China's banks hold liabilities equal to 350 per cent of China's gross domestic product

[barryqwalsh]

When Beijing begins the massive quantitative easing (money printing) required to recapitalise the banking system, the waves will be felt by every country with a heavy reliance on Chinese trade. Which includes Australia.

This is why so many Chinese have been zealous about getting money out of China and into hard assets overseas in recent years. Hello Australian property market.

This is why the capital flight out of China is now so great the government is having to impose tighter curbs.

Paul Sheehan: Is Malcolm Turnbull insane? We shall soon find out

 

[TheOldSchool]

China owns a bunch of debt. The rest of the world owns real things that China paid for. China better be praying the shit never hits the fan.

 

[waltky]

Is the China bubble about to burst?...

China's currency reserves plunged in January
7 February 2016 - China's foreign currency reserves plunged by $99.5bn in January, the People's Bank of China reported.[/i]

China has been running down its vast foreign currency reserves in an attempt to boost the value of its own currency and stem a flow of funds overseas. At $3.23 trillion, China still has the world's biggest reserve of foreign currency holdings. But that has declined by $420bn over six months and stands at the lowest level since May 2012. "While the remaining reserves still represent a substantial war chest, the mathematics around this rapid pace of depletion in recent months is simply unsustainable for any length of time," said Rajiv Biswas, Asia Pacific Chief Economist, IHS Global Insight.

Investor fear

The Chinese authorities fear a rapid devaluation of their currency, as it could destabilise the economy. Many Chinese businesses hold debt in dollars and managing those debts with a severely weakened yuan could cause problems and some companies to fail. So China has been trying to engineer an ordered devaluation of the yuan, but that is proving hard to deliver. Investors have been trying to pull funds out of investments priced in yuan and speculators have been betting on further falls in the currency.

To stabilise the situation China has been selling dollars and buying yuan. And it has been using other tactics, including curbing currency speculation and ordering offshore banks to retain their reserves of yuan. Commenting on the decline, veteran economist, George Magnus noted that there is "confusion" over China's foreign currency policy. "Clearly this can't go on for long," he tweeted, referring to the fall in currency reserves.

China's currency reserves plunged in January - BBC News

See also:

Toxic loans in China weigh on growth
Fri, Feb 05, 2016 - SOURCE OF CONCERN: While there is not enough data to calculate a precise figure for bad loans, some analysts estimate that China’s troubled credit could exceed US$5 trillion

Beneath the surface of the global financial system lurks a multitrillion-dollar problem that could sap the strength of large economies for years to come. The problem is the giant, stagnant pool of loans that companies and people around the world are struggling to pay back. Bad debts have been a drag on economic activity ever since the financial crisis of 2008, but in recent months, the threat posed by an overhang of bad loans appears to be rising. China is the biggest source of worry. Some analysts estimate that China’s troubled credit could exceed US$5 trillion, a staggering number that is equivalent to half the size of the country’s annual economic output.

Official figures show that Chinese banks pulled back on their lending in December last year. If such trends persist, China’s economy, the second-largest in the world behind the US, might then slow even more than it has, further harming the many countries that have for years relied on China for their growth. However, it is not just China. Wherever governments and central banks unleashed aggressive stimulus policies in recent years, a toxic debt hangover has followed. In the US, it took many months for mortgage defaults to fall after the most recent housing bust — and energy companies are struggling to pay off the cheap money that they borrowed to pile into the shale boom.

In Europe, analysts say bad loans total more than US$1 trillion. Many large European banks are still weighed down with defaulted loans, complicating policymakers’ efforts to revive the continent’s economy. Italy, for instance, announced a plan last week to clean out bad loans from its plodding banking industry. In theory, it makes sense for banks to swiftly recognize the losses embedded in bad loans — and then make up for those losses by raising fresh capital. The cleaned-up banks are more likely to start lending again — and thus play their part in fueling the recovery. In reality, this approach can be difficult to carry out.

Recognizing losses on bad loans can mean pushing corporate borrowers into bankruptcy and households into foreclosure. Such disruption can send a chill through the economy, require unpopular taxpayer bailouts and have painful social consequences. And in some cases, the banks might find it extremely difficult to raise fresh capital in the markets. Even so, the drawback of delaying the cleanup is that the banks remain wounded and reluctant to lend, damping any recovery that takes place. Japan, economists say, waited far too long after its credit boom of the 1980s to force its banks to recognize huge losses — and the economy suffered for years after as a result. Now, many banking experts are beginning to worry about China’s bad loans.

