China Insolvency Wave Begins As Nation's Biggest Provincial Borrowers "Defer" Loan Payments
Remember, back in the day, when a bankruptcy was simply called a bankruptcy? Naturally, this was well before ISDA came on the scene and footnoted the living feces out of everything by claiming that a bankruptcy is never a bankruptcy, as long as the creditors agree to 99.999% losses at gunpoint, with electrodes strapped to their testicles, submerged in a tank full of rabid piranhas, it they just sign a piece of paper (preferably in their own blood) saying the vaseline-free gang abuse was consensual. Well, now we learn that as the global insolvency wave finally moves to China, a bankruptcy is now called something even less scary: "deferred loan payments" (and also explains why suddenly Japan is going to have to bail China out and buy its bonds, because somehow when China fails, it is the turn of the country that started the whole deflationary collapse to step to the plate). After all, who in their right mind would want to scare the public that the entire world is now broke. Certainly not SWIFT. And certainly not that paragon of 8%+ annual growth, where no matter how many layers of lipstick are applied, the piggyness of it all is shining through ever more acutely. Because here are the facts, from China Daily, and they speaks for themselves: "China's biggest provincial borrowers are deferring payment on their loans just two months after the country's regulator said some local government companies would be allowed to do so....Hunan Provincial Expressway Construction Group is delaying payment on 3.11 billion yuan in interest, documents governing the securities show this month. Guangdong Provincial Communications Group Co, the second-largest debtor, is following suit. So are two others among the biggest 11 debtors, for a total of 30.16 billion yuan, according to bond prospectuses from 55 local authorities that have raised money in capital markets since the beginning of November." So not even two months in and companies are already becoming serial defaulters, pardon, "loan payment deferrers?" And China is supposed to bail out the world? Ironically, in a world in which can kicking is now an art form, China will show everyone just how it is done, by effectively upturning the capital structure and saying that paying interest is, well, optional. In the immortal words of the comrade from Georgia, "no coupon, no problem."
Our advice: go long Teva, which recently acquired Cephalon, and its wonderful drug Provigil, which is basically legalized cocaine, speed, meth and heroin all in one perfectly legal pill, as the newsflow, up until now only picking up with the idiot headlines out of Europe at 3 am Eastern is about to become one constant 24/7 flashing red rumor/disinformation mill. Also, next time someone wants to make THE drug cocktail of choice for the headline reacting speed trading junkie, please name it appropriately. Jeffrey will suffice.
More on China's piglipsticking:
As local governments delay payments for projects commissioned as part of the stimulus to ward off recession in 2009, less money is available for bank lending even as China is taking steps to inject more into the economy. The central bank has held interest rates at 6.56 percent since July to boost the economy, while the US Federal Reserve and the Bank of Japan have kept benchmark rates near zero since 2008.
"When companies start to roll over debt they're not retiring debt, and banks aren't retrieving their capital, so you're crowding out new lending," Patrick Chovanec, a professor at Tsinghua University in Beijing, said in a Dec 13 interview. "This is a problem that's going to start to bite next year."
Local governments had 10.7 trillion yuan in debt at the end of last year, 79 percent due to banks, according to the country's first audit released in June. So-called local financing vehicles that meet collateral requirements can have a one-time extension on their loans, Zhou Mubing, vice-chairman of the China Banking Regulatory Commission, said at a conference on Oct 24 organized by the Internet portal Sina.com.cn, according to a transcript of his comments on the website.
Guangdong Provincial Communications Group, Hunan Provincial Expressway Construction Group, Gansu Provincial Highway Aviation Tourism Investment Group Co and Sichuan Railway Investment Group Co owe more than 200 billion yuan to banks, the data show. They plan to defer 34.4 billion yuan in interest payments, according to their bond prospectuses.
Yes, that's a lot, and it's going to get much worse. But not if you listen to Beijing Bob: yes, even communist countries have a department of propaganda:
Lei Wanming, Gansu Highway's deputy Communist Party secretary, said the company's interest payment deferrals do not raise any concerns. "Our company can pay our interest and our principal payments with no problem," he said in a Dec 5 interview. "You can't just consider this issue by looking at a bond prospectus."
