's.  Or both.  Then shit gets interesting. 

Fri, 01/17/2014 - 08:49 | 4340386 Offthebeach
Offthebeach's picture

Better would be China fighting off alien UFO invasion of the Gobi desert. Pull off the streets 20 million unemployed utes, march them around for a few years. Build and crash 10,000 fighters, bombers. Fire off arty shells into hillsides until barrels melt.
Think Krugman browken window theory ( KBWT )

Thu, 01/16/2014 - 23:05 | 4339928 So Close
So Close's picture

When China sneezes the US catches a cold?

Thu, 01/16/2014 - 23:11 | 4339943 NoDebt
NoDebt's picture

Doesn't matter who sneezes any more.  It could be China, Japan, Europe, the US.... every globally-interconnected bank dies shortly after the first sniffle.

Fri, 01/17/2014 - 04:32 | 4340250 FreedomGuy
FreedomGuy's picture

Government will fix all of matter that they cause it.

Let's start a pool before the next round of government manipulation and fixes. When will we first hear the word "Quadrillion" whether in dollars or conversion?


Thu, 01/16/2014 - 23:12 | 4339944 knukles
knukles's picture

No, that's GM

Oh, they moved most of their HQ to China... duh....
Fucking win win bailout!

What the fuck are these people in DC doing?

Fri, 01/17/2014 - 00:02 | 4340044 old naughty
old naughty's picture

what people?

Fri, 01/17/2014 - 00:07 | 4340051 forwardho
forwardho's picture

When the derivative markets sneeze... everyones head will explode.

Thu, 01/16/2014 - 23:08 | 4339932 Jack Burton
Jack Burton's picture

The key phrase "Those on the other side of the high interest shadow banking loans were convinced someone would step in to bail them out of things went bad." Not word for word, but close enough. Much of what passes for finance and markets in America functions off of the same priciple, everyone is convinced that someone [the fed] will step in and bail out their deals and financial engineering products if things go south. At least in China, in this one case, we shall see what happens when the bailout doesn't materialize!  Bailouts, this is the assumption behind shadow banking and behind American financial engineers, and the big banks. ALL are operating under the implied bailout guarnatee. IF that guarnatee were taken out of the system, markets would go into crisis, and then implode like a super nova. Rigged markets are fun and profitable for our elites.

I hope this is the first of many decissions in China NOT to step in and make good everyone's loses. All these financial geniuses aren't worth shit IF they lose government guaranteed bailout protection. Without that cloak to hide behind, they are just fraudsters like we know they are!

Fri, 01/17/2014 - 08:53 | 4340393 Offthebeach
Offthebeach's picture

Im not needing a bailout. I have Social Security/cop/fire/teacher pension/ section 8 disability......etc.

Thu, 01/16/2014 - 23:09 | 4339935 NoDebt
NoDebt's picture

Amazing that it has to come out of China, pointing out there are positives to a default on an obviously stupid investment:

default of trust products could trigger some short-term negative impacts on China’s financial sector and the reputation of financial institutions.However, we believe it is positive for the healthy development of financial system in the long run because the default could do the following:

  1. Be a step to reduce the implicit guarantee of financial institutions for investment products. Banks could shift their financial liabilities back to the investors.
  2. Increase the risk awareness of both investors and financial institutions, which could correct the pricing of investment products to more risk-oriented.

This is a COMMUNIST country saying this, boys and girls.  Here in the US.... nope, any default is the end of the earth.

Thu, 01/16/2014 - 23:40 | 4339998 AlaricBalth
AlaricBalth's picture

+ 1. Excellent comment.

Fri, 01/17/2014 - 00:30 | 4340083 Jim in MN
Jim in MN's picture

They're just trying to make us look bad. 

Fri, 01/17/2014 - 01:38 | 4340151 Son of Loki
Son of Loki's picture

"They're just jealous of our freedom."

Fri, 01/17/2014 - 03:44 | 4340223 Fish Gone Bad
Fish Gone Bad's picture

Its not like the Chinese don't eat cats.  They also eat teacup poodles and malamutes.  Honestly, a malamute?  Now that is seriously just wrong...

Fri, 01/17/2014 - 08:56 | 4340396 Offthebeach
Offthebeach's picture

Make Amerikan loose face, embarrassing LBJ, FDR ancestors!

Fri, 01/17/2014 - 00:40 | 4340093 satoshi101
satoshi101's picture

Communism doesn't have anything to do with it, ... as the USA is far more COMMUNIST in fact.


