Chinese “Ghost Collateral” Scam Leads To Market “Shockwaves”, Huge Loss For Giant Commodity Trader
Back in 2014, a scandal erupted when media reports confirmed what many had previously speculated about China’s banking system: namely that much of China’s staggering loan issuance had been built (literally) upon air and that trillions in loan collateral had been “rehypothecated” between two, three or many more debtors – or never even existed – forcing banks to accept that they would never recover much if any of the pledged collateral – in most cases various commodities – if the economy were to suffer a hard-landing resulting in mass defaults. The most famous example involved collateral fraud at China’s 3rd largest port, Qingdao, where numerous borrowers were found to have “pledged” the same collateral of steel and copper to obtain funding from various banks.
For those unfamiliar there is an extensive selection of stories covering the topic, which peaked three years ago, and then quietly faded away as China did everything in its power to deflect attention from what some have said is the biggest threat facing its economy: a giant hole . Below we link to some of our more comprehensive articles on the topic:
- China’s “Evaporated” Collateral Scandal Spreads To Second Port
- What Is The Common Theme: Iron Ore, Soybeans, Palm Oil, Rubber, Zinc, Aluminum, Gold, Copper, And Nickel?
- China Faces “Vicious Circle” As Commodity Collateral Collapses
- China Scrambling After “Discovering” Thousands Of Tons Of Rehypothecated Copper, Aluminum Missing
- Copper Plunges Most In 3 Months As “Rehypothecation Evaporation” Concerns Grow
- Western Banks Scramble As China’s “Rehypothecation Evaporation” Goes Global
- BIS Warns About Rehypothecation Threats
- How China’s Commodity-Financing Bubble Becomes Globally Contagious
- China’s Collateral Rehypothecation Fraud Is Systemic
…click on the above link to read the rest of the article…
