The Second Chinese Corporate Default: Real Estate Developer With CNY3.5 Billion In Debt Collapses

Tyler Durden's picture


A few days ago, copper prices and the Chinese stock market were roiled by speculation that another - the second in a row - Chinese bond default may be imminent, in the shape of Baoding Tianwei Baobian Electric (TBE) a maker of electrical equipment and solar panels, whose bonds and stock were suspended from trading a week ago after reporting massive losses. A few days later, TBE "promised" not to default when its next interest payment is due in July (although how the insolvent company can see that far into the future is just a little confusing). And yet the market shrugged and contrary to its recent idiotic euphoria to surge on even the tiniest of non-horrible news, barely saw a rise. Today we may know the reason: overnight Bloomberg reports that second Chinese corporate bond default may be imminent after the collapse and arrest of the largest shareholder of closely held Chinese real estate developer Zhejiang Xingrun Real Estate Co, which just happens to be saddled with 3.5 billion yuan ($566.6 million) of debt.

Debt which absent a bailout, which at this point is very improbable, will not be repaid.

From Bloomberg:

Zhejiang Xingrun Real Estate Co. doesn’t have enough cash to repay creditors that include more than 15 banks, with China Construction Bank Corp. (939) holding more than 1 billion yuan of its debt, according to the officials, who asked not to be named because they weren’t authorized to discuss the matter. The company’s majority shareholder and his son, its legal representative, have been detained and face charges of illegal fundraising, the officials said.

What is curious about this particular potential default is that it touches not only on the massive leverage in the Chinese system, but on the one real bubble in China (since nobody there seems to care about the Shanghai Composite): housing.

The collapse of the company, in the eastern town of Fenghua, adds to concern of strains in China’s real estate sector. The property market in smaller Chinese cities faces “true risks of a sharp correction” due to oversupply and investors may have underestimated the risk, Nomura Holdings Inc. economists said in a March 14 report.

Two calls to the chairman’s office and financial department at Zhejiang Xingrun weren’t answered today. A woman who answered the phone at the Fenghua government’s news office who declined to give her name confirmed the company cannot pay its debt. A Beijing-based press officer at CCB said the bank asked for more information from its local branch about the report and hasn’t heard back.

So going back to the collapse, Bloomberg adds that the failure of the company was reported earlier today by the Chinese-language National Business Daily, which cited an unidentified government official for the news. The report blamed the failure on mismanagement and high costs of private lending, according to the newspaper.

“We think the default of the developer will alert the banks on escalating risk from developers amid the liquidity tightening,” said Johnson Hu, a Hong Kong-based property analyst at CIMB-GK Securities Research. “We maintain our view that banks may revisit loan policy on property and may take stricter stance on property development loans, particularly for small developers.”

It is also about to get worse: "Property shares slid to a 16-month low in February after Industrial Bank Co. suspended mezzanine financing for developers, adding to concerns that smaller developers may default on their borrowings amid the government’s property curbs and an economic slowdown."

And just like that, quite suddenly, the tide is flowing out and all those swimming naked will be revealed. What happens next? Precisely what we said would happen a week ago, when we explained the imminent plight of Chinese corporate where things such as this are about to be revealed...

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.

... as having taken place at a truly massive scale.

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Mon, 03/17/2014 - 08:30 | 4557881 Kina
Kina's picture

This is a bigger nightmare than MBS collapse of the US.

Mon, 03/17/2014 - 08:33 | 4557888 Independent
Independent's picture

Can't the Chinese just print money like our Jew Run FED and bail out everyone???  After all the Chinese invented paper money.

Mon, 03/17/2014 - 08:37 | 4557896 GetZeeGold
GetZeeGold's picture



Where are all the ghosts going to live?

Mon, 03/17/2014 - 08:45 | 4557927 BigJim
BigJim's picture

 which just happens to be saddled with 3.5 billion yuan ($566.6 million) of debt

$566.6 million... is that a lot these days? I genuinely can't tell any more. 

Mon, 03/17/2014 - 09:02 | 4557966 jbvtme
jbvtme's picture

long bamboo slivers and organ transplants

Mon, 03/17/2014 - 09:21 | 4558018 Independent
Mon, 03/17/2014 - 09:41 | 4558103 sessinpo
sessinpo's picture



Both of your links had nothing to do with China. And the NY Times is very left wing anti semitic.

You are full of racist progapanda.