Apples and Oranges,

In ASIA a DEBT MUST be repaid, if you don't pay it, then they go after the FAMILY.

In CHINA most of the real-estate speculation was on government flats, the government has been financing itself with sales of condo's forever,...

People were borrowing from shadow sources at astronomic rates to ride the real-estate boom,

So fucking what MORONS were flipping houses in ASPEN and making %100 in a week for years in 2004-2007, then one day it was over, ... and they walked, ... ran away,...

Too many people doubled-their bets, when they should have walked away from the table after the first few good wins.


The USA took care of the real-estate collapse by PRINT FIAT to the moon, to rise the housing bubble back off the ground.

Will CHINA do any differently?


The difference is the chinese government can afford to keep it all empty for-ever waiting for the price to go back up.

In the west a rotting track-home has a 5 year life in the elmements, in CHINA a 10by10meter FLAT ( concrete room ) has an infinite life, thus IHMO no fucking comparison,

IN time all these prison cells in all these buildings will be filled,


Sure glad I live in remote village and not these URBAN fucking citys, but then they're no different than USA, its just that chinese city's don't have the crime and poverty.
They're all fucking UGLY.

Fri, 01/17/2014 - 06:34 | 4340290 buzzsaw99
buzzsaw99's picture

a chinese made building with an infinite life, that's a good one!


another thing, the chinese gubbermint does not care about losing money on real estate as they can print as much as they want for free. they are worried that the peons will riot if the inflation rate goes too high for rice and noodles.

Fri, 01/17/2014 - 07:31 | 4340330 negative rates
negative rates's picture

Couldn't get my boots out of concrete the other day, I was worried cause I was alone and I got a sinking feeling like it was going to turn into quicksand.

Thu, 01/16/2014 - 23:18 | 4339959 knukles
knukles's picture

Who cares?
It's over there in China and we're isolated from them.
Buy moar!
They're a old behind the times uneducated unindustrialized nation of Yak farmers and camel hearders
Buy moar!
Chinese porn is lousy!
Buy moar!
Just Buy Moar!

Thu, 01/16/2014 - 23:24 | 4339971 ManWithaPlan
ManWithaPlan's picture

Heck all porn is lousy compared to American porn! It is one of our last great industries along with war and drugs...

Thu, 01/16/2014 - 23:28 | 4339980 knukles
knukles's picture

Imagine how much better it'd get if they declared a "War on Porn"!

Thu, 01/16/2014 - 23:29 | 4339976 fxrxexexdxoxmx
fxrxexexdxoxmx's picture

Chinese porn is really bad. And I search Asian porn all the time. The Japanse sites are really weird and somethings you should never actually see.

Thu, 01/16/2014 - 23:30 | 4339983 knukles
knukles's picture

Like what?
Comeon comeon comeon
Tellme tellme tellme
Whatdaydo whatdaydo whatdaydo

Thu, 01/16/2014 - 23:31 | 4339984 fxrxexexdxoxmx
fxrxexexdxoxmx's picture


Thu, 01/16/2014 - 23:36 | 4339986 darteaus
darteaus's picture

If the no bailout rule holds, it won't be long before: IT'S A STAMPEDE!!

Fri, 01/17/2014 - 00:22 | 4340069 jim249
jim249's picture

The fed will step in and buy all the bad debt and add it to their collection.

Fri, 01/17/2014 - 04:33 | 4340252 FreedomGuy
FreedomGuy's picture

Exactly! I am betting we will hear the word "Quadrillion" in the not too distant future.

Thu, 01/16/2014 - 23:34 | 4339991 ms8172
ms8172's picture

I am curious... can anyone comment what GOLD will do if China banks go into default?

Thu, 01/16/2014 - 23:39 | 4339996 element115
element115's picture

"2010 China Credit / Credit Equals Gold #1 Collective Trust Product"


I'm tendering offers for my "2014 Makes your dick BIGGER / Ponzi I promise it's as good as physical" Fund.

Send all money to....

Thu, 01/16/2014 - 23:40 | 4340001 imbtween
imbtween's picture

Best name ever. Sounds TOTALLY legit.

Fri, 01/17/2014 - 00:08 | 4340053 old naughty
old naughty's picture

what name? 

Snake oil label, left out poison alert.

Fri, 01/17/2014 - 00:04 | 4340048 starman
starman's picture

and so it begins................

Fri, 01/17/2014 - 04:06 | 4340234 Mentaliusanything
Mentaliusanything's picture

and so it begins... China Railways.. those tracks lead to an unbuilt bridge. remember Google is you friend. Now thats a debt that just keeps giving. Start your search with"China Railways+ debt". China inherited the same virus the rest of the World is fighting and they have no imunity.

