China Pulls The Rug From Under Europe, Halts French Bank Transactions, Makes Good On Trade War Ultimatum

Tyler Durden's picture

A flurry of headlines out of China suggest global macro-economic volatility may be ready to take it to the next level. We discussed last week how China's oh-so-generous offer of help to Europe was merely a veiled threat playing US against Europe in a game of who-gets-the-funding. Well, tonight, it seems, they are making good on some of those threats. Aggravated by EU's lack of market economy recognition, they pull trading lines with French banks, express concern at the EUR's safety (preferring US Treasuries), and indicate a clear preference for bonds over stocks - all the while warning of growing trade tensions - consider the sabre-rattled.

Initial comments from Commerce Minister Shen via Bloomberg:





was quickly followed by the 'threat/promise':



and then Reuters reports:

A big market-making state bank in China's onshore foreign exchange market has stopped foreign exchange forwards and swaps trading with several European banks due to the unfolding debt crisis in Europe, two sources told Reuters on Tuesday.


The European banks include French lenders Societe Generale , Credit Agricole and BNP Paribas.


"Apart from spot trading, all swaps and forwards trading (with the European banks) have been stopped," one source who is familiar with the matter told Reuters.

 And the piece-de-resistance of the night was, again from Reuters:

China, the largest foreign holder of U.S. government debt, will keep buying U.S. Treasuries, the official People's Daily, the ruling Communist Party's mouthpiece reported on Tuesday, citing government researchers.


In an article about the reasons for China's increased purchase of U.S. Treasuries, the newspaper cited Yan Xiaona, a researcher with the Chinese Academy of Social Sciences, as saying that the dollar "is relatively safer than the euro" because of the unfolding sovereign debt crisis in Europe.

Furthermore, as if he had just read our earlier debt vs equity post: 

Wang Chaocai, a Ministry of Finance researcher, was quoted as saying that "what else we can buy if not U.S. Treasuries? It's more risky to buy into equities."

Lastly, for feces and giggles, China Daily just had to throw in the military element with the tongue in cheeky "Backlash expected if US seals arms deal"...

It seems that China did not get the answer they wanted from the Europeans and just as we said last week, swung back in favor of the US - TSYs as opposed to stocks. China 3 - Europe 0 - US 1 is the approximate score in this first round perhaps.


UPDATE: The 'game' continues into the night as China's Xinhua News cites absolutely noone when it claims Fitch's bearish stance on China's banking industry has prompted suspicions of a 'conspiracy'. And remember Fitch is French-owned.

With Europe perceiving Fitch as “purposely targeting” the region, the ratings company needs to find a new candidate to add to the “blacklist” to show its fairness, the report said, citing Wu Jingmei, head of Renmin University of China’s credit rating research center.

and then goes on to comment (via Bloomberg)



and a seemingly well-time rebuttal from Ambassador Locke:





We have lost score now but this rhetoric seems to be gaining pace...

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
JOYFUL's picture

Deals with GDaff are simmering on the back burner.

The laughter you are hearing is the cackle of the damned from within the castle, as the Masque of the Red Death winds down. Don't believe everything, er, that should be Anything, you read in the MSM.  His gold is safe, his African Gold Dinar allies are attentive to his needs, and best of all, time is on His side, not Nato's.

In the age old tradition, the Chinese have allowed the enemy to orchestrate it's own destruction. No necks will need be broken in the advance to the new reserve currency paradigm. Banksters just hang themselves!  &

Politicos, being spineless, need instead be squished then left to dry out in the sun.

City of London is under a three pronged siege, Chavez, China, and the Libyan's the new "GOLDen Triangle...

Cameron and the CIA puppet princeling are roadkill. The failed to follow the sage advice of RoSpa...never wander out into traffic without Mommy!


Herman Strandschnecke's picture

Tufty should have left his mum on the pavement. She'd probably still be with us today.

BorisTheBlade's picture

China will be funding Europe, just not the "old" one: China backs Belarus with US$1b loan

RmcAZ's picture

1. Consume products that would have been exported.

2. Let currency free float and allow direct investment from abroad.

3. ???

