The Daily Telegraph skriver att kinesiska shadow banking systemet har slutat att låna ut pengar under februari. Detta är Lehman på steroider.
New loans from China’s $1.5 trillion-a-year shadow banking sector came to a sudden stop last month after lending out $160 billion in January, reported The Daily Telegraph today. Global financial markets have yet to fully digest what this means.
Copper and iron ore prices have slumped because both were being used as collateral in the shadow banking complex and these stocks could soon be dumped onto the market.
Lehman Brothers x2
But the size of this credit squeeze if it continues is humungous. It’s at least twice the size of the Lehman Brothers’ bankruptcy that tipped the US credit system over in 2008 and brought us the global financial crisis.
This explains why Chinese exports tanked by 18 per cent last month, a huge decline even after taking into account seasonal factors. Take the credit out of any system and trade suffers. Remember how global trade slumped in the first half of 2009?
The Baltic Dry Index of global shipping is down 31 per cent year-to-date. If the Chinese aren’t shipping stuff what will this mean for US consumers? Will they have to pay more if markets are undersupplied?
China has accounted for half of the $30 trillion in credit created over the past five years and $8 trillion has been from its shadow banking sector. Last week the country saw its first ever corporate bond default.
One can only imagine what that means for the quality of the rest of its loan books. Lehman triggered a revaluation of US subprime loans that almost broke the US banking sector. What will a shadow banking crisis do to the colossal Chinese economy?
There has been huge overbuilding, stockpiling and misallocation of capital. Last year China invested $5 trillion, more than the US and Japan combined. Where did that money go? Into viable projects?
It’s a bubble that hedge fund manager Jim Chanos identified several years ago as ‘Dubai x1,000′ alluding to the debt problems that followed the sudden stop of the Dubai boom in 2009.
If the Chinese economy has now just hit a similar sudden stop then the implications for the global economy will be enormous. There will be a deflation in industrial commodities, including oil and a contagion across world financial markets.
However, there may also be an inflation of certain products that become scarce if Chinese exports cannot be funded. Then again so many businesses depend on Chinese demand, from German auto manufacturers to European tourism.
This is no small deal. Watch this space.