Saturday, December 21, 2013

How Close is China to a Panic?

Earlier this year and then this week there were little short term lending crises in China. (See our earlier posts, "China is based on lies and violence. So it will crash" and How Much of Chinese Banks' $24 Trillion in Loans Are Bad?.)

The NYT reports "Fear of Credit Crisis Resurfaces in China as Interest Rates Rise", and Quartz has an article on the ponzi finance/shadow banking "wealth management products" in China.

There's going to be such a crash in China. Only a matter of time. You would not expect a system based on lies and violence to allocate resources appropriately and this one certainly doesn't.

Bronte blog captured this well talking about "senseless capital expenditure" of solar companies,

"But one friend suggested that this is just an analogue for all of China. Who cares if office buildings are glutted? Just build more. Who cares that the high-speed-rail between two cities you have never heard of, a railway line that consumed valuable steel and concrete by the millions of tonnes is mostly run at a third capacity with empty trains? Build more."
A correspondent observes,
"The Chinese are guided by the labor theory of value, such that a million tons of T-shirts with no armholes are worth the sane as a million tons of T-shirts that have both armholes, provided that the same amount of labor was used in making both batches of T-shirts."
Funny that the Shanghai composite has been in decline for over four years but it doesn't seem to register with people here. The restructuring professionals seem to know better, though.

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