China Bailing Out Europe (Again)? Don't Make The Head Of Greater China Research At Standard Chartered Bank Laugh

Tyler Durden's picture

With the G20 meeting in Paris such an epic dud there is nothing even the permaspin media can write about (there was no news of a bailout. Nothing), it is time for some paywalled publications to recycle the gibberish about China bailing out Europe all over again. Sorry, it's too late. Courtesy of last week we now know that China is much more focused on bailing out its own largely underwater banking system (first facts, then analysis), than worrying about buying the 17th Community Bank of Thessaloniki. Yet we can keep repeating this so very simple fact until we are blue in the face. So we will leave it Stephen Green, head of Greater China research at Standard Chartered Bank.

Via the WSJ:

Chinese Banks Need a Pre-emptive Bailout


Beijing can tackle tough reforms now, or wait until problems grow more severe.


China's banks are much unloved these days. The government is pressing them to maintain small-business lending even as Beijing scales back broader credit creation to fight inflation. Analysts fret about the growing risks of nonperforming loans. Last week, an arm of the sovereign wealth fund Central Huijin had to buy bank shares in an effort to arrest a sell-off that has seen share prices fall some 30% this year.


China is not suffering a banking crisis now, but there's growing cause for concern. The only way to avert more serious problems is a new wave of reform.


What ails China's banks? First, China's growth has slowed, thanks largely to tight monetary policy since the beginning of 2011. This inevitably will push some of the banks' borrowers into difficulties.


Second, China's real-estate industry is in the midst of a cyclical correction. This is a victory for the government's anti-speculation efforts, but not a cost-free one. After 18 months of various regulatory controls, developers' sales volumes have become weak and their finances are tight. Inventories of unsold apartments are accumulating. Apartment prices will have to come down. Some small developers will go under.


Finally, some 20% of outstanding bank loans are to entities established by local governments to fund infrastructure projects. This—alongside all that inflation–is one of the legacies of China's 2009-10 stimulus package. These local-government funding vehicles leveraged up on bank credit, and built new metro systems, roads and airports. But it's unlikely all these projects are going to be able to repay those loans.

Read the rest here.

So enough with the China bail out rumors already: they are so August 2011. Nobody is falling for that anymore.

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mossme89's picture

I just wish the market would crash already, so we could rebuild from scratch. All these lies, rumors, scandals and just general corruption are getting incredibly old and depressing.

If I ever get rich, I'll make sure to spread the wealth. Money is best when it's in the hands of many, not concentrated in the hands of a select greedy few, hence the 99% vs 1% thing.

Fish Gone Bad's picture

Money is an interesting tool.  If people get a lot of it, and do not know how truly toxic it can be, then it tends to destroy them (look at the Getty heirs, Paris Hilton, etc).  People who have to struggle (at least a little), have a fonder appreciation for what money can do.  That said, giving money away to people who have not truly "worked for it", is a profoundly bad idea, and has added to the current problems we have in our society now.  I can really go on and on about how important it is to keep one's life in focus.

DosZap's picture

Fish Gone Bad,

That said, giving money away to people who have not truly "worked for it", is a profoundly bad idea, and has added to the current problems we have in our society now. 

You said a mouthfull there..................................take just ONE item off the table, and we would be far better off as a culture, and a nation.

Welfare (and all the other side progs available with it).

It literally destroyed the  strong Black family in America,and continues to do so.(mainly them, but many whites also).

DosZap's picture

Red Arrow the shit out of it, dude.

I am old enough to have watched it HAPPEN.

Thank your .gub for it.

Dirt Rat's picture

“Money is like manure; it’s not worth a thing unless it’s spread around.” --Brooke Astor

SheepDog-One's picture

No G20 news about bailouts...nothing....

So put +1.5% on futures then?

Popo's picture

Black Monday.  Well... at least it *should* be....

Sudden Debt's picture

Strange that the martian ambassador hasn't said anything...

oldman's picture

Speakin from Earth for Mars, I can only say that what I have witnessed here during the past six years has bored me nearly to what Earthlings call death. We call it resting, but that story for another day because what I have seen in the past six months has become very interesting.

I am referring to the uprising against your masters and am only surprised that it took so long for Earthlings to move on what to the rest of the universe was so obvious; to use your phrase, you have the patience of Job. In honor of this patience, we will name the next new planet we discover 'Job' in your honor.

We have no interest in your planet with the exception of our curiousity and a tiny bit of tourism for our ancient ones; we send them down to earth to maintain their observation skills.