Mon, 03/17/2014 - 10:37 | 4558416 BigJim
BigJim's picture

 And the NY Times is very left wing anti semitic.


Mon, 03/17/2014 - 10:00 | 4558174 BlindMonkey
BlindMonkey's picture

Wouldn't the correct play be to short organs due to the increase in supply? How Bout going long in Chinese organ repo firms?

Mon, 03/17/2014 - 09:05 | 4557977 strangeglove
strangeglove's picture

$666.6 million... is that a lot these days? I genuinely can't tell any more. 

See What I Did there?

Mon, 03/17/2014 - 09:12 | 4557992 forwardho
forwardho's picture

With the majic of rehypothication that 566.6 million could be on 100 different books with an "imaginary" value of 5.6 trillion.

Not a problem till the 99 figure out they are scewed.

Mon, 03/17/2014 - 09:12 | 4557993 Element
Element's picture

How much is that in plastic bitcoins?

Mon, 03/17/2014 - 09:40 | 4558073 SamAdams
SamAdams's picture

Yes, at a monthly rate of $75-$85 BILLION for ever; $500 million doesn't seem that much at all.  Of course with the JPM's, GS's and other Pharisee banks, it is not real, it is just a book entry on the FED which is also entered on the banks to make them look solvent.  It's like moving $5 from your back pocket to your front pocket and calling it $10.

With Chinese corporate bonds, it was a real loan of real assets from third parties.  This sort of thing, if not bailed out, will make investors seek haven in US equities.  This is great for the Socialist USSA as their Bolshevik Pharisees really need people to believe their circle jerk has value.


Mon, 03/17/2014 - 08:49 | 4557936 XAU XAG
XAU XAG's picture



Makes a new meaning to.................."ghost bustesr"


Who you ganna call!

Mon, 03/17/2014 - 09:04 | 4557974 post turtle saver
post turtle saver's picture

better yet, where will they vote?

Mon, 03/17/2014 - 10:50 | 4558062 GetZeeGold
GetZeeGold's picture



No worries....they've got the new Diebolds.


Thanks Chuck Hagel......would you like to be the Secretary of Defense?

Mon, 03/17/2014 - 09:06 | 4557980 Johnny Cocknballs
Johnny Cocknballs's picture


Translated it means "province of wind and ghosts."


Mon, 03/17/2014 - 09:54 | 4558138 Zero-risk bias
Zero-risk bias's picture

Quite possibly.

Fenghua, Zhejiang province (Home of Xingrun Real Estate Co.)

Zhejiang province has the highest level of provincial local government debt in the whole of China. Other cities such as Ningbo and Wenzhou are infamous for their 'astute business-minded ethos', and their non-performing loans. Despite the fact that everyone and their moms all wanted to get into house flipping or take out loans to open factories after the financial collapse, no one would have been able to see this coming.


Mon, 03/17/2014 - 08:38 | 4557903 TruthInSunshine
TruthInSunshine's picture

What would Mao Silvertongue do?

Mon, 03/17/2014 - 08:40 | 4557910 Independent
Independent's picture

He would say Joooos do that to me again and I cut you with my butter knife as many times as Peking ducks fly over the Yellow River

Mon, 03/17/2014 - 08:41 | 4557911 SheepDog-One
SheepDog-One's picture

Ogolfer would just read his teleprompter and tell us we've never had it better, shut up and get back to work and pay your slave taxes, and he'd go off to shank some balls with Reggie.

Mon, 03/17/2014 - 08:51 | 4557937 TruthInSunshine
TruthInSunshine's picture

Confucius say:

"Long nights of poo poo platters & fly rice await corrupt bureaucrats who dip own wicks in people's ink."

Mon, 03/17/2014 - 10:01 | 4558184 ihatecats
ihatecats's picture

sorry,I don't get out much.Who's Reggie?

Mon, 03/17/2014 - 09:09 | 4557978 sessinpo
sessinpo's picture

 Independent    "Jew Run FED"


How sad it must be for you to be run by a few million Jews. There are billions of people in the world, and yet, you have no power over that minority. Perhaps you will one day realize, that even if there were no Jews on the FED, you would be in the same situation. But, your anti semitism would probably prevent that. Thus the elite will always defeat you. Corruption is corruption no matter what race or religion.