Fri, 01/17/2014 - 00:09 | 4340054 i_call_you_my_base
i_call_you_my_base's picture

"2010 China Credit / Credit Equals Gold #1 Collective Trust Product"

Apparently they name their investment products like they do the chinese restaurants in my neighborhood.

Fri, 01/17/2014 - 00:09 | 4340055 Hindenburg...Oh Man
Hindenburg...Oh Man's picture

NASDAQ futures are melting up on schedule. what is your worry??

Fri, 01/17/2014 - 00:10 | 4340056 kchrisc
kchrisc's picture

Black swan sighting!

Fri, 01/17/2014 - 00:11 | 4340060 old naughty
old naughty's picture

how can you see in the thick fog?

Fri, 01/17/2014 - 00:13 | 4340062 Harry Dong
Harry Dong's picture

Shcomp chart looking killer here.

Jan 31 happy near year to remember!

May you live in interesting times

Fri, 01/17/2014 - 00:25 | 4340075 satoshi101
satoshi101's picture

I agree, who writes this BULLSHIT?

I notice today's "BASH CHINA" post is anonymous,

TUMBLES? I'm seeing down 0.56% for the day, 6% for the month, and 8% for the quarter,...

But honestly it looks like a contrarian bargain time,


ZH has a track record of being 'bend over wrong' 100% of the TIME, so I can only guess is that there has never been a better time to 'invest' in the chinese casino's.

TPTB used to use short-sellers as an indication of moronity, now they use ZH 'froth' instead, there is a better correlation with ZH-BULLSHIT than short-selling as when the morons are ready for a haircut.

That probably why the PTB use ZH to pump&dump BTC.


Personally I think all stock-markets are BS, the only people who make money in these paper-markets are brokers and house-owners. Of course if you own the company it doesn't hurt to issue IPO's, that's like pulling FIAT out of your ass.

The entire notion of 'little people' buying toilet paper (stock), is barely 100 years old.

Fri, 01/17/2014 - 01:47 | 4340164 disabledvet
disabledvet's picture

why does a build up in military forces in the South China Sea matter? because that's where you're rocket launches are going to start popping off from. "no longer hidden from view." Just park your ship and count the number of launches.

Here's what Elon has said:

"If we can't re-use then we can't continue." He's talking "within hours"! In other words "daily flights." The production numbers of this rocket are already amazing. They've already made more than one every other week going on over a year now.

That's around or about "dozens." Hmmmm. Solar panels, batteries, rockets. "We think we can do it for under ten million."

1000 bucks an ounce for gold. How much again for copper? Four bucks a pound? That's "unprocessed" I might add. How about "pure copper" again? Currently launches themselves are somewhere in the neighborhood of a billion.

Ten million?


Fri, 01/17/2014 - 00:25 | 4340074 Jim in MN
Jim in MN's picture

Game changer in Japan: Two former prime ministers gang up on establishment with one running for the Tokyo governorship...largely on a Fukushima disaster platform.

I guarantee you have not seen this in any US media.

"Although former Prime Minister Junichiro Koizumi and Prime Minister Shinzo Abe are not running in the election, their differences over nuclear energy in Japan are expected to be on full display during the campaign."



Fri, 01/17/2014 - 00:26 | 4340078 Jim in MN
Jim in MN's picture

A retired ruling party heavyweight called the prime minister and the chief Cabinet secretary with a dire warning in late December.

“It is better not to battle head-on with Koizumi,” former Liberal Democratic Party Secretary-General Hidenao Nakagawa said in the phone calls.

But weeks later, the duel between “master” and “disciple” is shaping up in the form of the Tokyo governor’s election.

Fri, 01/17/2014 - 00:30 | 4340084 satoshi101
satoshi101's picture

I think what folks fail to grasp here is that this shit ain't cheap, ... I don't even have or use a credit card, and the banks here in ASIA offer 36% to their best customers,... I can tell you that the people borrowing money in these shadow markets are paying incredible rates of interest.

This kind of thing will take care of itself, only because they were seeing 100%/month increase in property were they willing to borrow money at 200%/year.

The real-estate boom is largely over in appreciation, given that now only the top 10% can afford to buy property, ... shit how many empty's rooms in the flat's in CHINA? Fucking millions.