Said otherwise, all is good, and China's 'relatively fast' growth is still on the agenda:
National leaders set a goal of "relatively fast" economic growth for 2012 at a major conference in Beijing that ended on Dec 14, according to the Xinhua News Agency. The global outlook "remains very grim", Xinhua cited the leaders as saying.
What is most ironic is that Meredith Whitney will be right... just wrong about the country.
The extra yield required to hold Hunan Provincial Expressway's 900 million yuan in 2012 bonds has increased to 308 basis points from 151 basis points on June 21, when they were issued. That compares with a current spread of 11 basis points on Shenzhen's five-year direct municipal bonds.
Yields on local government financing company bonds will remain high next year as selling debt becomes a main channel for raising funds, China International Capital Corp analysts led by the fixed-income analyst Xu Xiaoqing wrote in a Dec 16 research note. Most of the bonds are sold at yields of 8 percent, or 144 basis points more than the benchmark bank lending rate, according to the report. Five-year top-rated corporate bonds yield 4.98 percent, according to Chinabond, the nation's bond clearing house.
"Although the China Banking Regulatory Commission has recently eased loan restrictions to help liquidity, recent supply has been increasing, causing the secondary market to pay attention to systemic risks," they wrote. "The credit quality of recent financing vehicle bonds continues to get weaker."
For those who refuse to swallow China's lies, there is one way around it:
Five-year credit-default swaps insuring against default on China's sovereign debt rose 3.2 basis points recently to 149.66 basis points, according to data provider CMA...
As more and more scratch their heads, the math is clearly not your friend:
Even after the reduction in interest payments, Gansu Provincial Highway said that interest and principal payments in 2011 will amount to 3.33 billion yuan, more than its 2010 cash flow of 3.04 billion yuan, according to bond-marketing materials.
"This prospectus is telling us that banks can expect to only receive roughly half of what would have been expected in interest payments," Charlene Chu, a Beijing-based banking analyst with Fitch Ratings, said of the Gansu disclosure.
And as for what happens when an entire continent is stuck fighting simple math and failing, we refer you all to the case study that is Europe.
So as we all prepare for what is set to be, without doubt, a relentless barrage of headlines, lies, innunedo, rumors, media counterrumors, more lies, propaganda, from Europe, the US and now Asia, here, again, is Jeffrey.
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Cry 'Havoc,' and let slip the dogs of war....
Or can just ring the doorbell and run.
It's at times like this when you really appreciate holding physical metal, along with a goodly supply of tinned food....
Ukraine dumps euro and dollar, embraces gold and silver:
http://esilverprices.net/ukraine-to-issue-gold-silver-investment-coins/
The US dollar is toast.
This is just a prelude. They are only clearing their throats. You haven't seen any thing yet! From here the ride gets really wild. The next faze will be like base jumping off the Burg Khalifa in Dubai!
That sounds COOOOOOOOOOOOOOLLLLLLLLLLL!!!!
...you mean with a bungee rope right??
Wait till the Indian in-solvency wave begins. The whole game in the BRICS is a house of cards (or brics if you will), all tottering.
The demand is fake (pumped), th esupply chain is shaky (and this is true across all supply chains).
In fact, what becomes rapidly obvious if you pay attention, is that India/China were built up PURELY as low cost labour supply and easily led by the nose connedsumers.
If I did a post on Bangalore's growth in the last 15 years, the story would be a horror story of mangled implementation, curroption and a total lack of empathy for the humans involved.
BRIC wall is going down, even before the EURO I feel.
ori
/the-plan/
PS: That pig picture is chilling. Not just in a 1984 way neither in a lipstick on a pig way. Deeper.
Know what you mean. I have connections in Brazil, and though the resource/growth story is true, there are loads of problems. Corruption probably tops the list, followed by societal breakdown (they have graduated from simple robberies to gunpoint robberies/murders of car drivers, etc), inflation, and many others. Not sure how the story will play out, but it is certainly no paradise.
ORI. How about a guest piece on Bangalore?
I'd do it. In fact, I'd do a video piece, that will really tell a story, BRIC by BRIC.