Mon, 03/17/2014 - 09:26 | 4558041 Rafferty
Rafferty's picture

Yes, it is pathetic that the West is run by a tiny number of Jews.  A big part of the explanation is that we've bought into the narrative of the poor victimized Jews and that in turn means we can't even question them, far less criticize them.

Mon, 03/17/2014 - 10:02 | 4558189 Johnny Cocknballs
Johnny Cocknballs's picture

"Corruption is corruption no matter what race or religion."

Right, but when that corruption and the wealth and power which flows from it benefits a small ethnoreligious minority, for decades, and in more than one country, and where, for example, members of that group have been recently appointed to a wildly disporportionate number of positions at the head of federal agencies having anything to do with banking, finance, or budget  [to include the Fed, treasury, IRS, SEC, OMB, FDIC, National Economic Council, Council of Economic Advisors, CFTC] as well as a disproportionate number of high level posts in other federal branches and departments  [Treasury and State perhaps especially], then the question becomes, why is this one group given disproportionate benefit of the theft which "would occur anyway?"

In other words, you are attempting to distract from the {at least very arguable} legitimacy of asking about Jewish over-representation at the Fed, etc. by claiming we'd be in the same situation.  But while we may or may not be in the same situation {I would tend to believe it would be a little different, with less ethnocentrism and cronyism but don't think it would be a huge difference given the same monetary system, sure} the point is that one tiny minority is benefitting from it, and while obvious, there is great social pressure to not discuss the power of what is the most powerful ethnic group in the country - all while, for example, the chattering class worries out loud about their being too many 'whites' on the local fire department, etc.


In other words, I don't think you make the question regarding disproportionate Jewish power invalid simply by nakedly claiming we'd all be getting screwed anyway - as it stands, one group more than any other seems to benefit, and not just in the united states. 


I think adults can and should discuss what this means for the 97.5% of the rest of the country.  If you do not, perhaps you can share why.  I'll listen, but I've never heard a good argument - only ad hominem.

Mon, 03/17/2014 - 23:54 | 4561842 VD
VD's picture

so francis_sawyer creates another account....  let's cut the anti-semitism before you all get shit-canned again...

Tue, 03/18/2014 - 01:18 | 4561980 Johnny Cocknballs
Johnny Cocknballs's picture

eat a dick you phony fuck - you're the bigot, not me.

I grant you I push the proverbial envelope on a verboden topic on one of the few internet forums with the sack to allow people some leeway  {and yeah, thanks Tylers} but I don't hate anyone.

Except people who are full of shit.

Ya cunt.

Tue, 03/18/2014 - 01:41 | 4562007 The_Prisoner
The_Prisoner's picture

Gonna cry to Tyler to get people banned again? Is that your little power-trip?

Mon, 03/17/2014 - 10:52 | 4558505 TruthHunter
TruthHunter's picture

"Due to Oversupply"

There is no oversupply, only overprice.

Mon, 03/17/2014 - 08:38 | 4557895 Kina
Kina's picture

China cannot just print to allow this bubble to grow bigger. The stakes increase with the size of the bubble. State's ability to control the country and maintenance of social stability is at stake if there is a massive crash bought about by a massive bubble.


Ha.. they need to find a way to gradually deflate.... good luck.

Mon, 03/17/2014 - 08:41 | 4557912 Independent
Independent's picture

Its easy just turn billion Chinese asses towards the USA and fart all the smog and pollution to Yankee imperialist

Mon, 03/17/2014 - 08:50 | 4557942 Johnny Cocknballs
Johnny Cocknballs's picture

they can if the US is letting its bubbles continue to expand, which is appears to be.  Because not doing so would be, in essence, like letting themselves get robbed as the dollars value declines.

So they may as well overleverage and create debt and build while they can, eh?


In any event,  China can use a lot of the cash its sitting on to buy more gold mines in Africa, and maybe spend it to spruce up that wall.


So much of it smells like pee!

Mon, 03/17/2014 - 09:05 | 4557975 forwardho
forwardho's picture

At the root of all decisions made by Chinese ruling class is FEAR.

The vast majority of the 1.7 billion people live on the edge.

History of change in China has always been about starvation, and its consequences on social stability.

Mon, 03/17/2014 - 09:11 | 4557989 strangeglove
strangeglove's picture

If this is true and i aint saying it is, they will be able to export thier starvation around the world in effect starving our poor as they spend thie excess $ buying food for higher and higher prices.

as we use more and more EBT!


