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China Demands Gold As Collateral For Zimbabwe Loans

Tyler Durden's picture




 

China, as we noted here, is happy to provide the financing to turn Africa into Disneyland - Monorails and all - but there is one catch... the loans must be backed by gold as collateral. As The Source reports, China wants Zimbabwe to use its mineral proceeds to guarantee any future loans having already extended nearly $1.5 billion in the last three years to Harare’s ailing economy. Various minerals have been discussed to back the loans "but we feel gold is more stablee," Zimbabwe's Mines Minister noted. Of course, China is defending the demand, claiming "it’s in accordance with rules and regulations when granting any loan" and adding that "it doesn’t mean that we will use the collateral." 

 

As The Source reports, Gold may be used as guarantees for existing, future loans...

China wants Zimbabwe to use its mineral proceeds to guarantee any future loans, a Chinese official said on Tuesday, adding that Beijing had already extended nearly $1,5 billion in the last three years to Harare’s ailing economy. In February, Finance Minister Patrick Chinamasa said the two countries were negotiating what he termed a comprehensive financial rescue package.

 

...

 

“We are discussing whether we can take proceeds of sales for some minerals as collateral for the loans,” said Han.

 

“The bank and the team from the ministry of finance are now working at a technical level on how they can set up such a mechanism, how much the collateral would be and how much loans they (Zimbabwe government) can get.”

In principle, the funding request and use of minerals as collateral has already been accepted, Han added.

He said Chinese loans to Zimbabwe were nearly $1,5 billion over the last three years – about 37 percent of the 2014 national budget at $4,1 billion – and that it was now burdensome for the government to repay.

China explains this is business as usual...

We are asking for collateral because it’s in accordance with rules and regulations when granting any loan, but it doesn’t mean that we will use the collateral. This is the concept that we are now discussing with the Zimbabwe government,” said Han.

So not hollowing out another nation's reserves at all. But Zimbabwe adds...

“We have looked at gold and diamonds, which we are considering as part of the securitization,” Deputy Mines Minister Fred Moyo says in phone interview from capital, Harare.

 

Government may also consider using chrome, “but we feel gold is more stable,” Moyo says

But one has to wonder how likely it is that Zimbabwe will promptly repay billions of dollars of loans - given their track record - and what a great way for China to transform its excess USDs to Gold (and get paid interest while it waits).

Especially in light of the ongoing push for a multiple currency system in the nation (i.e. Zimbabwe is about to start printing again)...

Zimbabwe Multiple Currency System Essential to Economy: Mangudya

 

Multiple currency system is “sine qua non for turning around the fortunes of the economy,” Reserve Bank of Zimbabwe Governor John Mangudya says in 1st statement since assuming office May 1.

 

Economy faces “significant” challenges, incl. lower domestic demand, deterioration in BoP, banking  “vulnerabilities”

 

Lack of liquidity and its limited circulation within economy remains biggest immediate challenge; central bank must find solutions to lack of formal interbank market and lack of lender of last resort

 

Central Bank to arrange for funding to capitalize itself, become lender of last resort

Seems like China is on to something!

 

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Wed, 05/07/2014 - 20:33 | 4737998 One And Only
One And Only's picture

Racists.

Send in seal team 6 and have the IRS audit their asses.

Wed, 05/07/2014 - 20:34 | 4738007 So Close
So Close's picture

But it is not money.

Wed, 05/07/2014 - 20:41 | 4738024 Arius
Arius's picture

WHAT??

Thats crazy, I thought they were there to help the Africans ...

 

EDIT: i read it carefully and they quantify "this doesnt mean they will use the collateral" ... why are they asking for it then ??? ohhhh just in case ... i get it

These chinese are smt arent they ?  funny thing while drilling in the disputed waters near Vietnam, they say they will do it until August 30 ... just be patient and we will leave

quite a performance, i guess billions of people, got a few geniueses here and there  to pick from ...

Wed, 05/07/2014 - 20:45 | 4738052 Keyser
Keyser's picture

It begins... The alarm horns are sounding in the Fed... 

 

Wed, 05/07/2014 - 20:47 | 4738059 Arius
Arius's picture

it is all according to schedule, everyone is on the plan .... it will not happen until the fat lady sings ...