Iinterestingly enough, I have 8mm film from 1972-1975 bangalore, silent film... just the contrast tells the story.
Interesting, I'll pursue tha tline of thought. Thanks Yes we can.
ori
With you on the pig picture. It has an uncanny resemblance to a lot of North Florida/South Alabama in-laws.
I'd like to know more about your assertions about supply and demand. Apple has every machine in China that can make aluminum unibody notebook cases under contract. Demand is strong. Huge growth in road and rail construction. The only logistics problem I know about is that we have to ship huge numbers of empty containers back East. I don't see Bangalore as comparable except, perhaps, where deliverables are software and services but I look forward to learning more.
"The US dollar is toast."
Eventually. But there will be a fairly wide window of opportunity where it is king as everyone rushes to the safety of the (for now) best of the fiat currencies. In that window, there'll be a chance to buy productive assets in dollars at greatly depressed prices, just as the smart money did during the Great Depression.
Agreed, through of stock matket after real estate bust usually bottom after 12-18 months. You might have real bargains on the Hong Kong stock exchanege outside of banks and real estate related businesses.
They better stop considering before they can't get any.
Uh Oh!
This sure looks like real money from a sovereign going into circulation.
I am calling the top of the gold market.
Jews have always shafted the Ukrainians, and they have an inside joke of picking on them. I bet they sell them gold at the top of the market. I feel sorry for the non financial literate but honest and kind Ukrainians.
Thats why the ukrainian village idiots stomped them in WW2. Payback bitchez!
moral of the story. If you are a Jew, it is not funny to short change the village idiot. One day a competing army gives them, a uniform a gun and a sense of pride in themselves.
@I got The Bull..
+100. When a government decides to get into an investment its time to do the opposite. Government is the herd mentality in the fullest.
The ongoing Deflationary Depression will hit PMs as they are sold to pay down debt, which is mostly denominated in Private Federal Reserve Notes.
The Great De-leveraging continues..
only 13 anti-semite jew baiters today? Where are the rest of you idiots?
"Considering" was the operative word.
Next comes the ad in the WSJ announcing a LIMITED Printing. You know the money back guarantee will be no problem, right? And they're gonna give you an affadavit attesting to the purity.
If you want an affadavit now with a new driver's license that will cost you an additional $29.99 or can you just give them your bank routing number...
from you lips to anyone in state/defense if we dont have Ron Paul in 2012.
The thread picture is confusing... what does Candy Crowley have to do with the story, and doesn't she have long hair?
shut the fuck up HGR! you're insulting the pig!!!
My apologies to the swine community. My comment was lowbrow and way over the line.
There is no way Candy tastes half as good as bacon.
"There is no way Candy tastes half as good as bacon." Yeewww...
I thought between China and japan they owned trillions of treasuries. Why not sell some to help these companies that can't pay their loans?
As ZH has been saying for two years -- the world is broke, there is not a Country who can bail us out and when the tidal wave of bankruptcy hits there will be no safe place to be but gold and barter. It is going to be bad: currencies will be worthless and every nation and company in the world will be scrambling to stay afloat and our economies will dissolve into feudal states where barter is the only means of business and personal survival.
Barter skills and professional and trade skills will be the key to living, but not all skills and products will be seen as equal in the coming changing world. What good is barter if your product is software? What good is barter if you are a lawyer or an accountant? What good is barter if you have nothing to trade that will help people survive? QUESTION: Is it time to asses your skills and see if you will be a survivor in the coming crash or is it already to late?
I suppose if you are a Doctor a dentist, a farmer with land or make and sell supplies that people need to exist you will be OK. But anything else and I am afraid you better learn how to kill and steel because you will be part of the massive group of citizens that are in deep trouble and when they do the population will become animals and it will be survival of the fittest.
Any ideas of what we financial types should be getting into?
I think you may be right. Time to trade in my laptop for a good set of bicycle repair tools again. I can't wait for the grime under my fingernails.
Religion. They better get right with God. Managing a hedge fund may have made you a pile of fiat in ponzi times, but with no combat/survival skills you'll end up dog food in the new world disorder.
Ah soooooooooo. Have tickee but still no laundry.
