China's Credit Nightmare Explained In One Chart

Tyler Durden's picture

Everyone knows that after years of kicking the can and resolutely sticking its head in the sand, China is finally on the verge, if hasn't already crossed it, of a major credit event, confirmed by the first ever corporate bond default which took place a week ago. Few, however, know just why China is in this untenable position. If we had to select one data point with which to explain it all, it would be the following: just in the fourth quarter of 2013, Chinese bank assets rose from CNY147 trillion to CNY151.4 trillion, or, in dollar terms, an increase of almost exactly $1 trillion!

By comparison, US bank assets in the same period rose by just over $200 billion, a number which consists almost entirely of the reserves injected by the Fed.

And if we had to show it in one chart, it would be the following comparison of total Chinese and US bank assets: the two lines shown below are on the same axis, and at the end of 2009, the US had just a fraction more assets than China. Since then the US has added $2.3 trillion in bank assets, exclusively thanks to the Fed's reserve creation. As for China... total bank assets more than doubled from $11.5 trillion to a record $25 trillion! This is a number that is nearly double that of the US, and represents a pace of $3.5 trillion per year - or nearly four concurrent QEs - a rate of "financial asset" addition five times greater than in the US!


Another way of showing just the past three years:


What's worse: China is now hooked to a "flow" pace of $3.5 trillion each and every year, just to generate an annual GDP of about 8% and declining with every passing year. Any reductions in the pace of monetary flow will have magnified implications on China's growth, and from there, social, and globa, stability.

But what does this really mean? Simple: in this epic, unprecedented, feverish pace to "grow" the economy and create hot, if worthless, money out of assets, all assets, even "magic" assets (i.e. thin air), the following took place:

CITIC Trust tried to auction the collateral but failed to do so because the developer has sold the collateral and also mortgaged it to a few other lenders.

Until now nobody cared because defaults were prohibited in China and nobody really cared what was underneath the hood. Now, defaults are allowed and, in fact, are encouraged. Which is why suddenly everyone is starting to cast curious glances into the dark shadows where the engine is supposed to be.

They won't like what they find.

Curious for more: read Chart Of The Day: How China's Stunning $15 Trillion In New Liquidity Blew Bernanke's QE Out Of The Water, and Some Stunning Perspective: China Money Creation Blows US And Japan Out Of The Water

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VD's picture

at least they traded the chimera fiat for gold...

DoChenRollingBearing's picture

This will end well.

Got gold?

NoDebt's picture

I was wondering if China's shadown banking industry was going to hit the skids before or after places like JCP and Radio Shack went under.  

But at least Chinese banking outlasted Sbarro and..... Quiznos.  Quiznos just filed for bankruptcy.  How are their shareholders feeling?  Mmm, mmm, toasty!

Levadiakos's picture

This really Suk Sum Poo

Fukushima Sam's picture

So the US has the cleanest, yet most bloody, shirt?

SoberOne's picture

I just sold a BigMac and some Freedom fries that I already ate.

Boris Alatovkrap's picture

Ancient Chinese Proverb is say,

"Yu flung dung, no chao fo yu!"

1000 splendid suns's picture

The elites know the current paper ponzi monetary system is on it's last wheeze. While each country's liar's paper still maintain some level of confidence, China is using theirs to hoard gold and set up their industrial and metro infrastructure. When the music stops, the Fema camps open, in swoops the IMF and UN and unleash the new shit dollar.

The pentagon can't account for $8.5T, other govt agencies can't account for $5T, yet I must pay my taxes. Sound money and sovereignty has left the USSA, but the MIC is doing fine:



RockyRacoon's picture

I just sold a BigMac and some Freedom fries that I already ate.

That should put tomorrow morning's offerings on par with the current typical "financial" asset.

Seer's picture

Nothing can beat "Best looking horse at the glue factory."  Love that one!

Almost Solvent's picture

Quiznos is nasty shit.

Tried it the first time in Vegas, didn't even get through half the sub. Horrible loose shits that evening. Tried it the second time in Miami, got through a few bites before tossing it. Horrible loose shits again that evening.

Herd Redirection Committee's picture

One of the hidden costs of inflation is that food quality goes down, as restaurants and food producers try to maintain profits without being able to raise prices.

Zadok's picture

Quality of everything is WAY DOWN! So sick of outrageous costs for cheap crap that breaks soon, often, and catastrophically! Can't seem to find quality at any price, not like I could afford it anymore anyway!

Seer's picture

Quiznos, isn't that the "Italian" version of Taco Bell?

pods's picture

And we thought Ben was gonna print till his eyes bled.

Ben was a piker compared to the Chinese.

At least when this is over the Chinese will have their health?


Seer's picture

LIke I've been saying, the Fed has been doing brilliant work in suckering everyone else into the turd bowl.  The "strategy" being that with enough turds in the bowl we wouldn't fit, and would therefore miss out being flushed...

superflex's picture

Quiznos could make a filet mignon topped with king crab, asparagus and bernaise sauce taste like a chicken carbonera.

