
China Sees Bankruptcies Surge; Bondholders May Get Less Back - adventured
https://www.bloomberg.com/news/articles/2018-12-16/china-sees-bankruptcies-surge-with-call-to-resolve-zombies
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sonnyblarney
China has a pretty big layer of fictitious economics overlaying their real
economy.

So the number of defaults is whatever they want them to be, at least in any
particular sector. They can control this with the stroke of a few keys and
tweaks of policies concerning lending etc..

As long as the real economy reaps real material gains ... and there are no
shocks ... then the fiction can continue relatively unabated.

A lot of empty real estate is just fine in a county where more than 300M
people still live in the doldrums, meaning, there's some market clearing
availability/viability intrinsic to the situation (i.e. 'somebody' will buy
the stuff in a panic, even rational speculators, meaning theirs a 'floor' to
any panic in that sector, it's not a black hole)

Now if foreign orders for goods falter, that could definitely be a problem.

A real geopolitical calamity ... or something causing disruption to their new
infrastructure projects etc. ... could be a problem.

But sans existential crisis there's no reason to panic there's a lot of room
for adjustment.

Something to keep an eye on.

EDIT fyi here are countries with whom China has the biggest deficits, i.e.
they buy more than import, granted this would exclude major US imports etc.
but gives a hint of who is more dependant on China than otherwise:

Taiwan: -US$110.9 billion (country-specific trade deficit in 2017) South
Korea: -$74.7 billion Australia: -$53.1 billion Switzerland: -$29.8 billion
Brazil: -$29.4 billion Japan: -$28.1 billion Germany: -$25.7 billion Angola:
-$18.1 billion Saudi Arabia: -$13.4 billion Malaysia: -$12 billion

So while fewer Chinese buyers of iPhones might not be good, at least the US
gets even _cheaper_ stuff of the tons they already buy.

Whereas the Taiwanese will just be bloodied.

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erikb
This reads like putting 2010 knowledge about China and Trump propaganda in a
shaker and then really go at it for 10 minutes. Dude, get an update. We are in
2018.

Both Western and Chinese "fictitious overlay" to real market is so big that
each can lose their current leadership position through that fantasy blowing
up. In some regards the trade war is like this party game where you need to
step on other people's balloon with your foot that has also a balloon
attached.

The good news is, once one of the bubbles burst the other one can be exchanged
step by step with real markets that are overtaken from the other.

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sonnyblarney
My comments are valid in 2018, more so than ever.

China has a politically controlled economy, a politically controlled currency,
no real or objective accounting standards, a politicized legal system, very
high degrees of corruption, capital controls, massive state intervention in
financial and other sectors, and a centrally planned economic orientation
wherein especially banks take their marching orders from a single source.

So 'dude' , this is a fiction that does not exist even in 'Trump's America'.

American economic figures are open enough that they can be externally
validated, and if you 'don't believe them' \- you can happily bet against the
'fiction' on the open markets. Yes - the Fed's action does amount to a kind of
intervention, but even then we know mostly what they are doing. It's not a
fiction, more than it is a calculation.

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chrisco255
Oof, that's gonna hurt their social credit score. I wonder if they'll be able
to file for Chapter 1984 bankruptcy? =P

In all seriousness, I wonder if China does hit a recession, what the effects
will be on the world economy?

~~~
Foobar8568
It will be a nice crash. Look at their stock market over the year(s), both HK
and Shanghai one. I would bet the recent drop in the US stock market is
related to what is going on there.

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pcr0
Related, but the treasury rate hikes played a bigger part than the trade
conflict.

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zachguo
tldr section missed another important bullet point. "The new pace may
continue: China’s top planning body called on Dec. 4 for local officials to
clean up the debt of firms with excess production capacity or insolvent
balance sheets by 2020."

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ksec
I remember not long ago some of those Bonds from Chinese companies with
Interest Rate of 13- 17%, and they were in USD. I was thinking that is too
good to be true. As it turns out there is a high chances you don't get
anything back.

The thing is I don't understand why and how there is a lack of liquidity in
China. It all changes within 18 months, from they have too much money and
starting buying even more overseas to literally scrambling for cash.

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erikb
It is not news that you don't get anything back. There is a documentary
(forgot the name, but should be googleble) about how China created loads of
fake companies to get money from naive investors.

The problem with this whole situation since day one was: How can you be sure
that you're not cheated if it's in the other side sovereign's interest when
you get cheated.

So yes, there was probably never a point where you could have invested
reasonably into Chinese bonds or stocks or startups.