4. Profit.

slewie the pi-rat's picture

my first thoughts, too

other thoughts are coming to me, but i'm not sure what this actually means to the chinese:


given moody's downgrade of the french banks last week, i also took note of john mauldin's analysis and take on goldSeek, yest { Twist and Shout? }

Let’s look at just one country. French banks are leveraged 4 times total French GDP. Not their private capital, mind you, but the entire county’s economic output!....Essentially, French banks are perilously close to being too big for France to save with only modest haircuts on their sovereign debt. If they were forced to take what will soon be mark-to-market numbers, they would be insolvent.   (end paste)

maybe it's b/c i've been playing poker, but given

  • the interests of the int'l central banksters,
  • the SNB pegging the euro,
  • the 90-day "swaps" to give the EU more time

w/ this chinese emphasis on the political, i can't help wondering if this is actually aimed at germany's role in the decisionz here, b/c  merkel's banks may be light on capital, too, as tyler put up a few days ago, to the tune of:  [Frankfurter Allgemeine: "German Banks Need $175 Billion More In Capital"  b/c if those french banks go down, what tf does germany actually gain by not "sharing the wealth" w/ greece?

is this all an "act" to put the screws to germany in it's political decision, kinda like the show we got prior to the august 2 debt ceiling bill, votes, and supercommittee formation?  is china trying to give a "message" to germany about not underestimating the ramifications of it's vote?

or, is the feces gonna hit the  giggling fan tomorrow, the 20th?  or will greece stall for the "referendum"?  if greece stalls, then germany gets to vote, and if this "strategy" works, the fuking banksters are gonna laugh all the way to their vaults!

either way is ok w/ me, but i'd prefer to see the phoney-baloney "capital" go right up in smoke and out the chimney, where it belongs...

we shall see, eh? 

candyman's picture

PBB where are you? Hello, Hello, must have hung up.

lolmao500's picture

So what. Let's say China, the US and Europe collapsed all at once.

Who you think would be the first one back on it's feets? My bet would be China due to their political system.

Democracies don't work well in crisis.

DeadFred's picture

Especially if they prepared for it because they knew they were going to be pulling the trigger.

Almost Solvent's picture

Plus China has all the industrial works - the US would take forever to retool their industrial base

Cardinal Fang's picture

 A billion and a half people in crisis is a scary thought and no amount of any type of government is going to control that mob.

lolmao500's picture

True dat. But still, you think 400 million europeans and 300 million americans is better? Especially when America and Europe are that internally divided? China isn't much internally divided.

The US is as divided as just before the last civil war.

Europe well it's split between the euro shills, the nationalists and the SHITLOAD of immigrants who don't want to integrate and the various group that are just waiting for something to go violent on them.

China have divisions, sure, but not on the level of ours.


Not to mention, the Chinese are not ``spoiled`` that much yet or entitled. WE ARE. A LOT. Chinese are used to having it rough. Us? Mwhahahahaha

A bunch of angry entitled people are a dangerous mob.

Western's picture

You're a fool.

China has several separatist races and states within it. They're not huge threats, but your tirade ignored that fact and I voted you down.

chindit13's picture

The West has something China lacks:  marrying age women.

Over the next decade China will have a gender gap of something north of 30 million.  That means at least thirty million hormone filled boys are not only not going to find a date to the Senior Prom, they aren't going to find a bride.  Already Chinese "entrepreneurs" are "exporting" women and young girls from border areas in neighboring countries to try to fill the need.  Where I am they use the Chloroform Extraction Method.

Unless China's PR firms get started right now with their "To Bugger Thy Comrade is Glorious" campaign, China is going to have problems burning off all that testosterone.  Maybe they have already begun.  Though I'm only a novice in the lingo, I've been told the direct translation of the name of that empty city Ordos is "San Francisco".

TruthInSunshine's picture

The EUR is toast, as is the Eurozone.