They are trying to do and say things that aren't supported by mathmatics. They might as well get a bailout from a planet in Alpha Centauri star system. Everyone is in denial and many are starting to believe the denials.
I've been around awhile and have never witnessed so many governments at all levels so poorly run and indebted as in 2011.
A reflection of populations' desires and habits or the other way around?
What the unsuspecting do not know as they sit in front of their Christmas trees today is this system is going to stall and head down to earth rapidly.
There are no parachutes.....
I've been around awhile and have never witnessed so many governments at all levels so poorly run and indebted as in 2011.
It's called socialism and politicians dear boy. Look it up. They are not "poorly run" - they loot the system and taxpayers by design.
I hope we all realise that we are living in the golden age of civilisation and that this is the very peak of human development.
Problem is that by definition, it's all downhill from here...
Merry Christmas everyone...
I agree. if material wealth is the criterion.
But I a fascinated on a spirtual level about the world without the USA as supercop to the world. And I dont mean that in a bravadic sense, I mean it in a 50 vs. 750 military bases around the world way of doing things.
Having the US as Supercop only takes the war elsewhere, so that will be very different going forward, but lets face it, most of us would not have been educated had it not been for the educational facilities made available by the State(s) various through fiat money, neither would our families be as safe, healthy and well fed had it not been for the medical and agricultural advances made available from research paid for by fiat money, and the investment made into these companies which is itself originated from fiat money. Whilst we all slag this system off we have all benefitted from it greatly.
The world is going to be a very different place very soon, and I for one am not too keen to see it happen. Let's face it, the next global policeman might not be a Western power. How does that sound?
America has never been more fatter & dumber...
or tattooed.....
Americans have given up. Not that I blame them. Just look at the shit everywhere around you in this country. When you swim in shit, eventually you just give up and drown in it.
"Two mice, fell into a bucket of shit, one mouse quickly gave up and drown... the other mouse, struggled so much, he churned that shit into silver, and moved south to bang senoritas..."
mmm...senoritas...mas mamasitas por favor?
mucho Cerveza, Por Favor
"I don't know what's gonna happen, man, but I wanna have my kicks before the whole shithouse goes up in flames. Alright!" - Morrison
It will be great when the great collapse occurs and he is the only gringo within miles.
Ohhh Bobby, worry about yourself, I'll be fine ;-)
"No no gringo, no dispare, por favor, lo siento, no quiero sus balas en mi culo!"
La flama blanca bitchez, you're fucking out!
Oh God, the Shithawks are coming!
http://www.youtube.com/watch?v=fwiXG0p3N6g
Hillarious. Hadn't seen this movie yet, now I have something to do later. That Lahey character is a riot.
The Trailer Park Boys - one of Canadian TV's greatest exports
Yeah, I discovered them on Netflix. I saw Movie 2 first. Hilarious! I laughed so hard my stomache hurt for about 2 hours afterward.
I thiink it would be okay. The advances you speak of in AG and ED would have happened, and perhaps better than with the USA being bad cop for the last 50 years
I just look at the leadership (puppets as required) in the west. The Clinton-Gor-Edwards types were typical slothful/lustful stooges. The Bush-Dole types were pshycophants for the chance to wear a scarf like "lorence" of arabia.
Obama, is far better than both types, but he is still a chicago-robot. Point is, with this type of interia, I actually welcome our chinese masters. Nobody from Euroland changes my assesment. (Blair, Trichet, Merkozi, etc)
I don't think any Western country has had a decent political leader worth voting for in the last 50 years. When you look at elections today there is not one candidate as far as I can see advocating cuts in spending and balanced budgets. There will be many betterments, a collapse in government agencies will be the most important and the most beneficial, and personally I look forward to the day when investors feel real fear at these so called investment opportunities and managers, when capital is not in endless supply and when I can invest in a business safe in the knowledge that some other country can't simply magic new capital up from nowhere to build another similar business and undercut me.
I think the world will be better off with fewer motor cars and less available junk, and whilst I am inclined to agree that some the advances would have been made, I can't help but think they would have been fewer, and concentrated in areas of the greater importance. I do believe we will not see better times again in our lifetime, but this system is now over, and it's time to move back to value in money before we embark on the next great fiat experiment because as we all know, and our children will be told, it will be different next time....
