Chinese construction keeps trending down with Sany the worlds sixth largest heavy machinery maker reporting a rise in profit of 5.4% in the same quarter as a blow out in receivables of USD $1.39 billion and cash reserves falling by USD $535 million . Sany is clearly booking profits on 100% financed machinery while providing zero transparency on credit risk and delinquency . If the GFC has taught the world anything. then 100% ‘no money down” vendor finance should ring alarm bells. This all started about about 3 months ago when Zoomlion started to aggressively financing heavy machinery for anyone that wanted to sign up
The Fall of the Communist Dynasty and The Looting of China touched on the widespread fraud that has become apparent, both in mainland and US listed Chinese companies. I also showed that an extraordinary number of the Communist Party and the military cadre had massive unexplained wealth, with the Top 70 recording a net collective worth of over $80 billion. This week Bloomberg was banned by the Chinese government for reporting the incoming presidents families assets at over $367M.
As Xi climbed the Communist Party ranks, his extended family expanded their business interests to include minerals, real estate and mobile-phone equipment, according to public documents compiled by Bloomberg.
As I set out in The Fall of the Communist Dynasty, and a HT to John Hempton’s piece within which he contends that the entire Chinese economy is a Kleptocracy , this week we have news from Citron Research who reports that Evergrande Real Estate Group Ltd is ‘a deception on a grande scale’ .
Citron quote ;-
‘Evergrande who ranks among the top 5 Chinese property companies. Our analysis and primary research reveal that: 1] Evergrande is insolvent; and 2] Evergrande will be severely challenged from a liquidity perspective. The Company’s management has applied at least 6 accounting shenanigans to mask Evergrande’s insolvency. Our research indicates that a total write-down of RMB 71bn is required and Evergrande’s pro forma equity is negative 36bn.’
In his recent paper entitled A culture of mania: a psychoanalytic view of the incubation of the 2008 credit crisis , Professor Mark Stein develops a theoretical framework around the notion of a manic culture, comprised of four aspects: denial; omnipotence; triumphalism; and over-activity.
“A series of major ruptures in capitalist economies were observed and noted by those in positions of economic and political leadership in Western societies,” he said. “These ruptures caused considerable anxiety among these leaders, but rather than heeding the lessons, they responded by manic, omnipotent and triumphant attempts to prove the superiority of their economies.”
John Hempton from Bronte Capital expands on the theme of systemic challenges currently facing the Chinese economy that we touched on last week with The End of the Communist Dynasty
The Macroeconomics of Chinese kleptocracy China is a kleptocracy of a scale never seen before in human history. This post aims to explain how this wave of theft is financed, what makes it sustainable and what will make it fail. There are several China experts I have chatted with – and many of the ideas are not original. The synthesis however is mine. Some sources do not want to be quoted.
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A wild fortnight of turbulence in the exotic world of financial…
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Sharp drop for economy, IMF warns (http://www.theage.com.au/business/sharp-drop-for-economy-imf-warns-20110920-1kjn6.html)
, The Age, 20 Sept
First and foremost, the IMF has downgraded GDP forecasts, ‘warning of a new global recession that would hit commodity prices and drive millions worldwide into unemployment.’ Now suggesting growth to be “anaemic” in advance economies (1.6%). ‘However, this assumes European policymakers contain the crisis in the euro area periphery, that US policymakers strike a judicious balance between support for the economy and medium-term fiscal consolidation, and that volatility in global financial markets does not escalate’ the fund said.