Chinese Shadow Banks
The Chinese shadow banking sector and property market are imploding. Zhongrong missed payments and Evergrande finally declared bankruptcy. Many rich Chinese will seek British tax-havens, which are probably the source of much shadow banking funding.
Chinese blackmarket lending, outside of communist control (or with a light touch over the years) is called the shadow banking sector. Zhongrong is one of those shadow banks.
Per Bloomberg on August 15,[1]
“One of China’s biggest shadow banks skipped payments on several investment products, sparking rare protests in Beijing as the fallout from a deepening property slump spreads to the financial sector.
Zhongrong International Trust Co. missed payments on dozens of products and has no immediate plan to make clients whole…”
As reported by Thomas Hale and Wang Xueqiao in Shanghai and Cheng Leng, writing for the Financial Times on Augut 16,[2]
“Zhongrong, partly owned by investment group Zhongzhi, is one of the biggest players in a $2.9tn shadow financing market, referred to as the trust industry. Doubts over its health have added to mounting concerns about the state of China’s economy, which is struggling to recover after the Covid-19 pandemic.
Two listed companies said last week Zhongrong had failed to repay trust products, which offer savers and companies higher returns than traditional banks. This followed weeks of speculation over separate missed payments to retail investors from Zhongzhi’s wealth management businesses, which also direct billions of renminbi into savings products.”
The Chinese property market is doing no better than their shadow banking sector. Evergrande is the second largest Chinese property investor/developer. Evergrande started missing bond payments in September 2021, starting the current downturn in the Chinese property market. [3][4][5]
Today, August 17, 2023, Evergrande filed for bankruptcy. The South China Morning Post published on August 18 (they are ahead of the US Central Time Zone by a few hours),[6]
“China Evergrande Group sought Chapter 15 bankruptcy protection in New York on Thursday, a move that protects its US assets from creditors while it works on a restructuring deal elsewhere.
The Chinese home builder’s Chapter 15 petition references restructuring proceedings being carried out in Hong Kong and the Cayman Islands. Its Scenery Journey unit also filed for Chapter 15 protection, along with affiliate Tianji Holdings.”
Interestingly, the New York was a British colony from 1664 through 1776, Hong Kong was a British colony from 1841 until 1997, and the Cayman Islands are one of many British tax-havens. The sun has not yet set on the British Empire. They are probably the shadow banks funding many of these Chinese shadow banks. They certainly launder their money, notably via the City of London.[7]
The Chinese shadow banking sector and property market are imploding. Zhongrong missed payments and Evergrande finally declared bankruptcy. Many rich Chinese will seek British tax-havens, which are probably the source of much shadow banking funding.
[2]https://www.ft.com/content/d150a3c9-4d0b-4d46-b856-153a253d9dbc
[3]https://www.hamiltonmobley.com/blog/a-black-swan-in-china
[4]https://www.hamiltonmobley.com/blog/taiwan “Taiwan, the Republic of China, has never been part of the People’s Republic of China, commonly referred to as China. Taiwan was conquered from Qing China by the Empire of Japan in 1895. Taiwan became an independent country in 1945 when the USA conquered Japan. Today, it is a major producer of semiconductor computer chips. It also serves as a convenient excuse for China to put tanks and soldiers in the street as they prepare for riots as their banking and real estate market collapses.”
[5]https://www.hamiltonmobley.com/blog/chinese-covid-prisons “The CCP is not trying to suppress the spread of covid. Keeping people from gathering together has everything to do with their workers' prison labor like conditions, the collapse of their real estate market, and the bank runs they have had this year.”
[7]https://www.hamiltonmobley.com/blog/the-city-of-london