Wed, 05/07/2014 - 20:58 | 4738116 mjcOH1
mjcOH1's picture

Wow.   A business contract between Zimbabwe and China.   What could go wrong?

Wed, 05/07/2014 - 21:02 | 4738125 Grande Tetons
Grande Tetons's picture

If you had to bet...who was the more savy party of said contract? 

Wed, 05/07/2014 - 21:28 | 4738216 Clever Name
Clever Name's picture

Zimbabwe.

Something along the lines of "If I owe you $10..."

Wed, 05/07/2014 - 21:36 | 4738235 DaddyO
DaddyO's picture

After reading Brandon Smith's article down thread, this move by China makes perfect sense.

Serfs are many and broke, Tryants are few and well funded and heavily armed.

DaddyO

Wed, 05/07/2014 - 21:54 | 4738269 SafelyGraze
SafelyGraze's picture

fools

the dollar is backed by the full faith and credit of the government

but gold is not backed by anything

https://www.youtube.com/watch?v=k8Htfcjk_JA&t=20s

 

Thu, 05/08/2014 - 00:28 | 4738689 Boxed Merlot
Boxed Merlot's picture

It begins... The alarm horns are sounding in the Fed...

 

Annual budget @ frn4.1B?  At nearly 120M an hour, the fed's been adding that much to the US money supply every 35 hours or so for the last 4+ years.  C'mon, the beranke/yellen flow  musters up a measly frn1.5B in less than 10 hours of QE.  And it ain’t backed by nuthin.

Zimbabwe's still gotta lot to learn.

Thu, 05/08/2014 - 00:26 | 4738686 Libertarian777
Libertarian777's picture

will not 'use' means the Chinese will not rehypothecate the collateral. Once they have that cold hard metal in their custody it's going to damn well stay that way.

Thu, 05/08/2014 - 00:56 | 4738720 TheReplacement
TheReplacement's picture

There are plenty of geniuses but really, no genius really truly believes he can own the world.

Thu, 05/08/2014 - 17:41 | 4741243 Mad Muppet
Mad Muppet's picture

Well, no...but if you own all the wealth, minerals, and oil what else do you need to posess to consider that all others are under your thumb?

Wed, 05/07/2014 - 21:20 | 4738182 Offthebeach
Offthebeach's picture

Doesn't The Middle Kingdom know gold is barbaric?

Calling Dr. Krugman, Dr. Bernanke, Dr. Geithner, Dr. Friedman.....

Wed, 05/07/2014 - 21:22 | 4738193 1 over Infinity
1 over Infinity's picture

I would much rather have one trillion Zimbabwean dollars.


Wed, 05/07/2014 - 20:34 | 4738006 logicalman
logicalman's picture

Fucking genius!

 

Wed, 05/07/2014 - 20:53 | 4738089 Ignatius
Ignatius's picture

Naw, just dustin' off an old, well known script.

Wed, 05/07/2014 - 20:35 | 4738015 prains
prains's picture

Gold for paper......what a deal, gotta jump at that

Wed, 05/07/2014 - 20:48 | 4738061 SHEEPFUKKER
SHEEPFUKKER's picture

Shhhhh, don't tell anyone.  

Wed, 05/07/2014 - 20:55 | 4738096 prains
prains's picture

if they wait maybe walmat will mark it down and the gold will be even cheeper

Wed, 05/07/2014 - 21:10 | 4738151 Slave
Slave's picture

The first rule of Fight Club...

Wed, 05/07/2014 - 20:35 | 4738017 ebworthen
ebworthen's picture

Gold Bitchez!

Africa is to China as North America was to Europe, starting around 1492.

Wed, 05/07/2014 - 20:47 | 4738057 Grande Tetons
Grande Tetons's picture

I see a lot of Casinos in Africa's future. 

Thu, 05/08/2014 - 01:01 | 4738729 SilverRhino
SilverRhino's picture

I pity those black people living there.   China doesn't give two shits about life and will drive them off the land.   EPIC population dislocations and massacres.   

Africans thought the West was bad ... just wait until they get a taste of the East.

Thu, 05/08/2014 - 04:06 | 4738877 UselessEater
UselessEater's picture

oh you think this is new.

