10 ms·

China's Banking System Headed for Crisis, Reports Say

45 points by mathgenius 2y ago

gs17 2y ago
> A major Taiwan newspaper with anti-Beijing leanings is reporting that nearly 40 banks have disappeared in recent days, merging with larger institutions, and that as many as 3,800 banks are in varying levels of trouble. 40 banks disappearing is really not much (unless you had money at that bank) given the scale the same sentence implies. Looking it up, 40 is less than 1% and these are small banks. I'd presume this isn't that big a deal.
- nyokodo 2y ago
  > 40 banks disappearing is really not much If the failures are small, previously common, and at a manageable rate that isn’t accelerating then this could be a temporary blip. If the failures are larger, previously rare, and occurring at an accelerating rate then this could be the start of a Chinese banking collapse.
  - hakfoo 2y ago
    Having a bunch of institutions wind up at once sounds like the results of a stress test finally came back, so they now knew exactly who needed to have their plug pulled. This seems like it also differentiates the "financial economy" from the "real economy". The borrowers continue to pay the new owner, the depositors are made whole, and actual productive enterprises continue to tick on. The only ones punished were the investors who took a risk on bank management that wasn't doing an adequate job of managing risk. That feels like what SHOULD be happening. Endless bailouts have distorted the risk mindset of banks, and letting them fail should help restore discipline.
  - londons_explore 2y ago
    > start of a Chinese banking collapse. I don't really see how this is possible. If the government didn't want a collapse to happen, they can always print more RMB and loan it to the struggling banks on 'pay it back in 100 years' type terms and kick the can down the road till it isn't a problem anymore.
- halJordan 2y ago
  While idk about the politicality of the paper, there is absolutely an ongoing cull of banks in China. That is not political. Inferring some big doom would be. They are mostly rural and small banks. The problem being the same problem of say isps in America. None of the major banks can make an honest attempt at service because there's just no money in it. The "hope" is that these small banks are failing and the big banks buying up which will solve the dualing problems of small banks being vulnerable and big banks not having presence. But thats a pretty aspirational take.
- dghlsakjg 2y ago
  Losing 1% of your banks in a few days is not normal. China’s government stepped in and corrected big during the Evergrand thing, but it isn’t a big secret that China is super leveraged into junk real estate. The complete lack of transparency makes it super hard to tell what is rumors, but it wouldn’t be a huge surprise to see a major correction in China.
  - mikhael28 2y ago
    It is in China. They don’t have an organic drip drip of failure. It’s all closely coordinated - it would be weirder if they have one or two fail, then next week 4, then 5 the week after. It would be a huge surprise to see a major correction.
redserk 2y ago
We’ve had articles on China’s impending financial collapse for over two decades at this point. So call me skeptical. I wonder if this is because the US tends to take a hands-off approach until it’s too late, usually prompting an overcorrection, while China seems at least a bit more proactive. I’m very curious if anyone has credible studies explaining how the Chinese financial sector seems to survive through the persistent claims of impending failure.
- defrost 2y ago
  Australia owes a considerable portion of national income to China, has done for at least three decades and keeps a close analytical eye on the country. Various Australian PM's have been dismissive towards China for popularist political reasons, aside from that the China watching below the surface tends to be good. In the national press recently (last week) we have: As Beijing quietly heads into economic oblivion while Washington lights up, expect tougher times ahead https://www.abc.net.au/news/2024-07-23/china-approaching-economic-oblivion-property-market-trade-trap/104128504 https://www.abc.net.au/news/2024-07-23/china-approaching-eco... which outlines how playing the long game has worked to China's advantage for some time, and how the scale of recent turns in fortune make for a ditch that could take time to reach the bottom and time again to climb out.
  - nopoolontheroof 2y ago
    > which outlines how playing the long game has worked to China's advantage for some time It makes sense, doesn't it? The US seems to be destroying itself apart from within, and if the US falls or became weaker than China, Australia + NZ and other western countries who deal in the Pacific don't have much of a chance. It's the best possibly strategy China could choose: Just wait.
- refurb 2y ago
  The difference between now and two decades ago are the economic indicators - they aren’t just going down, they are getting worse and worse each quarter over the last 2 years. Growth has been poor, the economy saw deflation, housing prices and the stock market are losing value, youth unemployment, bank debt, etc. It’s one thing when it’s a transient event and you start to see a recovery, but China hasn’t, even after government intervention. Will the economy “collapse”? Who knows, and what does “collapse” mean anyways? But are the sign suggesting severe economic problems that are likely to have a big consequence on China's future? Seems like it.
everybodyknows 2y ago
> The government is likely to further push for mergers among banks to solve the problem because Beijing lacks a proper mechanism for banks to leave the market. A forced merger exactly is the mechanism by which the US FDIC removes failing banks from the system. There's a sort of auction offered over the weekend to potential acquirers, with the FDIC subsidizing the deal if necessary, and shareholders of the acquired typically wiped out.
- londons_explore 2y ago
  I'd like to see a new class of company which does not allow bankruptcy, and shareholders are compelled to pay for any debts the company has to allow it to shut down or merge. It could be used for banks, insurance companies, and various other services the government deems required. In return for th added risk, shareholders could expect higher returns, or they could choose to insure their shares against the risk of them ending up with a negative value.
  - 6510 2y ago
    I vaguely remember some coin offering by a Russian firm where they guaranteed to buy back some amount of coins per month at a fixed rate for some years (until non are left) where a different party offered the guarantee/insurance.
  - refurb 2y ago
    How would they “expect higher returns”? And what insurance company would insure against business losses?
    - keiferski 2y ago
      They couldn’t. These sorts of socially engineered corporate ideas never make any market sense.
    - londons_explore 2y ago
      The higher returns would stem from the lower counterparty risk associated with every contract signed by the company.
hker 2y ago
Possibly related articles on the recent issues with banks in China: * China's banking turmoil: 40 banks vanish, Jiangxi leads collapse: https://www.msn.com/en-ie/money/other/china-s-banking-turmoil-40-banks-vanish-jiangxi-leads-collapse/ar-BB1pKGjU https://www.msn.com/en-ie/money/other/china-s-banking-turmoi... | https://news.ycombinator.com/item?id=40944836 https://news.ycombinator.com/item?id=40944836 * Small banks in China are running into trouble. Savers could lose everything: https://www.cnn.com/2022/06/23/economy/china-bank-runs-protests-intl-mic-hnk/index.html https://www.cnn.com/2022/06/23/economy/china-bank-runs-prote...