All the King's Horses & All The King's Men will never put Humpty Dumpty Euro back together again.

The single currency’s true fatal flaw - FT MARKET COMMENTARY

If you want to understand why the euro is in such trouble forget, for a moment, debt and sovereign bonds – and take a look at the bank notes. The images on euro notes are of imaginary buildings. While national currencies typically feature real people and places – George Washington on the dollar bill, the Bolshoi theatre on the Russian rouble – European identity is too fragile for that. Selecting a place or a hero associated with one country would have been too controversial. So the European authorities chose vague images that represented everywhere and nowhere.

DaBernank's picture

B..b..but wait, the € is freegold.

Except for the bureaucrats, "European" unity is as close to being reality in the minds of the people as "Asian"unity that would include China, Korea, Japan, India and SEAsia. Nationalism, it's what's for dinner.

What happens to the ECB when we all have our Marks, Francs, Lira, Schillings, Guilder, and Drachma back?

FinalCollapse's picture

Are you crazy? Most of the Chinese woman are fed up with their drinking guys, and would do anything to get out and marry Western guy. Just do your homework - you will not believe the quantity and these days incredible quality of woman available to marry. China is the best place to find a quality woman. There are tens of millions to chose from.

lolmao500's picture

Yeah well that's 30 million soldiers.

AnAnonymous's picture

Or simply 30 million men who wont marry.

US citizens are hooked on power. They know that if they lose their world first rank status, all their ponzi economics and the priviledges they draw from it are gone. They fear that the only rival left china takes that position from them.

The simple solution that these guys will simply not marry is left out to favour scenarii of turmoil and chaos...

AnAnonymous's picture

Yeah well that's 30 million soldiers.

Ah, one remark. Actually, if they join the military, they will probably marry. Because accross history, the soldier status, military service was quite required to access marriage. The US, as a country based on the group, is fully using that tactics to get people joining the military, US women are proner to marry a male who dedicates his life to 'defending' the group (a US euphemism to mean aggressing and plundering foreigners)

AmCockerSpaniel's picture

War takes care of issues like the China gender gap. In the USA, the Civil War of 1861~1865 resulted in the practice of polygamy by the Mormons.

DosZap's picture


The West has something China lacks:  marrying age women.

Well if they had not murdered the female babies aborted them, sold them on main st mkts for food,and aphrodisiacs (no shit), they might have enough women.

But, in lieu of marriage,and children, testosterone goes hand and hand with the War machine..............fight or f*&^ most young men like to do both,and like the radical Islamists, they are brain washed BY the state from birth.

chindit13's picture

One Child Policy and the cultural preference for male heirs...the Law of Unintended Consequences.

Frankly, I have no idea how they are going to solve it or minimize its effects on social stability.  Some here suggest war, though I might not (want to) go that far.  Major disruptions within society, however, are all but guaranteed.  I noted something which I have already seen, which is an horrific increase in human trafficking where I am.  I have read of similar occurences in northern Vietnam border areas.

India has a similar problem brewing re excess males, as does South Korea.

AnAnonymous's picture

Frankly, I have no idea how they are going to solve it or minimize its effects on social stability.

Major disruptions within society, however, are all but guaranteed.


Really? And from what is the source of that certainty?

30 millions men out of how many?

Any reference to other populations?

Every man or woman no marry and marriage is not a guarantee against social unrest? Would not these guys be more prone to unrest if they cant feed their family?

US cheap propaganda as usual.

AnAnonymous's picture

But, in lieu of marriage,and children, testosterone goes hand and hand with the War machine..............fight or f*&^ most young men like to do both,and like the radical Islamists, they are brain washed BY the state from birth.


Utter bollocks. Actually, the soldier status is a bonus to marry a woman. If indeed these guys join the military, they will more likely increase their chance of marrying.

US cheap propaganda trying to confuse the effects of primogeniture with the army stuff...

Cheap as usual.