Zim was created only through the guns and finance and sanctions etc that were supported in various ways by the Anglo-American, Chinese and Russians.

why is your handle a Rhino?

Thu, 05/08/2014 - 18:53 | 4741512 MeelionDollerBogus
MeelionDollerBogus's picture

China wants the resources in the land, not to live there.
You're sadly mistaken if you think Chinese mainlanders want to live in any part of Africa forever.

Wed, 05/07/2014 - 20:37 | 4738026 Poor Grogman
Poor Grogman's picture

New china best seller

Confessions of a Chinese economic hit man.

Wed, 05/07/2014 - 21:48 | 4738260 TheFourthStooge-ing
TheFourthStooge-ing's picture

Title changed parallely to correspond with phenomenum prosperously:

Confessions of Chinese 'american' Extorter of the Weak, Farmer of the Poor, Working for the Chinese 'american' King Class, the Middle Class

Thu, 05/08/2014 - 09:07 | 4739336 Poor Grogman
Poor Grogman's picture

The mattering thing that an " American" would not notice is that Americanism is blobbing up.
-------------------------------------------------------------------------------------

Everywhere and always it an " American " way, the only place to be worth somthing.

Thu, 05/08/2014 - 11:12 | 4739847 TheFourthStooge-ing
TheFourthStooge-ing's picture

Made me laugh.

The nature of 'american' Chinese Citizenism is eternal, and propensitized to blobbing up.

Wed, 05/07/2014 - 20:39 | 4738031 whoknoz
whoknoz's picture

indeed...chrome plated gold would be rather tacky...

Wed, 05/07/2014 - 20:45 | 4738051 LetThemEatRand
LetThemEatRand's picture

Barborous relic.

Wed, 05/07/2014 - 20:55 | 4738098 Grande Tetons
Grande Tetons's picture

China will be a tough lender. 

Can't pay. OK. Gimme my fucking Gold.  

Wed, 05/07/2014 - 21:30 | 4738222 Clever Name
Clever Name's picture

And if they dont, what then? Would China invade Zim? I just cant see that happening.

Wed, 05/07/2014 - 21:39 | 4738241 Grande Tetons
Grande Tetons's picture

As per another post on this thread.....the term is economic hitman. 

Wed, 05/07/2014 - 22:04 | 4738298 Alberich
Alberich's picture

Ex-Rhodesian farmers might have some good advice for China on the value of Zimbabwean promises. If Mugabe hadn't murdered them on his way to the top. China better hold the collateral in escrow in Beijing.

Thu, 05/08/2014 - 03:59 | 4738873 UselessEater
UselessEater's picture

China and Russia are preferred Zim partners (Commo's vs Anglo's); western interests be very cautious - the west was by and large only useful to install Mugabe who has lingered on long enough to see the coming fruition of the BRICS.

http://www.zimbabwesituation.com/news/zimsit_china-demands-minerals-as-s...

The deal further entrenches the Chinese presence in Zimbabwe’s natural resource sector, and one which they have jointly looted and plundered with ZANU PF for close to two decades now.

Thu, 05/08/2014 - 18:51 | 4741497 MeelionDollerBogus
MeelionDollerBogus's picture

You obviously don't understand collateral.

Collateral is delivered PRIOR to the loan.

The loan is then repaid or not, and if not, the collateral is already in possession of the lender.

Wed, 05/07/2014 - 20:47 | 4738058 Gringo Viejo
Gringo Viejo's picture

You Betcha Bwana!

No gold...bad juju for you 'bro! 

Wed, 05/07/2014 - 20:57 | 4738078 Kreditanstalt
Kreditanstalt's picture

"Finance Minister Patrick Chinamasa"

"Chinamasa??"  Is it April Fool's Day or what?

Wed, 05/07/2014 - 22:15 | 4738333 TheFourthStooge-ing
TheFourthStooge-ing's picture

.

"Finance Minister Patrick Chinamasa"

ROR!

Is it April Fool's Day or what?

Every day is April 1st in the Mugabe Kingdom.

Thu, 05/08/2014 - 18:50 | 4741491 MeelionDollerBogus
MeelionDollerBogus's picture

Is new Chinese export for world of news! MAY-pril Fool's Day!

