‘China Default’ at end of January could rock world markets

21st Century Wire says…

Over the weekend, China announced sure signs of stabilising with a 7.7% growth rate, matching it’s performance for 2012, along with an announcement that the People’s Republic has finally passed the US as the world’s number producer. But that celebration was short-live…


Fears of a ‘major default contagion’, due to hit on January 31st – have already begun to cascade, as Shanghai stock market closed today at lowest level since last July.

It’s China’s first major ‘shadow banking’ default event, and investors on the bad end of the default were expecting that someone would bail them out, but that’s not looking very likely right now. Reuters reports:

“Industrial and Commercial Bank of China, the world’s largest bank by assets, said on Thursday that it has no plans to use its own money to repay investors in a troubled off-balance-sheet investment product that it helped to market.”

The Chinese Ministry of Finance is keen to reform a potentially chaotic trend towards shady money, and thus may use this collapse to send a message to other players that it will not encourage the dodgy shadow banking shell game, and let it fail. In short, the doctor will be administering ‘bad medicine’ to the patient – unlike in America and Europe, where elite gamblers operate under the expectation that a bailout is all but guaranteed should the ponzi scheme collapse.

What does this mean for the rest of the world markets?

It may deliver a short-term hit to the Yuan, shock pan-Asian investor confidence, and scare away some big speculators for a period of time. Whether the ripple effect hits the west remains to be seen, and won’t be seen overnight.

This will be a big test for China’s economy and financial management, and whether or not this collapse in Trust’ causes a chain reaction. Zero Hedge  explains the root of the problem facing Chinese investors who’ve bought into Chinese wealth management products (WMP) right now:

A major test for the Chinese economy, and may hit their inflated property market hard, as well as the Yuan – but if they take the hit and recover without kicking the can down the road like the US Fed have done, over and over, then it will help China achieve an even  stronger credit rating, but only after the dust clears.

Gold bugs sit and wait too, to see how bullion markets react to this…

Mega Default in China Scheduled for Jan 31st


Gordon Chang
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.

Zhenfu was undoubtedly desperate for money. One of its vice chairmen was arrested in May 2012 for taking deposits without a banking license, undoubtedly trying to raise funds through unconventional channels. In any event, the company was permitted to borrow long after it should have been stopped—reports indicate that it had accumulated 5.9 billion yuan in obligations. Zhenfu, according to one Chinese newspaper account, has already been declared bankrupt with assets of less than 500 million yuan.

Continue story at Forbes

READ MORE CHINA NEWS AT: 21st Century Wire China


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  • Wilkins Micawber

    And it’s all downhill from here!

  • beast6228

    Best thing to happen in years, the world does not revolve around China. They are nothing but a disease.

    • Muhammad Abbass

      You are utterly clueless aren’t you? You think this is somehow bad for China? Nincompoop. The difference is that your corrupt bought and paid for governments bailed out these sharks at your expense. Iceland threw them in prison and their political enablers but that’s what the real men and women of earth do. You just shell out and shut up and point the finger at others.

    • http://www.focusonrecovery.net 2012 Consciousness Shift Resou

      People are a disease? Be careful, guard your thoughts, thoughts are co-creative. The question is, what will you create?

  • BANKSTER SLAYER

    I love that 21st Century Wire is covering this story when so few web sites will do it. But especially Iove your one paragraph that totally hits the nail on the head:

    “The Chinese Ministry of Finance is keen to reform a potentially chaotic trend towards shady money, and thus may use this collapse to send a message to other players that it will not encourage the dodgy shadow banking shell game, and let it fail. In short, the doctor will be administering ‘bad medicine’ to the patient – unlike in America and Europe, where elite gamblers operate under the expectation that a bailout is all but guaranteed should the ponzi scheme collapse.”

    This is the key point that all the western money news sites are ignoring: that this event is a test. And western news sites seem to forget that “He who has the gold makes the rules.” China has the gold, and the West does not. Therefore, the Western investors in this fund are desperate to trigger a crash of the Yuan BEFORE the BRICS nations implement their gold-backed trade system and before the Petro-Yuan replaces the Petro-Dollar.

    I’m going to bet that the Chinese government feels it is in their best interests now to allow the West to believe that a Chinese crash is imminent. But in fact, the opposite is true. I believe the Chinese will use this January 31st event to HASTEN the arrival of the global currency reset timetable. So Goldman Sachs and JP Morgan may have just shot themselves in the foot.

    And while we’re on the subject, whatever happened to MAURICE STRONG who went to China a few years ago to serve the Chinese finance ministry in an “advisory capacity?” I would so love to know what role he is playing in all of this.

    • CMRedwood

      China is not an independent actor, it has some autonomy but not much as the western based apex globalists keep it under tight control. For decades Brzezinski et al nurtured it into their first model Technocratic state. It is no accident that US manufacturing was transferred to China, neither was it merely an organic process. If the petro-yuan “replaces” the petro-dollar then it is because TPTB want it so, not because China outsmarted the US, that’s the ongoing psy op to deflect blame of a contracting US economy. More likely, what is happening is a kind of rebalancing in which the dollar will undergo a devaluation (current estimates are 30%) and be strongly weighted in a basket of currencies on the run up to a centrally controlled global digital currency. This has always been the long term plan. Keep in mind that the military arm of the NWO and a core financier cabal still depend on some level of dollar hegemony – at least for now.

  • Meathead

    A “global financial reset” in the making. Looks like China will beat Ovomit to the punch. That’ll burn his girlish buns or frost his ????’s, if he really has any.

  • Muhammad Abbass

    Good.

  • ThePunisher

    Aware 2014!!

    Please Be Aware!!!

  • http://www.focusonrecovery.net 2012 Consciousness Shift Resou

    Yes, apparently one goal of various factions within the ruling class has been to create a controlled demolition of world economics. Once hard currency collapses the next goal may be to begin an electronic credit/debt based world wide economy system and the RFID/Smart-chip will be the only uplink to commerce.

    http://www.focusonrecovery.net/hijackofamerica/Bohemiangrove.html

    • BANKSTER SLAYER

      (I’ve always believed that’s Hillary Clinton inside the costume shown in that photo.) ;-)

  • http://query.nytimes.com/gst/fullpage.html?res=9D0CEED81431F935A35750C0A9619C8B63 ɹǝzıuɐƃɹo ʎʇıunɯɯoɔ

    “‘China Default’ at end of January could rock world markets”

    Oh well, so much for your doomsday scenario… someones credibility just took a hit.