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Mega Default In China Scheduled For January 31

Discussion in 'General Discussion' started by stg58, Jan 19, 2014.

  1. stg58

    stg58 Monkey+++ Site Supporter+ Founding Member

    What impact on the world markets. We all know that there is no juggling of the books and all is above board...
    Hopefully barry will step up and bail them out :(


    Mega Default In China Scheduled For January 31 - Forbes

    On Friday, Chinese state media reported that China Credit Trust Co. warned investors that they may not be repaid when one of its wealth management products matures on January 31, the first day of the Year of the Horse.

    The Industrial and Commercial Bank of China sold the China Credit Trust product to its customers in inland Shanxi province. This bank, the world’s largest by assets, on Thursday suggested it will not compensate investors,stating in a phone interview with Reuters that “a situation completely does not exist in which ICBC will assume the main responsibility.”
    There should be no mystery why this investment, known as “2010 China Credit-Credit Equals Gold #1 Collective Trust Product,”is on the verge of default. China Credit Trust loaned the proceeds from sales of the 3.03 billion-yuan ($496.2 million) product to unlisted Shanxi Zhenfu Energy Group, a coal miner. The coal company probably is paying something like 12% for the money because Credit Equals Gold promised a 10% annual return to investors—more than three times current bank deposit rates—and China Credit Trust undoubtedly took a hefty cut of the interest.
    gunbunny likes this.
  2. NWPilgrim

    NWPilgrim Monkey++

    This may be the default that starts things rolling, or another shell game shuffle. But the ability to shift and bailout is running thin globally. Soon one if these defaults will be that card that tumbles the whole facade.
    Moatengator likes this.
  3. VisuTrac

    VisuTrac Ваша мать носит военные ботинки Site Supporter+++

    LOL, and wOOt, it looks like the Chinese have joined the big boys on how to fleece investors.
    That is so gonna suck!
    Yard Dart and Quigley_Sharps like this.
  4. DKR

    DKR Interesting ideas, interesting stories

    The trust product, called "2010 China Credit / Credit Equals Gold #1 Collective Trust Product", used the funds it raised from wealthy investors in 2010 to make a loan to unlisted coal company Shanxi Zhenfu Energy Group Ltd.

    But in May 2012, Zhenfu Energy's vice chairman, Wang Ping Yan, was arrested for accepting deposits without a banking licence.

    Following an investigation, China Credit Trust told investors that Zhenfu Energy had taken out high-interest underground loans totaling 2.9 billion yuan, bringing its total liabilities to 5.9 billion yuan and threatening its ability to repay the trust loan.

    China's coal industry has been battered by falling prices over the last year. Several other banks and trust companies are facing losses on loans to another coal company, Liansheng Resources Group.

    Analysts have expressed increasing concern in recent years about Chinese banks' exposure to off-balance-sheet risks.

    While trust products and other so-called wealth management products typically don't carry a formal guarantee from banks that help to create and sell them, bankers worry that investors widely perceive them as carrying an implicit guarantee from state-owned banks.

    That means that banks may face pressure to shield investors from losses in order to protect their reputations, even if they are not legally required to do so.


    While manufacturing and services PMIs disappointed, the big problem in big China remains that of an out-of-control credit creation process that is blowing up. As wepreviouslynoted, instead of crushing credit creation, the PBOC’s liquidity rationing has forced distressed companies into high-interest-cost products in the shadow-banking world. Investors on the other side of "troubled shadow banking products" had assumed that ‘someone’ would bail them out but this evening Reuters reports that ICBC has confirmed that it will not rescue holders of the "CreditEqualsGold #1 Collective Trust Product", duetomatureJan 31st with $492 millionoutstanding. The anxiet from contagion concerns ofg the first shadow-banking default has driven the Shanghai Composite back near 2,000 for the first time since July – and to its narrowest spread to the S&P 500 in almost 8 years.

    The Shanghai Composite is tumbling… to six month lows (and back near 2,000 for the firs time since July)…

    and its closest (nominally) to the S&P 500 in almost 8 years…

    Good thing the market here is closed on Monday. Once the fabric of decent starts to rip.....
    BTPost likes this.
  5. gunbunny

    gunbunny Never Trust A Bunny

    Last year was year of the rat, correct? All the rats have jumped ship, leaving everybody else in the year of the horse ('s A$$).

    Maybe the (slowly) rising gold prices mean the end of the buying streak for them. When that happens, lead is sure to follow.
    Yard Dart likes this.
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