A new, made-in-China subprime crisis


#1

[Read the post]


#2

Meaningless statistics. The article says TRILLION TRILLION, and we’re supposed to be alarmed, but it doesn’t mention compared to what. Likewise the graph, which is not measured from zero, for added shock value. Look at that big red hump - must be a lot! Even if the problem is real, the reporting is poor.


#3

The Chinese love everything American, apparently.


#4

How might this event compare to the East Asian financial crisis of 1997? Perhaps the comparison is inapt. I don’t know. Just curious.


#5

Bank nonperforming loans to total gross loans


http://data.worldbank.org/indicator/FB.AST.NPER.ZS/countries/CN-BR-ZA-RU-IN?display=graph

It’s akin to reading tea leaves, really.


#6

If you read the article you would know this is a bad metric to use because China is creating many, many new loans to flatten the ratio of good loans to bad

Wasn’t there a recent Boing Boing article refuting this canard?


#7

“Forget it Jake, it’s China[town].”


#8

Yes, but it’s often not a canard, as in the graph @jerwin posted above. See how the red line just barely rises at the end there? That’s the ginormous hump from the OP. If something drops by 90% and then DOUBLES, it’s still way down.

Actually I didn’t mean to contradict the article, just to point out it’s presenting half the data with no reference point and trying to scare us. I didn’t even know it was also false.


#9

This might be interesting.


#10

A useful unofficial metric might be the number(if any) of relevant executives who decide to do a little emergency emigration and at what times they decide to do so.

As in our case, state entanglement with the banking system is likely helping to fuel the problem; but unless they’ve really gone soft of late, it probably won’t result in basically zero individual prosecutions if things go into cascading failure mode.


#11

And since they’re new loans, they haven’t non-performed. YET.

Another big factor is leverage–if one borrows heavily to invest, and those investments turn even mildly sour, your principal could still be wiped out completely, and then some.


#12

I think that would qualify as thick data, which is useful from an ethnographic perspective. Good luck getting Wall St to pay attention to it!


#13

_ (which were turned into bonds using the same trick that produced the US/EU subprime crisis)_

Nope. It was people not paying their debts that caused the crisis.


#14

Hint: A modest uptick in defaults among people considered to be poor credit risks doesn’t bring down the house unless the house is leveraged up to its eyeballs and taking crazy risks on lousy assumptions. Similarly, your giant pile of CDSs doesn’t fall over and die unless the underwriter seriously screwed up.

Sure, in the weak sense that these egregious structural deficiencies would have remained unexposed until a later time had the bad debt held together longer, ‘failure to pay debts’ was the proximate cause of the problem. However, some risk of default is entirely normal in lending; and a major part of being a lender is evaluating risks and keeping your exposure within acceptable bounds. If the whole place blows up; its’ pretty obvious that you failed to do that.

It’s like saying that earthquakes kill people: they do, sometimes in large numbers, in places with shoddy building codes and structural lousiness; but they inflict relatively few casualties and manageable repair costs in places with actually competent engineering practices.


#15

That is neither within my power, nor within my job description; but I would hope that the non-dumb ones with nontrivial exposure would consider it. I doubt that official numbers from the Chinese banking sector are any more reliable than Lehman Brothers’ assurances of robust good health were; but in a jurisdiction where whoever ends up among the scapegoats of a crisis faces a real risk of getting taken out and shot, I imagine that there is a certain…necessary honesty…in ‘running like hell for the exit’ figures.

Maybe they could hire TMZ’s paparazzi-spook apparatus to keep an eye on the matter for them…


#16

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