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Friday, January 06, 2006
China's economic expiry date
James Waterton's analysis of China's banking collapse persuasive and troubling:
In 2007, as per the agreement China entered into upon joining the WTO, it must open up its retail banking sector to foreign banks. This is a potential tripwire. Even if only a small number of Chinese are concerned about the health of their local banks (and thus their savings), when Citibank opens up next door the run on Chinese banks could easily spin out of control.
That's a problem, when up to half of the money deposited by Chinese citizens in Chinese banks is lost -- well, stolen and wasted by the Communist Party, to be less polite:
In 2002, Chinese officials admitted that 25% of the loans written by the state owned banks were non-performing. Standard and Poors and a number of others said it was closer to 50%, and possibly more. Within the space of four years, the Chinese administration has revised its estimation of the rate of non-performing loans down to an average of about 12%. How can this be done so fast?
Waterton asks if an attack on Taiwan might be a handy distraction chosen by Beijing.
Posted by Ezra Levant on January 6, 2006 | Permalink
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Comments
That's a tough one. The Chinese banking "system" is certainly one that needs to be replaced, and opening up to international banking will, in the long run, be for the best, but one hopes that somehow the transition can be smooth. Economic collapse there would be a global disaster. Attacking Taiwan? That could be just the tip of the iceberg if the economy really went south. Here's hoping that the WTO guys know how to thread this delicate needle.
Posted by: Edwin | 2006-01-06 8:14:33 PM
I have just posted longer comments over at SDA on this, but I would like to say here that China is hardly any worse than most other governments when it comes to meddling in the economy and printing money until everything goes kablooey. And all governments use wars as a way to distract people from the poverty that results when inflationary bubbles burst. Invade Iran much? Who's up for a little War on Lack of Licensed Daycare? I think we can have a War on Daycare *and* a War on Chicken Flu, if we use the army to help turn all the little kiddie-gardens into quarantine zones. It'll take a whole new ministry though - no, a Super-Ministry.
The first thing you have to realize that the people in the government are not your friends, and practically nothing that they do for you is actually going to help you in the long run.
By the way - when are the Conservatives going to announce their next big plan to help people?
Posted by: Justzumgai | 2006-01-06 8:26:20 PM
Question would be what happens when they "go down", will we be pulled down as well? China and Japan hold so many US Government bonds and USD that if they implode it will ding the US and probably start a pretty ugly chain reaction.
Posted by: Snowrunner | 2006-01-06 8:35:23 PM
Well, having lots of savings would help, as would a lean, self-sufficient and innovative business culture, a diverse economy, a solid work ethic across all regions, and a very light tax and regulatory burden. All of these things would be tremendously helpful for Canadians to weather the potential shocks coming from a big drop in foreign investment and a long slump in commodities prices.
In other words, we're screwed.
Posted by: Justzumgai | 2006-01-06 9:14:36 PM
The best way to steal from a bank is to own one. The commie thugs running China know that. So they keep a short leash on their piggy banks, as do the Librano$.
Chrétien knew that you needed to be able to have your own piggy bank. It took a courageous François Beaudoin, President of the Librano$ BDC, to just say no to lending more money to Chrétien’s Shawinigan Golf Club buddies. Beaudoin should get the Order of Canada.
Martin and Goodale prefer tight Bank Act restrictions which is why after years of promising to pass modernized legislation that would allow the Canadian banks to merge and/or be bought out by foreign banks, they have stalled for years. That’s because if Citibank owned say the Bank of Montreal they would insist on having auto leasing and life insurance products in their branches, just like every other industrialized country can do. But Buzz and GM would not want competition on auto leasing because that’s the only part of the automotive business that’s profitable. Also, Desmarais does not want banks competing with his sales force at Investors Group and Great West Life. Therefore the Librano$ keep stalling on modernizing banking legislation as patronization rewards to the cabal.
Meanwhile, the Chinese banks are bankrupt, have been for decades. So what? To make the appropriate accounting entries to actually show them as bankrupt isn’t going to do much other than reflect reality. The shareholders would lose. But the shareholders are commie thugs. So who cares? They hold lots if US treasuries. That won’t change. The Chinese Banks are very bankrupt but very liquid, rather unusual, a bit like GM and Ford .. hmmmm.
Posted by: nomdenet | 2006-01-07 4:16:04 AM
I'm sure Moe Strong has his investments hedged in both banking systems...and a power input to the world bank which has become famous for rescuing communist nations from the ravages of commercial banking cartels.
It will be interesting to see if the Trilateralists in the corporate banking system pull the pin of China when its communist manderins refuse to let go of the purse strings.
At any rate the tug of war over profit control adds more validity to my long held conviction that there is nothing more rapacious than a communist bureaucrat.
Posted by: WLMackenzie redux | 2006-01-07 7:32:26 AM
China Banking collapse? Hmmm. Let me see. I think that is delusional .The next MILLENEUM will belong to Communist China-not simply the next century .Canada will be an historical relic -Quebec separated and the rest of the place absorbed or Balkanized. Such is the price of bourgeois, indulgent values in a hard natural world.
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