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“We think the chain reaction will probably start,” Cui wrote. “In the U.S., it took about a year to reach the Lehman stage when the market panicked … We assess that it may take less time in China.”


Has China Reached its ‘Bear Stearns’ Moment?

The country’s first-ever bond default could potentially reshape the entire financial sector

In Shanghai on Friday, a solar energy equipment maker you’ve probably never heard of before, Chaori Solar Energy Science & Technology, couldn’t pay investors interest due on its bonds. In normal times, such an event might not get that much attention. But matters in China’s financial industry are far from normal these days. A dangerous build-up of debt and an explosion of risky and poorly regulated shadow banking have raised serious concerns about the health of China’s economy. That’s why the Chaori default — the first ever in China’s domestic corporate bond market — has sparked fears that the country could be headed for a full-blown economic crisis like the one that slammed Wall Street in 2008. “We believe that the market will have reached the Bear Stearns stage,” warned strategist David Cui and his team at Bank of America-Merrill Lynch in a report to investors.

The concern of Cui and others is that the Chaori default will be the tip-off point for an unravelling of China’s financial system. The default could wake investors and bankers to the realization that companies they thought were safe bets are potentially not, and they could begin to reassess other loans and investments to other corporations. In other words, they might start redefining what is and is not risky. That could then lead to a credit crunch, when nervous bankers become wary of lending money, or lending at affordable interest rates. More bankruptcies could result. That eventually causes the financial markets to lock up — and we end up transitioning from a Bear Stearns moment to a Lehman Brothers moment, when the financial sector melts down. “We think the chain reaction will probably start,” Cui wrote. “In the U.S., it took about a year to reach the Lehman stage when the market panicked … We assess that it may take less time in China.”

Such an outcome could be devastating to for China and ripple through the entire global economy. How likely is this scenario? Unfortunately, we can only tell what triggers a financial crisis after the trigger has been pulled. The general feeling among economists is that at least for now the default may not have a big impact. Chaori Solar, after all, is a much small firm than Bear Stearns was, and far less connected to other aspects of the economy.

http://time.com/15368/has-china-reached-its-bear-stearns-moment/

China’s Exports Collapse Leading To Second Largest Trade Deficit On Record…

But all is well…

SNIP

Plenty of excuses out there for this evening’s collosal miss in Chinese exports (-18.1% YoY vs an expectation of a 7.5% rise) mainly based on timing issues over the Lunar New Year (but didn’t the 45 economists who forecast this data know the dates before they forecast?) This is a 6-sigma miss and plunges China’s trade balance to its biggest miss on record and 2nd largest deficit on record. Combining Jan and Feb data (i.e. smoothing over the holiday), exports are still down 1.6% YoY – not good for the much-heralded global recovery. Exports to the rest of the BRICs were all down over 20% but no there is no contagion from an emerging market crisis…

http://www.zerohedge.com/news/2014-03-07/chinese-exports-collapse-leading-2nd-largest-trade-deficit-record

China Is Carshing…As Predicted

SNIP

The head of China’s sovereign wealth fund noted in 2009: “both China and America are addressing bubbles by creating more bubbles”.

He’s right …

Global credit excess is worse than before the 2008 crash.

The U.S. and Japan have been easing like crazy, but – as Zero Hedge notes [if you missed it when Tyler Durden first posted this] – China has been much worse:

Here is just the change in the past five years:

You read that right: in the past five years the total assets on US bank books have risen by a paltry $2.1 trillion while over the same period, Chinese bank assets have exploded by an unprecedented $15.4 trillion hitting a gargantuan CNY147 trillion or an epic $24 trillion – some two and a half times the GDP of China!

Putting the rate of change in perspective, while the Fed was actively pumping $85 billion per month into US banks for a total of $1 trillion each year, in just the trailing 12 months ended September 30, Chinese bank assets grew by a mind-blowing $3.6 trillion!

Here is how Diapason’s Sean Corrigan observed this epic imbalance in liquidity creation:

Total Chinese banking assets currently stand at some CNY147 trillion, around 2 ½ times GDP. As such, they have doubled in the past four years of increasingly misplaced investment and frantic real estate speculation, adding the equivalent of 140% of average GDP – or, in dollars, $12.5 trillion – to the books. For comparison, over the same period, US banks have added just less than $700 billion, 4.4% of average GDP, 18 times less than their Chinese counterparts – and this in a period when the predominant trend has been for the latter to do whatever it takes to keep commitments off their balance sheets and lurking in the ‘shadows’!

Indeed, the increase in Chinese bank assets during that breakneck quadrennium is equal to no less than seven-eighths of the total outstanding assets of all FDIC-insured institutions! It also compares to 30% of Eurozone bank assets.

Truly epic flow numbers, and just as unsustainable in the longer-run…

http://www.zerohedge.com/contributed/2014-03-07/china-crashing-%E2%80%A6-predicted

China Exports Decline Unexpectedly, Trade Balance Negative

In yet another downside surprise, China February Exports Tumble Unexpectedly.

Read more at http://globaleconomicanalysis.blogspot.com/2014/03/china-exports-decline-unexpectedly.html#lloGlM5TyZRSptJR.99

China Is Crashing. Credit Bubble, Financial and Industrial Bankruptcies, Debt and Bond Busts

The head of China’s sovereign wealth fund noted in 2009: “both China and America are addressing bubbles by creating more bubbles”.

He’s right …

Global credit excess is worse than before the 2008 crash.

The U.S. and Japan have been easing like crazy, but – as Zero Hedge notes  – China has been much worse:

 

 Here is just the change in the past five years:

 

 

You read that right: in the past five years the total assets on US bank books have risen by a paltry $2.1 trillion while over the same period, Chinese bank assets have exploded by an unprecedented $15.4 trillion hitting a gargantuan CNY147 trillion or an epic $24 trillion – some two and a half times the GDP of China!

Putting the rate of change in perspective, while the Fed was actively pumping $85 billion per month into US banks for a total of $1 trillion each year, in just the trailing 12 months ended September 30, Chinese bank assets grew by a mind-blowing $3.6 trillion!

Here is how Diapason’s Sean Corrigan observed this epic imbalance in liquidity creation:

Total Chinese banking assets currently stand at some CNY147 trillion, around 2 ½ times GDP. As such, they have doubled in the past four years of increasingly misplaced investment and frantic real estate speculation, adding the equivalent of 140% of average GDP – or, in dollars, $12.5 trillion – to the books. For comparison, over the same period, US banks have added just less than $700 billion, 4.4% of average GDP, 18 times less than their Chinese counterparts – and this in a period when the predominant trend has been for the latter to do whatever it takes to keep commitments off their balance sheets and lurking in the ‘shadows’!

Indeed, the increase in Chinese bank assets during that breakneck quadrennium is equal to no less than seven-eighths of the total outstanding assets of all FDIC-insured institutions! It also compares to 30% of Eurozone bank assets.

Truly epic flow numbers, and just as unsustainable in the longer-run.

http://www.globalresearch.ca/china-is-crashing-unsurmontable-credit-bubble-financial-and-industrial-bankruptcies-debt-and-bond-busts/5372573

China Allows First Corporate Bond Default.

http://www.moneynews.com/Markets/Chin…

But don’t panic…Janet Yellen says, all is well.

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