BIRDS OF A FEATHER

Japan's market may be rallying, but it is as they take the lead of most indebted nation? Shakey ground. Easy credit puts China near top of list waiting for an accident, possibly their banking system is in worse condition than Japan's.

EARLY comments on China:

Posted on 01/16/2003 8:06:25 PM PST by maui_hawaii (freerepublic.com)
SHANGHAI, Jan 16 (Reuters) - Chinese economists are engaged in a rare, frank debate over whether China's debt-laden banks are on the verge of collapse, just before a new generation of top financial officials gather to set the policy agenda for the year.

Even though Western analysts have lambasted China's creaky banks for years -- estimating 50 percent of all loans were bad due to years of policy-driven lending to state companies .

China’s four major state commercial banks—Bank of China, China Construction Bank, Industrial and Commercial Bank of China and Agricultural Bank of China, have long carried huge amounts of bad loans, which can never be recovered.

V. Stock Market
The Chinese people have invested as much as 2.45 trillion yuan (about US$302 billion) in China’s stock market, but where is the money is now? Some major investors have earned over 600 billion yuan (US$74 billion); the national stamp tax revenue has reached over 210 billion yuan (US$26 billion); brokers have made more than 210 billion yuan (US$26 billion); market makers and institutions gained over 200 billion yuan (US$25 billion); employee share options, transfer right shares (TRS) and other parties gained some 280 billion yuan (US$35 billion); earnings of premiums on options of new shares amounted to some 100 billion yuan (US$12 billion); listed companies took over 850 billion yuan (US$104 billion).
As a result, the dividends for the ordinary shareholders were only about 60 billion yuan (US$7 billion). In other words, tens of millions of ordinary shareholders spent 2,450 billion yuan (US$302 billion) purchasing 202.5 billion “non-tradable” shares. However, the book value of all these listed companies’ assets is only about 450 billion yuan (US$55 billion). This is the real situation of the Chinese stock market, and the risk in the stock market is very likely to ripple into the banking system as a whole [20].
In addition, a survey conducted by Sina.com on 25,675 shareholders dated March 30, 2005, revealed that 94.28 percent of the shareholders suffered financial losses. Among them, 67.34 percent of them lost more than 50 percent [22].
A report actually stated, “The actual goal of China’s stock market is not to bring financial profits to its investors, but to raise revenue. Whom is the money collected for? The answer is: for those enterprises that operate in the red, and for the Chinese government.” [23]

On June 2, 2005, the Shanghai Stock Exchange index plunged to 1,008.75, and was on the verge of dropping below the 1,000 mark. China’s stock market was on the brink of collapse, which the Chinese Communist Party (CCP) has been reluctant to admit publicly. The Chinese Communist regime ordered the implementation of a measure called “safeguarding (the stock market) with a policy” — The government invested 66 billion yuan (US$8 billion) of public funds to bail out the market. As a result, the market index recovered temporarily and the collapse was averted. However, the problem was simply delayed and would expand into the monetary sector. The CCP would be confronted with an even more desperate collapse if the stock market falls after all. The problem won’t disappear.


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