Posted on 11/29/2020 1:13:03 PM PST by SeekAndFind
This isn’t as much hyperbole as it sounds: the main reason investors bought bonds issued by Chinese state-backed companies is an implicit guarantee from default by the local or provincial government.
That belief has been shattered by a recent spate of defaults by major Chinese state-owned companies.
Yongcheng Coal and Electricity Holding Group, a state-owned coal company, defaulted on a $152m bond in November. At the time of the default, Yongcheng was a AAA-rated company by Chinese domestic credit rating agencies. This became, pun unintended, the proverbial canary in the coal mine.
Shortly thereafter, Tsinghua Unigroup, a state-backed technology company affiliated with Tsinghua University in Beijing, also defaulted on its debt.
Yongcheng and Tsinghua’s defaults are seismic. Both are major state-backed companies.
An analysis by Yicai, a Shanghai-based business media, found that a total of 149 bonds issued by 58 Chinese companies defaulted during the first ten months of 2020. The principal value of the defaults totaled 81.7 billion yuan ($11.6 billion).
More than half, or 49 billion yuan, were bonds from six companies within the coal industry. The real estate sector also saw significant defaults, with four developers failing to repay their bonds.
The recent string of defaults has rattled issuers, with several companies pulling their planned bond issuances in recent weeks.
In a departure from the previous decade, there appears to be a policy shift in how Beijing treats financial risks going forward. The People’s Bank of China Governor Yi Gang penned a series of editorials beginning on Nov. 17, addressing the financial structure and policy risks facing China going forward.
Yi’s commentary is surprisingly frank. He points out that China’s financial leverage has increased over the ten years ending in 2018, both in terms of bank loans to GDP and debt-to-equity ratios at companies.
(Excerpt) Read more at theepochtimes.com ...
Will the democrat party give the communists the money to cover the defaults as they plan on doing so for the democrat party run states here to coverup the bribes they took from the communists?
China sells bins at negative interest rates 11/21/20 In relatively small deal, China just sold euro-denominated debt at a negative rate (4.7B in three parts deals in euros).
They thought they were invincible. Then, Trump.
As someone who has scene more than his share of (stateside) junk bond defaults this year, thanks to the Wuhan virus, I’m reminded of the following scene from Animal House:
https://www.youtube.com/watch?v=JTF2j0OWUi8
More of the same in China. Their policy banks and provincial / city banks are always exploding.
Its why China has a very tightly closed capital account.
from Jan 2020:
Bloomberg has ties to China through his business and personal dealings and has already made some eyebrow-raising comments, per the report:
Calling Vice President Wang Qishan “the most influential political figure in China and in the world.”
Saying President Xi Jinping “is not a dictator,” adding he “has a constituency to respond to.”
“[China] has enormous financial leverage over anyone who does business with them, and so when Mike Bloomberg does interviews and says Xi is not a dictator, I believe Mike
Bloomberg is blinded by his wallet,” hedge fund manager Kyle Bass told the Post.
“His biggest weakness and biggest vulnerability is on China,” Bass added to the Post.
Bloomberg, who has retained an 88% stake in his businesses, has $10 billion in annual revenue, including 1% from China and another 4% from Hong Kong, according to the report.
One of the huge things at stake in the US Presidential election, is whether or not China will be able to foist a lot of their bad debt onto American and Western investors, before the bottom falls out.
They have the biggest debt bubble in human history.
Currently, the great bulk of their bad debt is with Chinese banks, and companies on Chinese stock markets - but they are trying to get those companies and bonds listed on Western exchanges, and incorporated into the indexes (like the S&P 500, or EAFE), that lots of individual 1nvestors and investment companies will buy with hard Western currencies like dollars and euros. They will then be the ones left holding the bag, when the bottom drops out.
A Biden Administration will likely open the door to fraudulent Chinese debt and equities, being sold on our markets, to unsuspecting Americans.
Thanks for this heads up about Biden. I understand certain Chinese companies are already listed on some of our stock markets, but they don’t have to undergo the rigorous audits our own companies must meet. Double standard I’m sure President Trump wants to correct.
A dollar in a university, is worth more than a dollar in a jail; in a temperate, schooled, law-abiding community, than in some sink of crime, where dice, knives, and arsenic, are in constant play.
The "Bank-Note Detector" is a useful publication. But the current dollar, silver or paper, is itself the detector of the right and wrong where it circulates.
If you take out of State Street the ten most honest merchants, and put in ten roguish persons, controlling the same amount of capital, -- the rates of insurance will indicate it; the soundness of banks will show it: the highways will be less secure: the schools will feel it; the children will bring home their little dose of the poison: the judge will sit less firmly on the bench, and his decisions be less upright; he has lost so much support and constraint, -- which all need; and the pulpit will betray it, in a laxer rule of life.
China can only survive by lying, cheating & stealing.
It begins. All of these bonds are worthless.
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