Mon, 03/17/2014 - 09:29 | 4558049 forwardho
forwardho's picture

In U.S. The nonproductive are given the EBT so they won't starve and riot.

Same Fear.

China does not believe in free rides so they have had a giant "make work" program. hence the empty citys.

As far as return on investment, both averted chaos.

China now has millions of unused units.

U.S. now has millions of fat assed dependents.


Mon, 03/17/2014 - 11:02 | 4558560 Seer
Seer's picture

You have talent for problem-solving!

Mon, 03/17/2014 - 09:33 | 4558069 Rafferty
Rafferty's picture

Leads to a big reduction in the Free Shit Army. What's not to like?

Mon, 03/17/2014 - 10:36 | 4558410 Kirk2NCC1701
Kirk2NCC1701's picture

This FSA thou speakest of...

Art thou referring to the unproductive Poor or the unproductive Rich, who liveth off the largesse of the Fed?

Mon, 03/17/2014 - 08:38 | 4557901 sunaJ
sunaJ's picture

Remember as a kid strapping into an amusement park roller coaster and slowly chugging up that first hill? We are just cresting it, and are about to see what the Rehypothecated Dragon coaster has in store for us. Hold onto your butts.

Mon, 03/17/2014 - 11:04 | 4558573 Seer
Seer's picture

Well, unlike back then that seatbelt is set to fail at the crest, AND, there's no rail past that crest!  The "free ride" tickets are automatically "expired."

Mon, 03/17/2014 - 08:42 | 4557914 Bangin7GramRocks
Bangin7GramRocks's picture

Oh no! This means the Chinese will need to invent some money and the US markets may only rise by 1% today. This is catastrophic!

Mon, 03/17/2014 - 08:45 | 4557924 firstdivision
firstdivision's picture

Actually the MBS collapse would have been much worse than this, if Hank Paulson didn't demand and receive over-reaching (and unconstitutional) powers to bailout the banks and hide the fraud of the MBS system. 

Mon, 03/17/2014 - 09:20 | 4558004 Element
Element's picture

Dude, toxic debt in zombie banks and mark to make believe.

It happened.

And no, Hankster did not save the world, he did plundered you.

The red is mine, can't believe anyone greened you for that.

Or was there supposed to be a /sarc on the end of that?

Mon, 03/17/2014 - 10:04 | 4558206 firstdivision
firstdivision's picture

Probably because others are not too inept to discern a description of events vs approval of the events.  Don't know how you get "Hank Paulseon is a true world hero" from my statement.

Mon, 03/17/2014 - 10:55 | 4558388 Element
Element's picture

Yeah, I get it: omelet <--> broken eggs ... bombs <--> wedding party

So I mustn't disapprove, but just see the bigger picture, why it's all necessary and justified and why the means have no import to the ends. Great, but actually no, instead, you just earned another red for being precisely that sort of disgusting person.

"Hankster did not save the world, he did plundered you" is what I really wrote.

"Hank Paulseon is a true world hero", is what you wrote as though you were quoting me, directly.

See a small difference? What you did is called a misrepresentation. It's a form of lie.

"Probably because others are not too inept to discern a description of events vs approval of the events."

No arsehole, you were not describing events there, anyone paying attention can see that you were ADVOCATING YOUR APPROVAL, as well as inculcating APOLOGETICS for massive criminality to serve banking interests at the expense of actual working people and business.

Which objectively makes you something of a complete CUNT and lowlife parasite, and pretty much qualifies for bullet insertion.


I would give you further disapproval, but clearly you don't merit the input.

Mon, 03/17/2014 - 13:49 | 4559514 firstdivision
firstdivision's picture

Forget your meds there?  Hopefully you and your entire family die in a car crash soon, as it would help rid the world of inept fools that cannot learn reading comprehension. 

Mon, 03/17/2014 - 11:08 | 4558589 Seer
Seer's picture

No vote from my end, but...

Who is to say that the US MBS book is closed?  Further, how can we reasonably assess the total impact?

In my mind it (MBS crack-up) was just a symptom of the disease, the disease that was always going to get us anyway: perpetual growth on a finite planet.

Mon, 03/17/2014 - 09:04 | 4557972 post turtle saver
post turtle saver's picture

somehow these are the guys the US is supposed to be worried about... uh, no

Mon, 03/17/2014 - 08:30 | 4557882 myne
myne's picture


Do NOT follow this link or you will be banned from the site!