Monday, March 10, 2014

The Sarcasm Report v.187

Wikipedia: South China Morning Post

The Kuok family is known to be pro-Beijing, and questions have been raised over the paper's editorial independence.

So, on that note, check out the "sugarcoated story" they have for us today.

March 10, 2014
South China Morning Post: Shadow banking the biggest threat to China's economy

Nowhere is this more apparent than in the real-estate sector. Liquidity-thirsty developers, unable to acquire financing through the formal banking sector, have been taking out massive loans at extremely high interest rates. But, in many cases, housing demand has not grown as expected, raising the risk of default - the effects of which would be transmitted to the entire financial sector.

The fact is that China has never been closer to a major financial crisis than it is today. Yet China's monetary authorities do not seem to understand the scale of the risk - or its root causes.

Emphasis added.


dearieme said...

That missing airliner over the South China Sea: is there any realistic chance that it's been shot down (presumably accidentally) by one of the countries disputing ownership of the seabed there? I can remember the US accidentally shooting down an Iranian airliner over the Gulf some decades ago.

Stagflationary Mark said...


Really makes one wonder how they didn't even have time to transmit an SOS.

fried said...

Shadow is that hard money lenders?
If so, who are they? Chinese billionaires, provincial development agencies, foreigners?
Is there a shadow banking 101 you could point me to...I remain curious as to who is providing loans of this size.
Many thanks.

Stagflationary Mark said...


Shadow Banking 101 coming right up!

Wikipedia: Shadow banking system

Let me point you to my favorite quote to get you started.

Shadow institutions are not subject to the same prudential regulations as depository banks, so that they do not have to keep as high financial reserves relative to their market exposure. Thus they can have a very high level of financial leverage, with a high ratio of debt relative to the liquid assets available to pay immediate claims. High leverage magnifies profits during boom periods and losses during downturns. This high leverage will also not be readily apparent to investors, and shadow institutions may therefore be able to create the appearance of superior performance during boom times by simply taking greater pro-cyclical risks.

Can't you just feel all that pent-up financial stability? *heavy sarcasm*

Forehead. Desk. Whack. Whack. Whack. Sigh.