{"id":11212,"date":"2015-08-18T18:57:49","date_gmt":"2015-08-18T23:57:49","guid":{"rendered":"http:\/\/olduvai.ca\/?p=11212"},"modified":"2015-08-18T18:57:49","modified_gmt":"2015-08-18T23:57:49","slug":"the-8-trillion-black-swan-is-chinas-shadow-banking-system-about-to-collapse","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=11212","title":{"rendered":"The 8 Trillion Black Swan: Is China’s Shadow Banking System About To Collapse?"},"content":{"rendered":"

The 8 Trillion Black Swan: Is China’s Shadow Banking System About To Collapse?<\/a><\/h3>\n

“Wealth management products in China have come under the spotlight after a series of missed payments raised concerns over the shadow banking sector that often directs credit to firms shut out from bank lending or capital markets,”\u00a0Reuters said in February<\/a>, after reporting that CITIC (China’s top brokerage), was looking at ways to repay investors after the issuer of one of the wealth management products the broker sold missed a $1.12 million payment to investors.<\/p>\n

That news came a little over a year after the now infamous “Credit Equals Gold #1 Collective Trust Product<\/a>” incident and a\u00a0subsequent default scare<\/a>\u00a0on a similar product backed by loans to a struggling coal company.<\/p>\n

Although wealth management products and CTPs (which differ from WMPs) are often described as “murky” and “opaque”, the basic concept is fairly simple. WMPs are marketed to investors as a way to get more bang for their buck (er.. yuan) than they would with bank deposits. Funds from these investors are then invested at a higher rate. If the\u00a0assets investors’ money is used to fund run into trouble, that’s not good news for WMP investors.\u00a0<\/strong>Simple.<\/p>\n

The main issue here is the sheer size of the market. As\u00a0FT notes<\/a>, “in 2010, as regulators tried to rein in the explosion in bank credit resulting from the country\u2019s Rmb4tn economic stimulus plan, banks turned to trusts to help them comply with lending controls.” So essentially, trusts helped banks offload credit risk at the behest of the PBoC. Here\u2019s the process whereby banks use trusts to get balance sheet relief:<\/p>\n

\"\"<\/a><\/p>\n

…click on the above link to read the rest of the article…<\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

The 8 Trillion Black Swan: Is China’s Shadow Banking System About To Collapse? “Wealth management products in China have come under the spotlight after a series of missed payments raised concerns over the shadow banking sector that often directs credit to firms shut out from bank lending or capital markets,”\u00a0Reuters said in February, after reporting […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[77,130,8256,8257,175,200,374,683,6876,4318],"class_list":["post-11212","post","type-post","status-publish","format-standard","hentry","category-economics","tag-black-swan","tag-china","tag-chinese-shadow-banking","tag-citic","tag-credit","tag-default","tag-gold","tag-reuters","tag-shadow-banking","tag-zerohedge"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/11212","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=11212"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/11212\/revisions"}],"predecessor-version":[{"id":11213,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/11212\/revisions\/11213"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=11212"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=11212"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=11212"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}