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I also saw that 3B to 300B leverage mentioned in the FT and I was surprised that it didn’t get picked up by the non-economics-related media, they all insist on

I also saw that 3B to 300B leverage mentioned in the FT and I was surprised that it didn’t get picked up by the non-economics-related media, they all insist on “Chinese government bad because it didn’t let China’s most successful entrepreneur do his thing”. We’re talking about a leverage ratio of 100, that’s a crazy figure, if I’m not mistaken Lehman’s leverage ratio when it folded was of “only” 30.

cfcosta 6y ago
I don't think it is a case of the CCP stopping all entrepreneurs, but a case of them choosing which companies succeed and which fails.
- xster 6y ago
  Are you referring to something specific?
- sudosysgen 6y ago
  This is pretty clearly the CCP intervening in the economy in order to stabilize it and avoid a financial crisis. I don't think this counts as picking winners and losers. I'm not sure that reclassifying something that is clearly a bank as a bank then enforcing the international agreements it would be bound too is picking winners and losers, it's just regulation. The issue is moreso that Ma seemed to somehow have captured the regulation to delay this, and only now, with the huge attention, was the regulation enforced.
xster 6y ago
According to https://youtu.be/HnCBbiCetSg?t=569 https://youtu.be/HnCBbiCetSg?t=569, the S-1 equivalent filing of the IPO showed Ant itself putting up 1.68% of its own money towards its lendings. That's way more leverage than the 8% mandated in Basel III.
- hintymad 6y ago
  It's also worth mentioning that Ant securitized its loans, creating a CDO-like structure. Pretty risky stuff, per my limited knowledge on finance.
dehrmann 6y ago
Either way is a failure for the CCP: it looks bad for letting the offering get this far, or it looks bad to future entrepreneurs for blocking it.
- sudosysgen 6y ago
  It is indeed a failure letting it go this far without enforcing regulations. That being said, this mode of failure is ten thousand times better than having the bank fail a few years down the line, so it's clearly by far the better choice. This should be a wake-up call to the CCP to reduce their cronyism with the billionaire class, but I'm not sure they will take heed.
  - bilbo0s 6y ago
    It's not even cronyism, it's out and out negligence. The ruling class in China is too busy jockeying for position in the plenums to be bothered to enforce the law and rein in billionaires that are running rampant through the Chinese economy. (Which law enforcement is your job by the way. Your job is not impressing your cadre.) These days the business class literally has to be doing something this outrageous to draw any of Beijing's attention. What will happen is that the rats will scatter and hide for a while until the ruling class goes back to power hunting. At which point they will come back out and begin engaging in similar outlandish behavior while trying not to wake the tiger.
    - mola 6y ago
      Well, seems like the US is even more negligible, they let the whole financial system collapse before doing anything about it. It saddens me that a democratic regime became comparatively as corrupt as a totalitarian regime. We cannot let the idea of democracy die because of short sightedness of corrupt business and political leaders.
    - cbnotfromthere 6y ago
      "The ruling class in China is too busy jockeying for position in the plenums to be bothered to enforce the law and rein in billionaires that are running rampant through the Chinese economy" Yup, the problem of the Chinese economy (and state, in general) are the billionaire "running rampant". Hint: when your position is to the left of CCP, perhaps it's time for a pause.

cfcosta 6y ago

I don't think it is a case of the CCP stopping all entrepreneurs, but a case of them choosing which companies succeed and which fails.

xster 6y ago
Are you referring to something specific?
sudosysgen 6y ago
This is pretty clearly the CCP intervening in the economy in order to stabilize it and avoid a financial crisis. I don't think this counts as picking winners and losers. I'm not sure that reclassifying something that is clearly a bank as a bank then enforcing the international agreements it would be bound too is picking winners and losers, it's just regulation. The issue is moreso that Ma seemed to somehow have captured the regulation to delay this, and only now, with the huge attention, was the regulation enforced.

xster 6y ago

According to https://youtu.be/HnCBbiCetSg?t=569 https://youtu.be/HnCBbiCetSg?t=569, the S-1 equivalent filing of the IPO showed Ant itself putting up 1.68% of its own money towards its lendings. That's way more leverage than the 8% mandated in Basel III.

hintymad 6y ago
It's also worth mentioning that Ant securitized its loans, creating a CDO-like structure. Pretty risky stuff, per my limited knowledge on finance.

dehrmann 6y ago

Either way is a failure for the CCP: it looks bad for letting the offering get this far, or it looks bad to future entrepreneurs for blocking it.

sudosysgen 6y ago
It is indeed a failure letting it go this far without enforcing regulations. That being said, this mode of failure is ten thousand times better than having the bank fail a few years down the line, so it's clearly by far the better choice. This should be a wake-up call to the CCP to reduce their cronyism with the billionaire class, but I'm not sure they will take heed.
- bilbo0s 6y ago
  It's not even cronyism, it's out and out negligence. The ruling class in China is too busy jockeying for position in the plenums to be bothered to enforce the law and rein in billionaires that are running rampant through the Chinese economy. (Which law enforcement is your job by the way. Your job is not impressing your cadre.) These days the business class literally has to be doing something this outrageous to draw any of Beijing's attention. What will happen is that the rats will scatter and hide for a while until the ruling class goes back to power hunting. At which point they will come back out and begin engaging in similar outlandish behavior while trying not to wake the tiger.
  - mola 6y ago
    Well, seems like the US is even more negligible, they let the whole financial system collapse before doing anything about it. It saddens me that a democratic regime became comparatively as corrupt as a totalitarian regime. We cannot let the idea of democracy die because of short sightedness of corrupt business and political leaders.
  - cbnotfromthere 6y ago
    "The ruling class in China is too busy jockeying for position in the plenums to be bothered to enforce the law and rein in billionaires that are running rampant through the Chinese economy" Yup, the problem of the Chinese economy (and state, in general) are the billionaire "running rampant". Hint: when your position is to the left of CCP, perhaps it's time for a pause.