China Faces 15 Trillion Bombshell As Shadow Banking Sector Collapses…”The bottom line is this: if this implodes, it will not only tank the entire Chinese banking system but the global economy as well”
by Tyler Durden
ZeroHedge.com
02/29/2016
We’ve spent more time than most documenting China’s wealth management product problem.
WMPs are part and parcel of Beijing’s sprawling shadow banking complex which, until 2014 that is, helped pump trillions of yuan into China’s economy and shouldered the burden when it came to propping up the most important economy on the planet.
But WMPs are dangerous. In fact, we flagged them as an 8 trillion black swan back in August on the way to asking what would happen if China’s shadow banking sector were to collapse altogether.
This is space that’s running what amounts to an enormous maturity mismatched fraud. Of course the describes the entire fractional reserve banking system, but in the case of China’s WMPs, it’s all on the verge of implosion. Don’t believe us? Just ask anyone who bought into products sold by Fanya Metals’ Shan Jiuliang.
This is a very real threat to the Chinese banking sector. The multifarious nature of the space’s liabilities makes it virtually impossible for anyone to assess what the embedded risks are. As we first documented last summer, some 40% of credit risk is carried off balance sheet and that figure might well have grown recently, especially considering mid-tier bank’s propensity to extend new credit through new cateogries of channel loans that are classified as “investments” and “receivables”
In any event, China is desperate to revive the credit impulse and that means keeping the shadow banking space alive. Here’s BofA with more on China’s ticking WMP time bomb:
The Rest…HERE
