Tuesday, May 24, 2016

Is China's economy about to go south?

Thanks to William for the link!

via Bloomberg.
Charlene Chu, a banking analyst who made her
name warning of the risks from China’s credit binge, said a
bailout in the trillions of dollars is needed to tackle the bad-
debt burden dragging down the nation’s economy.
Speaking eight days after a Communist Party newspaper
highlighted dangers from the build-up of debt, Chu, a partner at
Autonomous Research, said she was yet to be convinced the
government is serious about deleveraging and eliminating
industry overcapacity.
She also argued that lenders’ off-balance-sheet portfolios
of wealth-management products are the biggest immediate threat
to the nation’s financial system, with similarities to Western
bank exposures in 2008 that helped to trigger a global meltdown.

The former Fitch Ratings analyst uses a top-down approach
to calculating China’s bad-debt levels as the credit to gross
domestic product ratio worsens, requiring more credit to
generate each unit of GDP.
While Chu is on the bearish side of the debate about the
outlook for China, she’s not alone. In a report on Monday,
Societe Generale SA analysts said that Chinese banks may
ultimately face 8 trillion yuan ($1.2 trillion) in losses and a
bailout from the government, citing the scale of soured credit
within state-owned enterprises.
Interviewed in Hong Kong last week, Chu estimated as much
as 22 percent of all China’s outstanding credit may be
nonperforming by the end of this year, compared with an official
bad-loan number for banks in March of 1.75 percent.
This is the wild card in the US election.  People are already skittish when it comes to the economy and if China goes south then it will almost guarantee a Trump win.

There are so many points of failure for the Democrat party this year that I find it amazing that people are missing this stuff.  Europe is teetering on the brink of violence.  The Middle East is as usual full of misery and agony.  China and the Pacific is on the brink of economic recession and the rest of the BRIC countries are on edge.

Its the economy stupid!

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