If you want on or off the ping list send me a FReepMail.
Note: I am NOT going to cover the ongoing epidemic in China. I am not qualified to talk about it. If it affect the Chinese economy or political situation then I will talk about that.
Item One:
At the risk of sounding alarmist, I think the opening shot in China's banking collapse may have been fired. On 12/1/23 Ping An Bank reported a substantial default in their trust division. This default involved 41 trust products (loans) and exceeded 100B Yuan (>$14.04B US). Four were resolved but thirty-seven can't make payments. Ping An is a joint stock commercial bank with headquarters in Shenzhen (immediately NW of Hong Kong).
In a letter to the Guandong Provincial government the bank detailed eleven of the defaulted trust products involving ~$1.44B and impacting 3,891 investors. This equates to an average loss of ~$282,806 US. Crucially, this represents less than a third of the thirty-seven defaulting trust products.
Most Chinese families do not have the two million Yuan to invest in trust products of this type. If Ping An Bank does default this will mark a shift in losses from the middle class to the wealthy.
I saw no mention of the type of businesses that were defaulting. Guandong Province is the center of the Chinese electronic and light industrial manufacturing sectors.
Item Two:
There are reports of the CCP cracking down on large businesses who default on debts to small and medium enterprises (SMEs) who provide them goods and services. This seems primarily focused on the Real Estate sector.
The reason the CCP is siding with the SMEs against the large businesses is because the SMEs have the most employees. If they go under, and many have in the past three years, it will cause the greatest societal dislocation.
Item Three:
Related to this is the fact that over 1,500 municipal governments in China are in default on debts and not making payment.
The day of reckoning for the Chinese economy can not be put off indefinitely. This example was a private commercial bank. The Bank of China and other large banks have CCP/ government backing. They are the ones staring at the prospect of ruinous losses as the Real Estate sector unravels. The Real Estate unraveling will likely bring down most of the local and provincial governments with it. The longer it goes on the worse it will be.
The CCP seems to be pushing debt around from one entity to another without actually solving the problem. The only escape for the CCP is to print money to cover the losses. This will lead to rapid inflation and a devaluing of the Yuan. This will then cause the remaining foreign investors to flee leading to increased unemployment. The PRC is no longer the price leader in ANY sector. Their only saving grace is the large sunk cost in facilities.
Financial losses of this magnitude which lead to unemployment will eventually lead to societal unrest, the thing the CCP fears most.
The big question is, does the CCP go out with a bang or a whimper?
WWG1WGA
Garde la Foi, mes amis! Nous nous sommes les sauveurs de la République! Maintenant et Toujours!
(Keep the Faith, my friends! We are the saviors of the Republic! Now and Forever!)
LonePalm, le Républicain du verre cassé (The Broken Glass Republican)