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The Chinese Death Star

“On any list of banking accidents waiting to happen, China is assured a place at the very top. But could a crash there take the entire global economy down with it.”


(via Peak Crackers)

Following on the heels of a report that appeared in the Telegraph on the topic, William Pesek at Bloomberg has recently also written an article about Charlene Chu (formerly with Fitch, nowadays with private firm Autonomous Research) and her opinions on China’s shadow banking system and the dangers it represents. The article is ominously entitled “China, the Death Star of Emerging Markets”. 

China has recently made unwelcome headlines, as one of the shadow banking system’s countless ‘wealth management trusts’ which was evidently invested in a bankrupt venture (in this case in a coal company – reportedly a great many such investments in insolvent coal mines exist) was about to go belly-up and then was bailed out at the last minute. Here is a recent article by Mish on the trust that was ironically named “Credit Equals Gold Number 1”. At first it was reported that the trust wouldn’t be bailed out, but in the end its 700 investors were able to ‘breathe a sigh of relief’ as Tom Holland remarked in the South China Morning Post (SCMP). However, Holland also cautioned  that by bailing out this trust, China has laid the foundations for a much bigger crisis down the road, as moral hazard has increased considerably as a result.






  1. What I see in my minds eye is so many threads of the domeheads’ making unravelling and them trying to re thread or nip the loose ends. The alt community might be plagued with disinfo about how they are going to let things fall and re boot with something new. The way I feel it is that this bullshit is them trying to convey the message of “we are still in control, nothing to see here, move along”. Whilst the real situation is they are losing their grip on their faulty system and it simply will run away from them when the fan really hits the shit and replacing it with another facsimile of a faulty system simply won’t work.

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