Wed, 05/07/2014 - 20:58 | 4738085 Al Huxley
Al Huxley's picture

You'd think they'd want something of timeless value as collateral, USTs or USDs.  Why a depreciating commodity like gold?  Everybody who's anybody knows it's best days are over...

 

http://www.reuters.com/article/2014/05/07/gold-outlook-idUSL6N0NS4LG2014...

 

Those crazy Chinese, who would ever think of using GOLD as collateral?

 

BTW, in case you're questioning 'Metals Focus' credibility (the linked article), I've done some quick research, and it seems EVERYONE there has an illustrious past with GFMS and Thompson Reuters, so you know they're the best of the best in unbiased precious metals analysis.

Wed, 05/07/2014 - 21:53 | 4738277 TheFourthStooge-ing
TheFourthStooge-ing's picture

.

they're the best of the best in unbiased precious metals analysis.

Ah, they must be the ones that lured Jon Nadler away from Kitco.

Wed, 05/07/2014 - 23:11 | 4738525 IridiumRebel
IridiumRebel's picture

Well, all of those "journalists" will be replaced by computers who write content...all those guys will be labor stats soon enough.

Wed, 05/07/2014 - 20:52 | 4738088 icanhasbailout
icanhasbailout's picture

If Zimbabwe has gold, what does it need a loan for?

Wed, 05/07/2014 - 20:56 | 4738105 prains
prains's picture

....haven't you heard? Paper with Mao's face printed on it is moar valuable

Wed, 05/07/2014 - 20:58 | 4738120 Al Huxley
Al Huxley's picture

It's currently in 'deep storage' much like a large amount of US gold.

Thu, 05/08/2014 - 05:59 | 4738958 CHX
CHX's picture

Bingo! Unstoring is a costly, energy- and labor-intensive business...

Wed, 05/07/2014 - 22:01 | 4738291 TheFourthStooge-ing
TheFourthStooge-ing's picture

No, no, you've got it all wrong. It's not a loan at all. Zimbabwe gold miners are just forward selling their production. It makes perfect sense. I mean, gold fluctuates. One day up, another day down, it's entirely too risky.

On the other hand, a dollar is always a dollar. Always. That's rock solid stability, something which Zimbabwe can use.

It seems to me that if anyone is taking a risk here, it's China.

Wed, 05/07/2014 - 22:49 | 4738431 HardlyZero
HardlyZero's picture

Maybe China just wants to see the Gold, touch the Gold, shine and polish the Gold, and protect and hold and store Zimbabwe's Gold (without added storage fees).

So it is really cheaper and safer to store the Gold in China (heh).  Like where-ever the Ukraine Gold went for safe keeping.

The Zimbabwe leadership might visit one of China's new ghost towns (first dibs !!) and visit their Gold in China.  One day that may be an escape/exit strategy.   Maybe when Zimbabwe finally hits the skids then China has provided a "safe haven" for the ex-Zimbabwe leaders who have sold all the land to China.

But, maybe China will return the Gold when Zimbabwe needs it back. /

It could be completely innocent Gold fever/lust of the worthless relic.

Maybe Zimbabwe at this stage is being finally assimilated by China, resistance is futile.

Similar to Ukraine and Russia.

China wants Africa as their backyard, and the new new cheap labor.

Wed, 05/07/2014 - 20:56 | 4738101 navy62802
navy62802's picture

So in other words, China does not recognize the USD as a reserve currency.

Wed, 05/07/2014 - 20:59 | 4738121 Al Huxley
Al Huxley's picture

SSSSHHHHHHHHHHH!!!  You're going to spoil the surprise for everyone.

Wed, 05/07/2014 - 20:58 | 4738117 RaceToTheBottom
RaceToTheBottom's picture

Wait, loans were supposed to be paid back?

Wed, 05/07/2014 - 21:02 | 4738126 Dr. Engali
Dr. Engali's picture

Maybe they could sell their gold for some Zimbabwe dollars on eBay. They would get a lot more fiat for their money.

Wed, 05/07/2014 - 21:13 | 4738159 logicalman
logicalman's picture

Fuck it.

Give me another beer and a bong hit.

