The Chinese Financial System is Full of Lies
According to Baoshing's most recent regulatory filing, the smallish lender based in Inner-Mongolia, made a $600 million profit in 2017.
It had assets of around $90 billion, non-performing loans were modest — under 2 per cent — and its capital buffers would fit comfortably with the global demands of a Tier1 bank.
Then it collapsed!
The Baoshang collapse totally contradicts fundamental claim of the CCP that interbank defaults are not possible thanks to 100 per cent implicit guarantees.
Now credit risks and counter-party risks are descending on this very core market in China's financial system, all the key players in the system have to figure out how to price risks in the new paradigm, and quickly. However they can't because it's full of fraud and lies.
The consequences are big and unpleasant waves of risk repricing with major banks shying away from doing business with smaller lenders.
This is a major problem, as small-to-medium sized banks combined have balance sheets as big as the big banks combined, but are far more dependent on interbank funding - that spells
'credit crunch.'
Not an ideal mix when the broader Chinese economy is slowing and under pressure from the ongoing push backs from the US against China's legacy of economic aggression.
Meanwhile in China's property market China has an estimated 21.4 per cent dwellings vacancies. China now has as much as 6.4 billion square metres of empty residential floor space.That is 1.68 times the amount of floor space built over the past five years, and hints at the scale of construction downturn needed to allow the excess supply to be filled with residents.
To give you a better sense of the scale of China's overbuilding, assuming a reasonably generous average of 40sqm of floorspace per new dwelling, that is 160 million units that are currently sitting empty.