ReactionToClosedMinds's picture

ANANonymous ... let the record state ... Amerika stinks ... but take your anit-amerikan propaganda, liberalize yourself and peddle your 'bolsheviks-made only-a-few-mistakes' nonsense elsewhere.  I, for one, do not want to live where you are in political control .... I'll take Barney Frank over you any day  

AnAnonymous's picture


Facts have nothing to do with anything by themselves. Facts are not bolshevik.

US citizens and their cheap propaganda. Even with their talent to monetize anything, it is so cheap they could not pay back their debt with it.

As to living somewhere on this Earth, one can not escape the US world order.

The US acts, the others react.

US world order.

eaglefalcon's picture

I think you are talking about "ethyl ether extraction method", which tends to knock someone out temporarily.  Chloroform can easily kill someone 

trav7777's picture

don't confuse marrying age with "marriageable"...western women are about fucking useless.  They can have them and they'll bust their balls and bring those chinks to their knees.  Plus, western women don't like short dicks, so these slopes are probably SOL

BandGap's picture

Total bullshit. lol.  You know not of what you speak.

Cardinal Fang's picture

double post, my apologies...

Newsboy's picture

Look what China did in it's last crisis. Something like 100,000,000 Chinese died over the years of the Cultural Revolution.

India is who would bounce back, but they would bounce back to being India. Their clusterfuck complexity is incomprehensible to outsiders, but they blend 5000 years of technology into every busy street. Oxcarts and AC busses, and everything in-between.

India did not cut all the rungs on the ladder as it climbed, unlike the rest of us.

Léonard's picture

Europe will not disintegrate. This is only a wet anglo-american dream to make people forget about the anglo-american sphere upcoming collapse and the end of the dollar.

Just take a look at the UK national debt, the UK economy based on the collapsing banking system and also to the US National debt, the US States debt, the US banks and the US consummers debt and compare it to Europe and the Eurozone. Europe goes pretty well compare to the USSA and Perfide Albion.

Mind you, the US and the UK even needed France to go on war to Lybia. That should tell you how bad the financial situation is for these two.

edotabin's picture

The nerve of those europeans to speak poorly to Timmay! This is what they get.

I can see Gpap on the horn with the public prosecutor.....again.

bid the soldiers shoot's picture

Remember, they built the original Maginot Line.

chump666's picture

They do that, Germany will leave the EU the next day - back to the Deutschmark. 

Ahmeexnal's picture

You are correct. Germany will go back to the Mark....the 1923 Weimar mark!

Uncle Remus's picture

Beware homeless painters in Vienna. Or is it out of work actors/out of office ex-governators in Sacramento?

Pool Shark's picture

Unemployed baseball pitchers (Castro) 

lolmao500's picture

Riiiiiiiiiight. They have to kick Merkel out and a whole other bunch of treasonous EU shills before that happens.

dleddy14's picture

Ha ha, I skimmed this arrticle, said to myself "gold".  Came down to the comments, and there was yours.  perfect.

Yen Cross's picture

 Just wait until (PBOC) pulls the rug on, the other bond markets!  Can you say bubble?


duo's picture

mmmmm, trade war begun, it has

jdelano's picture

Too old, too old to begin the (infantry) training.

tmosley's picture

They'll get to you once they are out of children for the meat grinder.

Manthong's picture

If you have a lot of (recent) experience crawling and dragging things, sniper duty might be an option.

Rhodin's picture

Takes a bit more than that.  I'm a decent shot, but would never qualify for sniper.  I've talked to a few ex snipers, though most don't talk much,  or avoid the subject.  It's not an average job.  Work with little or intermittent  backup and support.  Need excellent eyesight, patience, self-control and perfectionism.  Few can relax and enjoy killing, (not actually required though);  I'm hearing the younger folk have less problem with that last item.  In recent years more can do the job since tech has made it easier to plot bullet drop/range, wind drift, temperature, and humidity for one shot hits at long range. 

DoChenRollingBearing's picture

Not me tmosley!  Too old.  Besides I'll shoot the f**kers trying to get ME or my stuff.

Maybe I should send our kid down to Peru...  You know, an long "internship"...