China Non-Performing Loans Surging

Another big shoe to drop in the global markets could come from China. Neil McDonald, a Hong Kong based restructuring and insolvency partner at Lowells LLP, told Bloomberg “We work really closely with SASAC, the state-owned enterprise regulator in China, and there are literally trillions and trillions of renminbi of, frankly, defaulting loans already in China that no one is doing anything about.” That does not sound reassuring. Any problem with China will crush those delusional people seeing a global recovery take place or one that has been taking place since the March lows. Of curse these people are confusing manipulation-led stock market rise with economic recovery. The problem is both are unsustainable. You can only manipulate the markets for so long and you can only hide how bad the economy is for so long. As China runs into trouble -still it will be in a lot better condition than countries like the US as they are a creditor and surplus economy taking all the textbook steps in their economy- stock markets in the US will crumble. One of the big losers will be commodity companies such as the steel companies. One of the winners will be gold as a flight to safety asset. One way the Chinese can deal with their troubles is by raising the yuan which would hurt the dollar badly if not completely destroy it. This will be something people need to watch closely. China situation holds a lot for the current financial, economic, and monetary system and could spell the end of the fiat monetary system.