Fears that the country’s economy is slowing have weighed heavily on global markets in recent months because a weak China can drag down growth globally. Many of these concerns focus on China’s banking industry. In recent years, banks and other financial companies in China issued a tidal wave of new loans and other credit products, many of which will not get paid back in full. Although there is not enough official data to come up with a precise figure for bad loans, some analysts have come up with estimates of around US$5 trillion.

MORE

Related:

New breed investors embrace China's white-knuckle ride
Sun Feb 7, 2016 - A new breed of small investor is riding China's rollercoaster stock markets, looking for a quick buck and thriving on the volatility that has sent others scurrying to the exit clutching their stomachs.

Last summer's 40 percent crash and a 20 percent drop so far in 2016 have sent trading volumes tumbling on the Shanghai and Shenzhen bourses, where retail investors account for 85 percent of the business, unlike more developed markets, where institutions dominate. Many investors have not just been put off by the falls, but by the wild intraday swings, with sharp morning gains frequently swallowed by sharper afternoon losses. Not Zhao De. The 26-year-old Beijinger only has around 55,000 yuan ($8,400) to play with, and he wants to make it work hard and fast.

He's currently out of the stock market, not because it's too volatile, but because it stops him making the most of that volatility. He wants to take bigger positions for shorter periods, but the stock market makes him wait a day for trades to be settled, which prevents intraday trading. He's in commodity futures for now. "If I buy futures, I can directly short sell," he said.

Liu Jingde, Cinda Securities analyst, said this growing new cohort of investors is more open to the opportunities to make money and has a greater willingness to take risks, using futures and options products. "It could make the fluctuations of the market more extreme if these investors take more frequent short-term positions," he said. China's securities regulator did not immediately respond to requests for comment on the implications for the market.

Rao Xianjun is another of this new breed, who typically have trading apps on their phones and bone up on opportunities through investor communities on media platforms such as QQ, WeChat and Weibo. He's looking at stocks in the new energy, technology and medical sectors, but he doesn't want to tie up his money for long, and says he will be looking to make money by short selling, cashing in on the over-exuberant response of investors to government policies. "The nation's leaders will obviously focus on new initiatives, and after the buzz of it all quietens down ... that'll be my time to move in."

GUT INSTINCT

 

[EdwardBaiamonte]

Is the China bubble about to burst?...

China's currency reserves plunged in January
7 February 2016 - China's foreign currency reserves plunged by $99.5bn in January, the People's Bank of China reported.[/i]

China has been running down its vast foreign currency reserves in an attempt to boost the value of its own currency and stem a flow of funds overseas. At $3.23 trillion, China still has the world's biggest reserve of foreign currency holdings. But that has declined by $420bn over six months and stands at the lowest level since May 2012. "While the remaining reserves still represent a substantial war chest, the mathematics around this rapid pace of depletion in recent months is simply unsustainable for any length of time," said Rajiv Biswas, Asia Pacific Chief Economist, IHS Global Insight.

Investor fear

The Chinese authorities fear a rapid devaluation of their currency, as it could destabilise the economy. Many Chinese businesses hold debt in dollars and managing those debts with a severely weakened yuan could cause problems and some companies to fail. So China has been trying to engineer an ordered devaluation of the yuan, but that is proving hard to deliver. Investors have been trying to pull funds out of investments priced in yuan and speculators have been betting on further falls in the currency.

To stabilise the situation China has been selling dollars and buying yuan. And it has been using other tactics, including curbing currency speculation and ordering offshore banks to retain their reserves of yuan. Commenting on the decline, veteran economist, George Magnus noted that there is "confusion" over China's foreign currency policy. "Clearly this can't go on for long," he tweeted, referring to the fall in currency reserves.

China's currency reserves plunged in January - BBC News

See also:

Toxic loans in China weigh on growth
Fri, Feb 05, 2016 - SOURCE OF CONCERN: While there is not enough data to calculate a precise figure for bad loans, some analysts estimate that China’s troubled credit could exceed US$5 trillion

Beneath the surface of the global financial system lurks a multitrillion-dollar problem that could sap the strength of large economies for years to come. The problem is the giant, stagnant pool of loans that companies and people around the world are struggling to pay back. Bad debts have been a drag on economic activity ever since the financial crisis of 2008, but in recent months, the threat posed by an overhang of bad loans appears to be rising. China is the biggest source of worry. Some analysts estimate that China’s troubled credit could exceed US$5 trillion, a staggering number that is equivalent to half the size of the country’s annual economic output.