My statement to you today about the 'revolution' and how it will come out is a single sentence that I learned from a brilliant four-year old last week:

"You just never know."

Thank you for your time and good luck to each and every member of each and every species on your beautiful planet     om

Thought criminal's picture

There are rumors that he pledged off-record to participate in EFSF in exchange for some human blood...

slaughterer's picture

Thanks for the judgement on G20 as "epic dud."   I agree.  But, it seems, given the earnings we are looking at this week, especially in infotech, and also the necessity for Eurobanks to repatriate Euros, that the ES is going to test 1250 and the EUR/USD 1.40 before they take the final dive.

Belarus's picture

There was news out of G-20 this weekend. They'll provide more funds, per Geither, "if needed."  So when the IMF needs more money, and it will, it will be U.S. taxpayers on the line. Right now, Charles Dallara is in talks with officials from Eurozone bailout about the July agreement for a 21% haircut. 

Just like everything else, everyone comes at a price, and Dallara will cave once pension fund holders of Greek debt will be reassured they'll be capitalized by the EFSF. I think this is the last detail that needs to be worked out before the big Oct 23 unveiling of the plans  to be announced.

Of course, as banks and CDO's begin to expode, the EFSF and IMF will run out of money in the big black hole faster than anyone else will have thought......

Markets will begin to panic, and Geither will than pledge anything left of the future U.S. taxpayer, which is, It's somewhere in this vortex is when you want take stock of your last load of hard assets. 


cowsense's picture

When winter comes around, the horse you've been ridin' may decide he doesn't like a cold saddle blanket on his back. His otherwise gentle nature can change and he may decide one morning to buck your butt off. Only a very experienced rider knows when it's going to happen and it's never your eyes or your ears that warn you. It's always your ass telling you somethings aint right today.

agent default's picture

Here is a scary thought: If Jim Chanos is right who is going to bail out China?

JustObserving's picture

Here's some news from a couple of days ago:

"The number of Americans who lack access to basic necessities like food and health care is now higher than it was at the peak of the Great Recession, a survey released Thursday found. And in a finding that could worsen fears of U.S. decline, the share of Americans struggling to put food on the table is now three times as large as the share of the Chinese population in the same position."

China has $3 trillion in reserves and its population is familiar with deprivation.  They will survive.  But the US will need Quantitative Easing soon enough.  US debt and unfunded liabilities are growing at unprecendented rates ($8.6 trillion a year per

Your concern about China may be a tad misplaced.



max2205's picture

I don't believe that. McD's and Taco Smell on every corner.

.99 meals for everyone

Conman's picture

Believe it. Spend some time at your community food bank and you will see. Hard to shop for groceries if you only make 20k a year on minimum wage and have to pay rent, insurance, gas, etc.

myne's picture

Ironically, China bailing itself out with Treasuries could save the US a lot of trouble.

Think about it. Massive waves of dollars will wash up on the shores of the US, creating jobs. This will stop Bernanke enacting QE13. It will also rapidly boost employment because they will want US goods in exchange.

Sure, the inflation will be insane, but after a year or two of very high inflation, a good chunk of the debts will be cleared. The Treasury will be recieving loads of cash enabling them to pay the external debts "legitimately" with dollars.

If someone manages to slash the budget or, in the face of high inflation, simply put a hold on it, the budget might go black for the first time this century.

After a while, interest rates will have to rise, but that's the beauty of the Fed's move. Most of the remaining debt will be locked at ultra low rates for very long timeframes with the dividends going to the treasury anyhow.

Since bond prices will collapse as this happens, the Fed will be able to buy what's left of the national debt at rock bottom prices. Thus internalising all the debts. Much of it might simply be written off.

A few banks will fail due to the negative real interest rates, but you've been dealing with that for the last 4 years. No biggy.

Sure, the old people will get royally screwed over in pensions etc because you know the CPI will be underreported by a lot, but perhaps shifting welfare back onto the family isn't such a terrible idea. It promotes good parenting. You KNOW you have to rely on your kids to look after you.

It's just a matter of lasting until China is forced to pull the plug.

Sounds like a great time to take on a lot of debt. High inflation is coming. Better lock in rates on real assets now while 30 year loans are 3%.

Economics always seems to force a rebalance one way or another. I'm not saying the invisible hand is particularly wise, it's just effective over the long term.