45 points by mathgenius 2y ago

gs17 2y ago

> A major Taiwan newspaper with anti-Beijing leanings is reporting that nearly 40 banks have disappeared in recent days, merging with larger institutions, and that as many as 3,800 banks are in varying levels of trouble. 40 banks disappearing is really not much (unless you had money at that bank) given the scale the same sentence implies. Looking it up, 40 is less than 1% and these are small banks. I'd presume this isn't that big a deal.

nyokodo 2y ago
> 40 banks disappearing is really not much If the failures are small, previously common, and at a manageable rate that isn’t accelerating then this could be a temporary blip. If the failures are larger, previously rare, and occurring at an accelerating rate then this could be the start of a Chinese banking collapse.
- hakfoo 2y ago
  Having a bunch of institutions wind up at once sounds like the results of a stress test finally came back, so they now knew exactly who needed to have their plug pulled. This seems like it also differentiates the "financial economy" from the "real economy". The borrowers continue to pay the new owner, the depositors are made whole, and actual productive enterprises continue to tick on. The only ones punished were the investors who took a risk on bank management that wasn't doing an adequate job of managing risk. That feels like what SHOULD be happening. Endless bailouts have distorted the risk mindset of banks, and letting them fail should help restore discipline.
- londons_explore 2y ago
  > start of a Chinese banking collapse. I don't really see how this is possible. If the government didn't want a collapse to happen, they can always print more RMB and loan it to the struggling banks on 'pay it back in 100 years' type terms and kick the can down the road till it isn't a problem anymore.
halJordan 2y ago
While idk about the politicality of the paper, there is absolutely an ongoing cull of banks in China. That is not political. Inferring some big doom would be. They are mostly rural and small banks. The problem being the same problem of say isps in America. None of the major banks can make an honest attempt at service because there's just no money in it. The "hope" is that these small banks are failing and the big banks buying up which will solve the dualing problems of small banks being vulnerable and big banks not having presence. But thats a pretty aspirational take.
dghlsakjg 2y ago
Losing 1% of your banks in a few days is not normal. China’s government stepped in and corrected big during the Evergrand thing, but it isn’t a big secret that China is super leveraged into junk real estate. The complete lack of transparency makes it super hard to tell what is rumors, but it wouldn’t be a huge surprise to see a major correction in China.
- mikhael28 2y ago
  It is in China. They don’t have an organic drip drip of failure. It’s all closely coordinated - it would be weirder if they have one or two fail, then next week 4, then 5 the week after. It would be a huge surprise to see a major correction.