Right. My major gripe with the western way of doing things is that as you mentioned, we can have Benny bucks make AAPL the largest market cap in the world,
It was a double reverse tarrif they experimented in. But back the old days (hopium wars) they actually repatriated PMs from the east. This time we got deigned for obsolecence devices to play angry birds. And a global community that associates the USA with the military adventurism.
Not ONE candidate?!
You must have been in your bunker since 2007.
We are not knowing how yet but many many peoples will be dieing in ways we are having no knowing how yet but I am having the thinking that the way many peoples will be dieing that we are not knowing how yet will be caused by a terrible disease having very bad sickness and very much speed in how it is being spread.
That is what many people with the reds in their necks are saying here too.
Makes more sense than the FEMA camps.
Comparing politicians is like collecting piles of dog shit and trying to determine which smells the best. (This same analogy works for currencies so give me credit for a 2-fer)
That be said, Obama is still writing his page in history - I'd wait to the end for a final judgement.
Unfortunately, the grass is always greener on the otherside. After hopping the fence we never really know what will happen until we have truly have time to take a breath.
I think there may not even be a replacement Team America World Police.
I think we should just get an annulment. Meaning the $ cost of the last 40 year of american military adventurism is simply removed from the shoulders of the generation that has not been born yet. It will be the living americans' burden to carry the guilt for the war dead.
If only eh?
Wouldn't that effectively be a timed default?
Potential problem: A sort of moral hazard. If the debts will be cleared for the next generation, what's to keep the present generation from going all out. Also, the present generation would be like f - this I'm not paying now. Why didn't we get the same deal.
Secondary: define generation. People are born every day and those born now will have already received the "benefits" - whatever they may be. The generational line is sort of fuzzy. Do we cancel debts for those born now this exact minute? etc
3rd - what is the cut of for american military adventurism. What part is included. What is legitimate defensive military needs and what is for adventurism. It gets really grey.
Well, in any case the thought would be nice.
Right. I know it is a fantasy. From my american centric view the USAs force projection has benefitted Europe as much or more than the USA in maintaing franchises around the world.
So lets just wipe out any debt owed to europe and vica versa as a start, And the fed can go bankrupt. who would miss it?
Quite. I would think pretty much the modern world, not just Europe, has received a benefit from US dominance. True some "unfortunate" places have been "put in their place", but the stability provided has allowed for everybody else to prosper and progress. At least, avoided total war - or is it just putting a lid on a boiling pot?
China, Japan, and other major debt holders may miss the cancelled debt. Thinking since debt can move around this could it include domestic debt holders, ie pensions (if they have any funds), banks, etc :)
material wealth as a criterion - that's a good point.
I am not sure the spiritual level (if I understand what you mean by spiritual) is the right way to look at it. I think we need to think on a physical security level. We could be plunged into a new world of physical uncertainty. It could become a free for all with virtually everything up for grabs and old agreements and alliances remade.
Just hope cooler heads and enough of an impetus for shared prosperity prevails.
I posted above. I am willing to take a shot at not having the US being the "gun in the room" for geopolitics. Looking into libertarian philosophy even further out than Ron Paul. and the calculation that Oil is over $300/bbl if you factor in the MIL cost. Ron Paul says we could negotiate for it cheaper than that. And when I say we, I mean the world, not just the USA.
Unfortunately, not familiar with specifics of libertarianism.
I was gonna write a whole essay, but it may be simpler to say that maybe on paper this is possible.
What I see, based on what is suggested above, is that this agreement is hinged entirely upon trust and cooperation, but there may be too many moving parts.. Pre-existing situations may put a wrench in it.
example: historical cultural differences may not encourage cooperation/trust. A country / government may not be willing to sacrifice the possibility of losing out on future supply. A rich country may not be willing to "wait in line" for its share of the oil and may be willing to pay a higher price and help jack up prices for its own benefit. And... from there a whole spiraling out of control or excess may occur.