That said the USA is full of DARK-MATTER ( empty homes ) as well,


In summary, anytime you have a BOOM in folks borrowing at 100%/year or more, ... that shit can't last, cuz the only folks making money are the loan-sharks and the TRIAD, and even they can assume that a lot of their money can't be paid back.

Well except here in ASIA, bad debt can be forcibly collected on another family member, something that I don't see in the USA.

Fri, 01/17/2014 - 07:34 | 4340335 negative rates
negative rates's picture

Just sold my car and now i'm on foot. Can they track you down as easy on foot? 

Fri, 01/17/2014 - 00:33 | 4340088 Hail Spode
Hail Spode's picture

"Credit Equals Gold #1 Collective Trust Product"


Learning the hard way that no matter what the name says, credit does not equal gold.

Fri, 01/17/2014 - 00:43 | 4340097 mobydick
mobydick's picture

But, but, but....what are we going to do with all these new real estate spruikers that we now have in Oz?

Fri, 01/17/2014 - 00:45 | 4340102 satoshi101
satoshi101's picture

Understandably, the PBOC does not look upon the shadow banking sector favorably.


China is a benevolent government anytime a PREDATOR fucks the people the government doesn't like it, this is why they shutdown BITCOIN.

The USA the GOVERNMENT is ran by the predators, this is why the FED prints to the MOON, and bails out the predators.


No fucking way to compare CHINA to USA.

In USA we call 'shadow banking', ... we call it loan-sharking or pawn-shops, or USURY, and its generally illegal in the USA as well cuz its fucks poor dumb people... why in the fuck is the west calling ALT loan's "Shadow banking"???

Fri, 01/17/2014 - 07:35 | 4340337 negative rates
negative rates's picture

That kangaroo just took off with my bitcoins!

Fri, 01/17/2014 - 09:09 | 4340416 Offthebeach
Offthebeach's picture

Used car pay-by-the-week rates for dead POS breakdown vehicle run % 35.

Fri, 01/17/2014 - 00:48 | 4340107 q99x2
q99x2's picture

There's a guy with a beard that's not doing anything and would be glad to help. He has two friends, one that has pledged to do God's work and another with presidential cufflinks. You get those guys in to help and everything will be ok.

Fri, 01/17/2014 - 01:07 | 4340127 walküre
walküre's picture

I knew it! Chinese are printing Mao paper in their basements, flooding the world with their crap and buying everything that is not nailed down because our idiot bankers accept their accounting and paper at face value.


My new Henckel knives are not even a couple months old and rusting! Supposedly "German stainless steel" and made in China.

Priced like the real deal. Fuckers are destroying us all.

Fri, 01/17/2014 - 01:54 | 4340173 Space Animatoltipap
Space Animatoltipap's picture

Just thank the NY/Londen elite. They massaged China into their "1984" world. 

Fri, 01/17/2014 - 01:11 | 4340130 besnook
besnook's picture

the chinese have a lot to learn from the fed and it's owners. economic theory does not support the merits of creative destruction. bankrupting banks and banking services companies only makes things worse. bad money is best protected from default so the numbers work. if anything, the bad debt should be put into the bottomless pit of the pboc and everyone made whole at 100% on the yuan. lloyd and jamie and reid and b(e)ohner would approve.

Fri, 01/17/2014 - 01:24 | 4340141 combatsnoopy
combatsnoopy's picture

Isn't this a state owned bank?
Of course they dont' have the money, they gave it to the U.S. Treasury since Congress just passed yet ANOTHER spending bill!

Fri, 01/17/2014 - 01:45 | 4340161 sandiegoman
sandiegoman's picture

If china economy goes, so does gold, at least for a time.

Fri, 01/17/2014 - 07:19 | 4340319 Matt
Matt's picture

Sweet, maybe it'll hit $500 and I can load up.

Fri, 01/17/2014 - 01:58 | 4340163 ebworthen
ebworthen's picture

Oh no!

Call Sum Ting Wong!

Who is Hu Flung Poo?

U.S. next.


Fri, 01/17/2014 - 01:50 | 4340168 Space Animatoltipap
Space Animatoltipap's picture

Even when tiny tiny Greece sneezed the EU and therefore the US was threatened. Now what if a bigger entity in the WW $ based ponzi scheme sneezes? 


Fri, 01/17/2014 - 02:12 | 4340186 delivered
delivered's picture

In the end, it only comes down to one simple fact - Who gets left holding the bag?

