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TFC Commodity Trading Forum

Re: Timebomb in China

I just happened across 2 news items that is rather concerning.

{November 20 – Bloomberg: "When China unveiled plans on Friday to end the implicit guarantees underpinning asset-management products worth trillions of dollars, it should have been a bombshell for the nation's savers. But for Yolanda Yuan and other individual investors who've piled into AMPs issued by banks, insurers and securities firms, the government's announcement was largely a non-event. The reason: they didn't believe it. 'I don't think any big banks will dare to take the risk of allowing defaults on AMPs, as that will lead to a flood of fund redemptions,' said Yuan, a 29-year-old sales manager at a state-run financial company... She has about 100,000 yuan ($15,069) of personal savings in products covered by the new regulations. Over the past 13 years, assets in Chinese AMPs have swelled from almost nothing to $15 trillion in large part due to one key assumption: that investors would be made whole no matter what happened to the products' underlying assets. Authorities are now moving to quash that belief amid concern that rampant moral hazard is distorting market prices and making the financial system vulnerable to crises."}

Also followed by this other article. Which begs the question: "What do we already know about their shadow banking numbers?" It must be horrific

November 19 – Wall Street Journal (Lingling Wei, Jacob M. Schlesinger, Jeremy Page and Michael C. Bender): "A month before President Donald Trump's visit to Beijing, Chinese officials presented an offer they thought Washington couldn't refuse. China proposed that during the trip, Mr. Trump and his counterpart, Xi Jinping, unveil a plan to widen foreign firms' access to China's vast financial industry, according to people with knowledge of the matter. It was a move previous U.S. administrations had sought for years. To Beijing's consternation, according to the people, Washington wasn't interested. The offer was made a second time during one of Mr. Trump's meetings at the Great Hall of the People. Hours after Air Force One took off from Beijing, China announced the opening on its own. The cold shoulder from the White House reflects a fundamental shift in how the U.S. manages its relationship with China, one that suggests a bold gamble and a rocky road ahead despite the bonhomie of the presidential summit earlier this month in Beijing.".

There's a timebomb in China that can cause a major blow to markets globally.