Everything on their menu was shit.

Good Riddance!

Strider52's picture

Speaking of things closing, mega-dealer Tulving has been shut down due to non-delivery! 

His website gives no clues ( that he's shuttered.

Update: Tulving files for bankruptcy March 10, so this might be old news...

crusty curmudgeon's picture

“…if you received metal or cash from The Tulving Company after December 9, 2013, you may be required to return it to the bankruptcy trustee. Returning products in a bankruptcy proceeding is unusual, but may apply here due to the liquid nature and high value of the products.”

Amish Hacker's picture

Possession is nine-tenths of the law. Full disclosure, I'm not Perry Mason, but I think Tulving is going to have a hard time proving they still own something you bought, paid for, and took delivery of,  more than three months ago. Especially the "or cash" part.

Renewable Life's picture

The REAL question of this "chart" is.........Of those Chinese banking assets, how much is from western banks and western corporations doing business in China that because of tax purposes, dont want to withdraw those funds?????

I know the Chinese government knows that answer....does fucking Wall Street???

DCFusor's picture

DCRB, you know I do "got gold".  But I thought it somewhat disingenuous to not mention the population ratios, or scale the charts by something similar - China um, has a few more people in it than the US, right?  This might be doom porn with different rules than actual, informative reporting...I will settle for truth presented in a way that makes more sense, personally.

DoChenRollingBearing's picture

Having only partial data when dealing with a complex problem is always, well, a problem.  Yes, China has some four times our population.  But, our GNP per capita is some six times theirs.

I could not even guess how "well" China is served by their banks.  Nor how they work (eg, how many Chinese save or borrow at their banks).

Nor for that matter, gold oz / capita. By the central banks or by the citizens.

So, that takes us up to, what, a five (six?) dimesional matrix with many variables hard to quantify. Maybe the Tylers have freinds over at CERN who could help them with this one...


I just like to remind everyone that having some gold on hand whenever there is more bad (or even questionable) macro-news, it´s a good time remind those who may be new or who have not made the leap into gold ownership to look into it...

headhunt's picture

I agree - disclosure, I own gold

Dr. Sandi's picture

The NSA thanks you. They will forward that info to the Department of Taking Your Stuff.

Seer's picture

And, at least they have something to show for it all: ghost cities.  All folks in the US got was a dumb t-shirt which read: Hope is Wealth!

Yoki's picture

China has purchased alot of gold recently, they have already anticipated this crisis and many others. Unlike in America, China has been doing a very good job of monetary policy(in comparison to US). Thus far if you ask anyonw who knows a couple of things, they would tell you that China has done a much better job then America, hands down, Ben shut up, Yellen you're even worse. Take a lesson from China. 

China has brought some 600 million people out of poverty into capital enslavement in the last 20 years, with 500 million or so in the last 15 years

Their monetary policy is simple. Keep the production up. Buy Gold. Screew Americans, sell them cheap crap that will make them sick, (Like the chinese Garlic). Laced Candy, and Dominate the world.

China loves the Russia/US conflict, the more US goes into debt, the better china is off. And China is the real winner on this one. 

Oh yeah, and like the US, China can print to infinity too.


Now serve those drinks to your overloads biatches, you don't want them sober. CTR-P, CTR-P......  Shut up! collect your food stamp. oh look there's Biber!

mumbo_jumbo's picture

"Unlike in America, China has been doing a very good job of monetary policy(in comparison to US)"


LOL...are we reading the same article??  WTF?

epicurious's picture

Absolutely right about the danger of eating any food from Asia.  In my travels there I have been astounded at the amount of food grown right in sewage.  This is true all over China.  We grow our own garlic just to avoid this issue and I am fairly wealthy.

mac768's picture

How will they pay for the Ferrari?

CultiVader's picture

Hey DoChen. Just for my own internal voice, is it 'dough' Chen or 'dew' Chen? My condolences on your most recent boating accident.

DoChenRollingBearing's picture

The Pacific has some rough waters just off the coast here in Peru.  Perhaps I should have left my gold at home in some dark place to sit there, but it seemed like it would be safer to bring it down here with me, and taking it out boating.  Well, perhaps it was not so safe...

Do as in "dough".  Do Chen is how a Peruvian-Chinese guy translated "rolling bearing" into Mandarin, that´s how I wound up choosing my moniker here.

Chief KnocAHoma's picture

It will start in Asia then cascade like a bitch. Debt and paper assets will be erased overnight causing massive panic. Since 2008 I have thought this was a race to the bottom with the one hitting ground last would be the winner. The FED and money printers may have played this perfectly keeping the US plate levitating long enough for the others to crash.

I think we will find out soon... like before Easter.

Seer's picture

Before Easter isn't accurate enough for me!

