Monday, November 28, 2011

Jim Chanos on His Trip to Australia and Hong Kong

Video at the link below.
Chanos Says China Bank System `Extremely Fragile'
Our concerns about what we saw in Australia: an economy clearly tied to China, has hitched its wagon to the tail of the tiger.
The banking system in China is extremely fragile. . . . In fact because of what happened in the last two crisis in 99 and 04 when non-performing loans went crazy in China, without even a recession, the Chinese banking system was not recapitalized like ours was, it was papered over. So going into this credit expansion Chinese banks are sitting on lots of bonds from these so called asset management companies from 99 and 04 and they are keeping them on their books at par, at full value. In the case of Agricultural Bank of China, which we are short, those restructuring receivables are equal to over 100% of their book.

And when they talk about those foreign reserves of 3 trillion dollars, what everyone forgets is there is liabilities against that. And everyone seems to think it is just a free and clear open checkbook. It's not.
There is a growing sense that the Chinese government will ease. What we point out is their credit this year is going to grow between 30 and 40% of Chinese GDP. If that's tight, I'd hate to see . . . [Betty: what loose would look like.]

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