 

Wed, 05/07/2014 - 23:02 | 4738503 IridiumRebel
IridiumRebel's picture

They like dumbed down folks.

Wed, 05/07/2014 - 21:15 | 4738168 dag
dag's picture

Africa is truly the stupid continent.

Thu, 05/08/2014 - 02:12 | 4738797 Ward no. 6
Ward no. 6's picture

and the usa isn't ????

Thu, 05/08/2014 - 05:56 | 4738954 CHX
CHX's picture

Actually its a win-win-win for China, for Africa, and for gold.

Wed, 05/07/2014 - 21:16 | 4738170 NOZZLE
NOZZLE's picture

Try to  imagine what a country would look like if it was run by the infantiles that run Zimbabwe.  Oh wait, we live in a country run by Zimbabwe like infants. 

Wed, 05/07/2014 - 21:39 | 4738242 Fix It Again Timmy
Fix It Again Timmy's picture

Now yer talk'n sense, ya city slickers........

Wed, 05/07/2014 - 22:06 | 4738303 Dan The Man
Dan The Man's picture

This is brilliant.  Once again, the old school takes the new school to the woodshed.

Wed, 05/07/2014 - 22:16 | 4738341 flyingcaveman
flyingcaveman's picture

I would have thought the art work on the Zim-bucks woulds have been good enough for collateral.

Wed, 05/07/2014 - 22:22 | 4738359 user2011
user2011's picture

Are Chinese loaning the African USD or Chinese money ?   Both USD and Chinese RMB are massed produced like toilet paper, what's the value of it ?

On the other hand, if Zimbawae has gold, why would they need a loan ?

So, who is scamming who ?

Wed, 05/07/2014 - 22:57 | 4738484 NoDecaf
NoDecaf's picture

A tour guide told me that the Nicaraguan canal was tied to their gold reserves if they (the Nicaraguans) didn't hold up their end of the deal, and that this was promised by Ortega himself without a vote in their National Assembly.

I haven't been able to find anything online to back this up, so if anyone reading this can find a link please provide it below.

Wed, 05/07/2014 - 23:39 | 4738600 vulcanraven
vulcanraven's picture

TRADITION, BITCH!

Wed, 05/07/2014 - 23:46 | 4738613 BenderTheOffender
BenderTheOffender's picture

Don't the people of Zimbabwe know about Cash-4-Gold?  They even provide a free envelope and free shipping.  And they promise to pay more than anyone else.  Perhaps they can use this as some sort of barganing chip.

Thu, 05/08/2014 - 00:00 | 4738637 Schmuck Raker
Schmuck Raker's picture

...Finance Minister Patrick Chinamasa....

Seriously? As in, "Don't whip me Masa!" {via Roots for the younguns}

Thu, 05/08/2014 - 00:43 | 4738703 Kina
Kina's picture

LONDON, May 7 (Reuters) - Gold prices have probably peaked this year and could sink to their lowest since 2010 at $1,100 an ounce as the U.S. economic recovery gathers pace, consultancy Metals Focus said on Wednesday.

 

I think statement puts paid to their anlysis. Clearly the US is on the edge of recession with negative GDP 'growth' in the first quarter. There is no recovery.

 

And if there is no recovery the options are to let the ship sink, or puff away with the printing press. Now Im told TPTB will not allow defaltionary spiral...so the option is an inflationary blow off.

 

I also fail to see how anybody can do an anlysis when the market has for past few years been under total price control by TPTB - not a market at all. And when they tried to trash the price too much China / Asia bought it up as fast as they could...TPBT almost blew their own brains out with that heavy handed knock down of gold.

WHEN it was a market of true price discovery gold went to near $2,000 and that was some few trillion USD ago.

Now we have the US trying to start wars with a major nuclear power who is allied to another major nuclear power and controls a large portion of energy to Euroope...risk much?

If anything the geopolitical games are going to heat up as the competition for energy and food resources heats up....

 

It is possible that gold can go to $500 but only if TPTB want to throw the printing press at the coomex and dont give the slightest shit how obvious their corruption....oh and that china would buy another 5000 tons if they did that.