Or am I being jaded and pessimistic. :)
A country / government may not be willing to sacrifice the possibility of losing out on future supply. A rich country may not be willing to "wait in line" for its share of the oil and may be willing to pay a higher price and help jack up prices for its own benefit. And... from there a whole spiraling out of control or excess may occur.
How else would a line be determined other than by willingness to pay? And a countries share? Who gets to determine that? Man, get educated on markets. A price is simply the result of cooperating individuals agreeing to an exchange.
What you should be worried about is military action to steal oil and other resources from the people that produce it.
I agree but I think we peaked around the late 1980s.
I wouldn't disagree with that, but I don't think it will get any better than it has been in our lifetimes...
I am having the belief that the peaking the US was having was happening when peoples were still being able to buy cars that were new and GTO pontiacs were being the new cars they were buying.
Yea the 80's... peak poontang.
It would have to be pre gold standard, everything has been an illusion since.
You are probably correct. The late 1960s were probably the peak. That MF'er LBJ wanted to get incredibly wealthier off of Vietnam. LBJ bankrupted everything with Vietnam and War on Poverty then Nixon goes off the gold standard,
The world will be a much worse place as the population bubble pops. Famine, disease, war, and misery are coming.
Finally the population will stabilize at a much lower level, and there will be plenty of land and water and game for everyone, and the world can slowly become a better place again.
Does this mean I'll get laid even less?!?!?!?!
And how the teleprompter will be scripted;
--
The crowd goes into a wild emotional delirium, that strangely lingers over the MSM and the whole globe, until about 9:38AM Tuesday, as four silkworm missiles hit a cruiseliner entering New York harbour. At first they think it's just a maritime accident, then there's a strange underwater blast beside the ship, then 3 more missiles are clearly seen striking home only minutes after this. The globe is aghast! Almost all on board are killed, in front of a global audience of billions. In the following hours unexploded sea mines are found in the three largest harbours on the US east coast. Then mustard gas bombs detonate inside two Washington schools, killing and burning scores of children and teachers. Within minutes of this a shaky coastguard video emerges from a White House briefing showing one of the suspected mines actually has handwriting on it, that appears to be an excerpt of an accusation by Mahmoud Ahmadinejad during his last speech to the UN General Assembly.
The Barry looks very cross and says shit like; "To those who wear the uniform, get ready".
And the King of Saudi Arabia says shit like; "Now we are all Sunnis".
The bewildered global crowd cheers and emanates great good-will and sympathy to the USA, and Wahhabi's in general.
And we're off to the races again!
Saved by the war.
--
Stranger things have happened.
Ah, Doctor Stangelove...I wondered where you had got to...
Are you some kind of prevert commie puke Mandrake?
No, you fucking idiot, it's called "resource depletion." It's fucking jokers like you who constantly drum stupid shit that keeps people from realizing the ACTUAL source of the problem.
It's GROWTH that's failing.
yep every single 1 of us that holds fiat currency as our main asset is totally and utterly, completely (directly or indirectly) broke, merry xmas and a happy new year!!!! long live hyperinflation!
The new Porcine line of Mary Kay products - Made in China.
If all of China's accumulated trade surplus is represented by USD and related treasury issues, and if the USD is basically worthless, then what is China's real net worth?
All the pasture and potatoe land they want to buy on tuesday. And they will.
You really think they'll be able to buy property here?
LMFAO
They are already aquiring rural land. In the 1980s the Japanese bought lots of urban property.
What would stop them?
If you did try to stop them they would most likely use one of your family members as whale bait. They are our new masters, just practice the silence and no eye contact rules, you don't want to visit Chintanomo.
Hah! Thanks for the Vancouver reference.
Q: What separates China from India?
A: The Fraser River.
And there you go!
You see, nearly EVERYTHING is worthless, it's based on unsustainable shit/practices. This is all about a major paradigm shift. Some (morons) will cling to stupid trite ideological arguments, but that's got NOTHING to do with the fact that the current paradigm WILL fail because it's based on infinite growth on a finite planet.
"Worth" (as measured in the unsustainable paradigm) IS, therefore, meaningless. What's your value to those around you, that's what the new "worth" will mean.