The scam summarized in the article sounds just like the MBS mess in the US from 2007/2008. Originate the loan and earn fees, Check. Package/sell it to a middleman for repackaging and earn a fee, Check. Help the middleman sell the investment to retail investors and earn a fee, Check. Just what ever you do, don't own the paper at the end of the day as everyone but the suckers buying this crap knows it's worthless. Also, make sure you earn enough through the entire process to pay the legal fees and penalties (but avoid doing any jail time) that will come down the road. Just a cost of doing business is the way I figure these banks see it. Just constantly repackaging crap, earning a fee every step of the way, with no responsiblity accepted. The Chinese have certainly learned well from their US counterparts.

So in the end, there's only one question that remains - Does the CB bailout the retail investors? In the US, that has already been answered with a resounding yes. In China, we shall see as I have to figure they're using this problem as a beta/pilot study to see what really happens when $500 million of what various party thought were viable assets vanishes like a fart in the wind. If the disease is left unchecked and spreads too quickly, the entire beast may die. Can you even imagine what the unwinding of the shawdow banking system in China would look like? FUBAR can't even begin to describe this mess.

Watch the Shibor rates as they've been very volitile and were only contained when the PBOC stepped in. There are going to be alot of banks that didn't get the crap moved off their balance sheets so liquidity may really come under pressure in the coming weeks/months. 

BTW, what was it that finally triggered the MBS/CLO/CDO meltdown in the US back in 2008? Was it something as simple as a $1 billion repackaged deal going bust that started the avalanche? Had to start somewhere so I'm wondering, what was that first trigger? Thoughts?



Fri, 01/17/2014 - 03:23 | 4340214 jubber
jubber's picture

HK back above 23000 ???

Fri, 01/17/2014 - 04:09 | 4340235 syntaxterror
syntaxterror's picture

Yellen is secretely bailing them out. Move along.

Fri, 01/17/2014 - 04:12 | 4340236 Ulterior
Ulterior's picture

gold has fallen today, must be "manipulation", right?

Fri, 01/17/2014 - 08:34 | 4340370 fijisailor
fijisailor's picture

I guess you're smarter than the German regulator who says it is manipulated.

Fri, 01/17/2014 - 04:24 | 4340240 Paracelsus
Paracelsus's picture

Run on shadow banks? This reminds me of Cyprus.The "Bank Holiday". Same as it ever was....The big fish get their moolah out weeks ahead of us proles.

China have any Home Depots selling pitchforks and torches?

I wonder if the fellows will do a Bernie Madeoff,and confess,knowing they are alot safer "inside".

The number one rule with Ponzi schemes is to know when to fold the tent and split town.

Fri, 01/17/2014 - 06:16 | 4340284 buzzsaw99
buzzsaw99's picture

the shanghai is just another squid pump and dump

Fri, 01/17/2014 - 06:35 | 4340293 hero HNL
hero HNL's picture

From Japanese internet, there is rumor that China is plotting to buy korean companies like hyundai, samsung, etc....They are all insolvent & their huge debts are hidden from the public.


You may know that most korean companies are not korean-owned. Rather US banks own a majority of common & preferred shares of these companies after the IMF liquidated korea during the Asian Financial Crisis of 1996. See the investor relations section of these companies at their web sites.


I wonder how the chinese are going to do it....perhaps help from korean insiders?

Fri, 01/17/2014 - 06:43 | 4340297 buzzsaw99
buzzsaw99's picture

maybe they should buy north korean companies since they are such good friends? /s

Fri, 01/17/2014 - 06:52 | 4340304 new game
new game's picture

they do have 3 + trillion in reserves. tad of leverage goes a long way.

so who here thinks they are not going to keep it going?

when have tptb let their milk and honey turn sour?

come on, really!

and have millions even moar poar and in the streets...

just a bigger can, kicked again...

pst. really just the first kick.

Fri, 01/17/2014 - 06:52 | 4340303 Roanman
Roanman's picture

Just out or curiosity, I'm wondering where those Six Dollar Shirts are manufactured.

Fri, 01/17/2014 - 06:59 | 4340310 Incubus
Incubus's picture

only way this will be solved.


It is high time to recognize that the amoral psychopaths will "rise" to the top of any socioeconomic construct.


You just need to "skim" off the top layer of fuckwits every few decades.  I'll leave it up to the imagination. 

Fri, 01/17/2014 - 08:32 | 4340369 RSDallas
RSDallas's picture

The key word in the article is "probably".  China, just like the US Federal Reserve Crooks, will ensure that no default occurs.  

Fri, 01/17/2014 - 08:45 | 4340378 fijisailor
fijisailor's picture

Just think of all the surplus the Chinese can throw into a banking bailout.

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