Thu, 05/08/2014 - 18:43 | 4741472 MeelionDollerBogus
MeelionDollerBogus's picture

Got news for you: the rigged price has been rigged since 1933 and was rigged during the last peak too.

Thu, 05/08/2014 - 00:42 | 4738706 Aussiekiwi
Aussiekiwi's picture

Don't the Chinese realize that you can just print Gold?

Thu, 05/08/2014 - 00:46 | 4738708 Kina
Kina's picture

We wont know the free market price of gold until the back of the manipulators is broken...and that may be when they lose control of USD and or rates....or some other event swamps them and there is massive massive demand for holding physical gold.

 

If a new cartel wants to make money.....buy up lots and lots of gold...then demand delivery. See them scramble to find it...

Thu, 05/08/2014 - 00:59 | 4738725 Government need...
Government needs you to pay taxes's picture

Will African slaves become an acceptable settlement currency?

Thu, 05/08/2014 - 01:05 | 4738734 BidnessMan
BidnessMan's picture

China has 500M destitute peasants in the countryside who already speak Chinese.  Why would they want any African slaves?

Thu, 05/08/2014 - 05:39 | 4738937 Gavrikon
Gavrikon's picture

Sterilized females?

Thu, 05/08/2014 - 07:07 | 4739023 BidnessMan
BidnessMan's picture

You have a point.  50M more men than women because of the 1 child policy and abortions.  The natives will get restless.

Thu, 05/08/2014 - 18:07 | 4741318 MeelionDollerBogus
MeelionDollerBogus's picture

Already played out. American slaves will be the next to have their turn.

Thu, 05/08/2014 - 01:33 | 4738759 Notsobadwlad
Notsobadwlad's picture

A. Define China. Is the China quoted here the people, the government or the frigging CHINESE AND INTERNATIONAL BANKERS? I can guarantee you that the Chinese people have no interest in turning the Zimbabwe people into their debt slaves... what evil faction of China does seek this?

B. How can it be right and fair to trade fiat nothingness created from less than thin air for a phsyical asset that has real value. Of course banks do this as their main choice of enslavement when they have given themselves monopoly power to create an ddistribut power.

Zimbabwe and all countries should take the high road and politely tell the bankers to go ply their parasitic trade on someone stupid... and then plan how to survive and thrive without becoming debt slaves.

Thu, 05/08/2014 - 04:21 | 4738883 UselessEater
UselessEater's picture

Think for a moment - how does a southern African dictator get into power and stay in power for 40 odd years?

Zimbabwe would not exist if it were not for the banker games and vested interests of supposedly opposing east AND west key nations.... the very ones now turning the USA into a prospective Zimbabwe.

Thu, 05/08/2014 - 02:04 | 4738795 Sizzurp
Sizzurp's picture

So China is buying Zimbabwe's in the ground gold reserves with printed paper.  Given what Zimbabwe just went through with their own worthless paper, you would think they might have learned something.  The irony is about as thick as their skulls.

Thu, 05/08/2014 - 04:38 | 4738898 The wheels on t...
The wheels on the bus are going to fall off's picture

Isnt the mining business the heart beat of the Zimbabwe economy? they have to sell something in order to get currency with at least some confidence at this stage in order to survive.

What other option do they have? sell it in US dollars?

Printing money is not the ideal solution for these guys, given the history......what to do?

In my opinion this is a genius stroke by China, no doubt the loans are too much to pay back anyway so eventually the gold will be transferred. 

Thu, 05/08/2014 - 05:38 | 4738935 Gavrikon
Gavrikon's picture

What a great idea.  "Cash for Gold."

Who woulda thought?

Thu, 05/08/2014 - 06:11 | 4738962 Fred123
Fred123's picture

rofl.....what fool would think that these African nations would actually honor this agreement? They are as corrupt as their Chinese overlords and just as greedy.

Thu, 05/08/2014 - 06:58 | 4738994 Chuck Knoblauch
Chuck Knoblauch's picture

monorail?

hahahaha.

Thu, 05/08/2014 - 09:04 | 4739319 d edwards
d edwards's picture

China sayz: gold bitchez!

 

Joking aside, Zim not that long ago was printing $1 trillion bills. If I was making a loan to them I'd want hard assets as collateral too.

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