From Wikipedia (

Easter is a moveable feast, meaning it is not fixed in relation to the civil calendar. The First Council of Nicaea (325) established the date of Easter as the first Sunday after the full moon (the Paschal Full Moon) following the March equinox.[7] Ecclesiastically, the equinox is reckoned to be on 21 March (although the astronomical equinox occurs on 20 March in most years), and the "Full Moon" is not necessarily on the astronomically correct date. The date of Easter therefore varies between 22 March and 25 April inclusive. Eastern Christianity bases its calculations on the Julian calendar, whose 21 March corresponds, during the 21st century, to 3 April in the Gregorian calendar, and in which therefore the celebration of Easter varies between 4 April and 8 May.

I need to know for sure, whether I need to file my income taxes or not!

BurningFuld's picture

I loves a good cataclysm.

McMolotov's picture

Paul Krugman has a raging 2" boner right now.

Winston Churchill's picture

0.002" . never trust an economist to measure anything.

Dr. Engali's picture

I didn't think enuchs could get a boner. Hmmmm....... Learn something new every day.

Winston Churchill's picture

Look up"rig" in a good dictionary Doc.

OpenThePodBayDoorHAL's picture

geez, "raging" and "2 inch" don't seem to go together

ultraticum's picture

Na zhende shi hen duo qian!  That's a Sh%$# load of dough.

Seer's picture

Isn't China communist?  That is, isn't it supposed to be that the State -PBOC- owns most of everything?

The US, on the other hand...

Bottom line: What is the premise?  If it's "growth" then it's can ONLY go this way: perpetual growth on a finite planet is not possible, no matter what ideology or spin is applied to the "process."

Carl Popper's picture

Sure it can.  All we need is cheap fusion power.  


We could vertically farm with cheap fusion power, mine asteroids, terraform mars and possibly Venus if we build a giant sun shade.  


Energy is the only true limiting factor.  

29.5 hours's picture



Well, energy -and- common sense.  Common sense is probably the limiting factor...



BKbroiler's picture

I'm guessing he couldn't find the sarc key

Seer's picture

Math challenged?

Like any good detective looking to actually solve a "mystery," I've got to ask: where are the bodies?  That is, where are you going to put the inifnite number of people?

The earth's total area is roughly 197 million square miles: this includes polar reqions and ALL bodies of water.  That number isn't "infinite," it's not 300 million square miles, it's a fairly accurate number, but it IS a number, one that's NOT infinity.

The population of Hong Kong is roughly 60,000 people per square mile.  I'm not thinking you're going to be able to shove much more than this into every square mile, so...

60,000 x 197,000,000 gives: 1.182e + 13.  Clearly a HUGE number!  But, infinite is MIUCH bigger.  Go ahead, tell me that we can pack 1 trillion people into 1 square mile because, with no limit, that's an acceptable number accordning to your notion here.  Oh!  And be sure to account for the places in which all that wonderous technology can operate (be sure to account for farm land, fishing etc.).

Totentänzerlied's picture

The entire population of Earth at this moment could live pretty comfortably, in terms of ft2 (or ft3) per person, in a medium-sized country, about the size of Texas. That leaves all other arable land available for agriculture and the non-arable for industry, largely automated.

The issue is energy (including food), and water, specifically the efficiency of the processes by which we use energy to do work, mainly growing food, manufacturing things, and transporting everything. There are thermodynamic limits but we are nowhere near them.

If you qualify "perpetual growth on a finite planet" with "using contemporary industrial techniques and agricultural methods, and assuming contemporary societal and economic configurations" then the statement is as good as tautological. Perpetual growth in hunter-gatherer societies was also clearly impossible, and likewise nowhere near the spatial capacity of Earth's surface. The planet and its resources are indeed finite and largely static too, but employment of those resources, particularly energy resurces, and the efficiency of that, is not static.

The issue is, has always been, energy. If the population was approaching 1 trillion, it would indicate that all previous "hard" limits on population - resources, employment, housing, food and water, sanitation, healthcare - had been thoroughly surpassed, and the only remaining one would indeed be where do we physically put all these bodies.

Seer's picture

I go from math-challenged to reading-challenged, sigh.

The POINT was about whether or not there could be infinite growth.  PLEASE, read.

Further, without understanding this POINT we will never be able to break out of the game that TPTB have us locked into.  As long as people continue to maintain the belief that there's no limit then eventually it leads to mass starvation/war; and, people will continue to run headlong into a repeat (chanting along with whatever "leaders" or ideology is creating the illusion.

"The issue is, has always been, energy."


That is, energy is only part of the equation.  If I put you out into space, say 1,000 miles from the sun, you'd have AMPLE energy; but, I'm not thinking that you're going to live very long.

Again, either one believes there are limits or one does not.

andrewp111's picture

I believe that a level of about 1016 people, the waste heat alone would be too much for the planet to be liveable. So, there are hard limits that have nothing to do with how many can be packed into a square mile. Long before that point is reached, outer space must be colonized.