redserk 2y ago

We’ve had articles on China’s impending financial collapse for over two decades at this point. So call me skeptical. I wonder if this is because the US tends to take a hands-off approach until it’s too late, usually prompting an overcorrection, while China seems at least a bit more proactive. I’m very curious if anyone has credible studies explaining how the Chinese financial sector seems to survive through the persistent claims of impending failure.

defrost 2y ago
Australia owes a considerable portion of national income to China, has done for at least three decades and keeps a close analytical eye on the country. Various Australian PM's have been dismissive towards China for popularist political reasons, aside from that the China watching below the surface tends to be good. In the national press recently (last week) we have: As Beijing quietly heads into economic oblivion while Washington lights up, expect tougher times ahead https://www.abc.net.au/news/2024-07-23/china-approaching-economic-oblivion-property-market-trade-trap/104128504 https://www.abc.net.au/news/2024-07-23/china-approaching-eco... which outlines how playing the long game has worked to China's advantage for some time, and how the scale of recent turns in fortune make for a ditch that could take time to reach the bottom and time again to climb out.
- nopoolontheroof 2y ago
  > which outlines how playing the long game has worked to China's advantage for some time It makes sense, doesn't it? The US seems to be destroying itself apart from within, and if the US falls or became weaker than China, Australia + NZ and other western countries who deal in the Pacific don't have much of a chance. It's the best possibly strategy China could choose: Just wait.
refurb 2y ago
The difference between now and two decades ago are the economic indicators - they aren’t just going down, they are getting worse and worse each quarter over the last 2 years. Growth has been poor, the economy saw deflation, housing prices and the stock market are losing value, youth unemployment, bank debt, etc. It’s one thing when it’s a transient event and you start to see a recovery, but China hasn’t, even after government intervention. Will the economy “collapse”? Who knows, and what does “collapse” mean anyways? But are the sign suggesting severe economic problems that are likely to have a big consequence on China's future? Seems like it.

everybodyknows 2y ago

> The government is likely to further push for mergers among banks to solve the problem because Beijing lacks a proper mechanism for banks to leave the market. A forced merger exactly is the mechanism by which the US FDIC removes failing banks from the system. There's a sort of auction offered over the weekend to potential acquirers, with the FDIC subsidizing the deal if necessary, and shareholders of the acquired typically wiped out.

londons_explore 2y ago
I'd like to see a new class of company which does not allow bankruptcy, and shareholders are compelled to pay for any debts the company has to allow it to shut down or merge. It could be used for banks, insurance companies, and various other services the government deems required. In return for th added risk, shareholders could expect higher returns, or they could choose to insure their shares against the risk of them ending up with a negative value.
- 6510 2y ago
  I vaguely remember some coin offering by a Russian firm where they guaranteed to buy back some amount of coins per month at a fixed rate for some years (until non are left) where a different party offered the guarantee/insurance.
- refurb 2y ago
  How would they “expect higher returns”? And what insurance company would insure against business losses?
  - keiferski 2y ago
    They couldn’t. These sorts of socially engineered corporate ideas never make any market sense.
  - londons_explore 2y ago
    The higher returns would stem from the lower counterparty risk associated with every contract signed by the company.

hker 2y ago

Possibly related articles on the recent issues with banks in China: * China's banking turmoil: 40 banks vanish, Jiangxi leads collapse: https://www.msn.com/en-ie/money/other/china-s-banking-turmoil-40-banks-vanish-jiangxi-leads-collapse/ar-BB1pKGjU https://www.msn.com/en-ie/money/other/china-s-banking-turmoi... | https://news.ycombinator.com/item?id=40944836 https://news.ycombinator.com/item?id=40944836 * Small banks in China are running into trouble. Savers could lose everything: https://www.cnn.com/2022/06/23/economy/china-bank-runs-protests-intl-mic-hnk/index.html https://www.cnn.com/2022/06/23/economy/china-bank-runs-prote...