Official figures show that Chinese banks pulled back on their lending in December last year. If such trends persist, China’s economy, the second-largest in the world behind the US, might then slow even more than it has, further harming the many countries that have for years relied on China for their growth. However, it is not just China. Wherever governments and central banks unleashed aggressive stimulus policies in recent years, a toxic debt hangover has followed. In the US, it took many months for mortgage defaults to fall after the most recent housing bust — and energy companies are struggling to pay off the cheap money that they borrowed to pile into the shale boom.

In Europe, analysts say bad loans total more than US$1 trillion. Many large European banks are still weighed down with defaulted loans, complicating policymakers’ efforts to revive the continent’s economy. Italy, for instance, announced a plan last week to clean out bad loans from its plodding banking industry. In theory, it makes sense for banks to swiftly recognize the losses embedded in bad loans — and then make up for those losses by raising fresh capital. The cleaned-up banks are more likely to start lending again — and thus play their part in fueling the recovery. In reality, this approach can be difficult to carry out.

Recognizing losses on bad loans can mean pushing corporate borrowers into bankruptcy and households into foreclosure. Such disruption can send a chill through the economy, require unpopular taxpayer bailouts and have painful social consequences. And in some cases, the banks might find it extremely difficult to raise fresh capital in the markets. Even so, the drawback of delaying the cleanup is that the banks remain wounded and reluctant to lend, damping any recovery that takes place. Japan, economists say, waited far too long after its credit boom of the 1980s to force its banks to recognize huge losses — and the economy suffered for years after as a result. Now, many banking experts are beginning to worry about China’s bad loans.

Fears that the country’s economy is slowing have weighed heavily on global markets in recent months because a weak China can drag down growth globally. Many of these concerns focus on China’s banking industry. In recent years, banks and other financial companies in China issued a tidal wave of new loans and other credit products, many of which will not get paid back in full. Although there is not enough official data to come up with a precise figure for bad loans, some analysts have come up with estimates of around US$5 trillion.

MORE

Related:

New breed investors embrace China's white-knuckle ride
Sun Feb 7, 2016 - A new breed of small investor is riding China's rollercoaster stock markets, looking for a quick buck and thriving on the volatility that has sent others scurrying to the exit clutching their stomachs.

Last summer's 40 percent crash and a 20 percent drop so far in 2016 have sent trading volumes tumbling on the Shanghai and Shenzhen bourses, where retail investors account for 85 percent of the business, unlike more developed markets, where institutions dominate. Many investors have not just been put off by the falls, but by the wild intraday swings, with sharp morning gains frequently swallowed by sharper afternoon losses. Not Zhao De. The 26-year-old Beijinger only has around 55,000 yuan ($8,400) to play with, and he wants to make it work hard and fast.

He's currently out of the stock market, not because it's too volatile, but because it stops him making the most of that volatility. He wants to take bigger positions for shorter periods, but the stock market makes him wait a day for trades to be settled, which prevents intraday trading. He's in commodity futures for now. "If I buy futures, I can directly short sell," he said.

Liu Jingde, Cinda Securities analyst, said this growing new cohort of investors is more open to the opportunities to make money and has a greater willingness to take risks, using futures and options products. "It could make the fluctuations of the market more extreme if these investors take more frequent short-term positions," he said. China's securities regulator did not immediately respond to requests for comment on the implications for the market.

Rao Xianjun is another of this new breed, who typically have trading apps on their phones and bone up on opportunities through investor communities on media platforms such as QQ, WeChat and Weibo. He's looking at stocks in the new energy, technology and medical sectors, but he doesn't want to tie up his money for long, and says he will be looking to make money by short selling, cashing in on the over-exuberant response of investors to government policies. "The nation's leaders will obviously focus on new initiatives, and after the buzz of it all quietens down ... that'll be my time to move in."

GUT INSTINCT

the American bubble burst in 2008 and we recovered rather quickly. China will do the same if necessary but much faster having learned from our experience..

 

[waltky]

China's banks hold liabilities equal to 350 per cent of China's gross domestic product

Three anda half times...

... dat's a lotta debt.

 

[EdwardBaiamonte]

China's banks hold liabilities equal to 350 per cent of China's gross domestic product

Three anda half times...

... dat's a lotta debt.

yes so they write it off and???????????????????