CPL's picture

Well has your salary kept pace with proper inflation.  You know the food shrink ray and x4 food prices.  Right now walmart sells a two pound tube of hamburger meat.  It's all the bits of the cow you don't want unless it's ground up.  Neck, leg, spine, assholes, etc.  It was on special for 10.00 for the 2 lbs tube.  Couple of feet over, one pound grade AAA steak grain fed, 10 per pound.


Now I understand that minimum wage is around 10 bucks now, so what I don't think you understand is your wage will never match or come close to the increases needed to match real inflation.  You will always be in the hole once the shit storm of forex starts to take off and the trade war is in full swing.  


So don't count on the mark to market opportunities, mark to market was disbanded three years ago in the FAS meetings.  We are now in very swing of the largest valuation problem to ever swing a stick.  It's not so much the debt owed.  It's the detrivatives written under leveraged vechicles then packaged again....and again...and again.  An entire string of IOUS written for IOUS with a leveraged 50/50 spread then double or nothing.


That's what is happening, the standard mechanics the market uses to blow off steam and repair were sealed tight as a ducks ass three years ago and you think the inflation is the issue?  No, it's value.

myne's picture

My wage is fine. I live in a moderately well managed country.

Beef mince here is as low as $6 a kilo (~2.2lb). Hell I saw scotch fillets going for that price too! It's mostly grass fed on decently populated farms. Delicious Australian beef :D

I think that's partly due to the recent hysteria banning live exports to Indonesia due to their inefficient (cruel) slaughter. Beef is mad cheap at the moment.

Chicken is around $13/kg, often claimed to be free range.

On the up side, the minimum wage is in the $15/hr range but rent is too damn high!

I agree on the pressure relief valve. Bankruptcy and liquidation is the only option for these ponzi banks.

agent default's picture

You don't get it. 

They need to bail out China so that China will not liquidate their USD denominated assets, so that interest rates will stay low so that the FED can bail out the US, so that the US will keep buying made in China crap to sustain the Chinese economy, but in order to do that they will have to print, so the interest rates will inevitably go up at some point so China has to liquidate now, but if they liquidate now the FED will not be  able to bail out the US meaning that China will not be able to bail itself out meaning that...


What a tangled web we weave.

piaoyou's picture



Everyone seems to believe China has 3T$ in the reserve, but they never make a careful calculation on what portion of reserve of China really owns. The Majority of the reservce actually comes from foreign investment. Due to China inflexible exchange system, their US$ being forced to cash in for RMB.

I have read the data from a folk who has traced those money for years. His conclusion is, unfortuantely contradicted to most of others, China actually owns about 0.9T$ debt if those multinational corpoartions and government investment completely redraw their $ out of China. Of course this situation will never happen since China market still looks very attractive to them and represents a significant contributions to their earnings now.

China has no capability to baitout Europe. They can merely have enough resource to rescue his own banking system.

DosZap's picture


Well, you nailed it, if that's the case, then 98.7% of everyone is going D_O_W_N.









SHRAGS's picture

Piaoyou, can you give us a hint about your source for the 0.9T reserves?  Would be very interested to see the data.

piaoyou's picture

I posted the detail above. It looke like a whole bunch of craps.

Quinvarius's picture

From here on out, we all do our own printing.

agent default's picture

You know I have been thinking about that for some time.  Instead of making statements and holding press conferences why don't they just give everyone  a printing press and just say fuck it, at least this way you pay for your own damn paper. Really it is getting to the point of total currency debasement, they might as well take the piss out of the whole thing anyway.  Even better, let us introduce our own currency.  I  would print something like "I promise to pay the bearer six eggs" or a  live chicken, or something like that.  It's asset backed 100%.

max2205's picture

Why Ben would never let developers go under....

sabra1's picture

we 99% have a 50/50 chance of going to hell, the 1%, have a 100% chance! doesn't that make you all warm and fuzzy like?

americanspirit's picture

Tyler - I think it should be your strict policy not to link partial articles posted on ZH to sources that solicit paid subscriptions before allowing you to read the rest of the piece. I've never complained about any ZH policy before but this has happened several times recently and it is really annoying. Especially when the solicitor is that Murdoch rag the WSJ.

chump666's picture

Still betting on huge YUAN liquidation and absolute economic meltdown, timed...3-6mths maybe less. Bank bailouts in China should lead to bank runs,

As for those idoits in Europe, look at your people, they are going nuts.  Germany will be in this too very soon, once the Germans realize they have been conned by France to bail out French banks.


smiler03's picture

".... Beijing was willing to pump tens of billions into the eurozone to purchase infrastructure assets from debt-plagued nations"

This just looks like a fire sale to me, no bailing out here.