Report: China is in default on US$1t in debt to US bondholders

[SBFNews]

Report: China is in default on US$1t in debt to US bondholders

By Surin Murugiah / theedgemalaysia.com
05 Jul 2023, 11:36 am

KUALA LUMPUR (July 5): China is reportedly currently in default on its sovereign debt held by American bondholders.

In a report on Tuesday (July 4), US newspaper and digital media company The Hill, which focuses on politics, policy, business and international relations, said a private group of American citizens holds a large quantity of these gold-denominated bonds.

The publication said this citizen-led group, the American Bondholders Foundation (ABF), serves as trustee with power of attorney for some 20,000 bondholders, whose bonds are valued at well more than US$1 trillion (RM4.6 trillion).

It added that to this day, China has had access to US capital markets while openly rejecting its sovereign debt obligations to American bondholders.

The Hill said lest anyone wonder about the age of these bonds, it is irrelevant.

What matters is that this is a sovereign obligation.

The report said that as recently as 2010, the German government made its last payment for reparations from World War I.

It said in 2015, Great Britain made payments on bond issuances that dated from the 18th century, on the return of Hong Kong to China.

It said President Joe Biden’s administration and the US Congress have a unique opportunity to enforce the well-established international rule that governments must honour their debts.

The first step would be to acquire the Chinese bonds held by the ABF and utilise them to offset (partially or in whole) the US$850 billion-plus of US treasuries owned by China (reducing up to US$95 million in daily interest paid to China). This would lower the national debt and put the US in a better financial position globally.

The second would be to pass legislation that requires China to abide by international norms and rules of finance, trade and commerce. This would include abiding by the transparency rules of capital markets and exchanges and ending its practices of exclusionary settlement, discriminatory payments, selective default and rejection of the successor government doctrine of settled international law. If China fails to meet those obligations, it would be barred, together with its state-controlled entities, from access to all US dollar-denominated bond markets and exchanges.

https://theedgemalaysia.com/node/673621

 

[syed putra]

Wait a minute! Isn't it suppose to be the other way round?

 

[k1976]

Goldman Raises 2023 Default Forecast for China Junk Property Bonds​

• Firm reinstates original 2023 projected default rate of 28%
• More delinquencies expected amid policy uncertainty: analysts

By
Wei Zhou
+Follow

3 July 2023 at 09:49 GMT+8Updated on3 July 2023 at 12:53 GMT+8

Goldman Sachs Group Inc. is now expecting a higher default rate for Chinese high-yield property dollar bonds, as missed payments and policy uncertainty continue to weigh on the country’s real estate sector.

The investment bank’s projection has returned to 28%, a level the firm first released in December before cutting it to 19% in February in the wake of policy-easing measures and a nascent rebound in new-home sales. The year-to-date default figure has reached 15.6%, according to Goldman Sachs, with Central China Real Estate Ltd. among the most-recent delinquen

 

[k1976]

Wait a minute! Isn't it suppose to be the other way round?

U read the para 1-3 for more background

 

[k1976]

China is hiding $3 trillion of foreign currency in 'shadow reserves,' adding unknown risks to the global economy, former Treasury official says​

Filip De Mott
July 1, 2023, 8:13 am

China's President Xi Jinping attends a meeting with Malaysia's Prime Minister Najib Razak at Diaoyutai State Guesthouse, in Beijing, China, November 3, 2016.REUTERS/Jason Lee

• China has more foreign exchange reserves than reported, a former Treasury official wrote.
• An additional $3 trillion is hidden in "shadow reserves," such as state commercial and policy banks.
• "Not everything that China does in the market now shows up in the PBoC's balance sheet."

Half of China's currency reserves are "hidden," a situation that may add risks to the global economy down the road, former Treasury Department official Brad Setser wrote.

While the country's State Administration of Foreign Exchange reported $3.12 trillion in foreign assets last December, Setser estimates that foreign exchange reserves actually sit at around $6 trillion.
"China is so big that how it manages its economy and currency matters enormously to the world," he wrote in The China Project. "Yet over time the way it manages its currency and its foreign exchange reserves has become much less transparent – creating new kinds of risks for the global economy."
A key indicator about China's reserves is a sudden pause in its reported activity. From 2002 to 2012, China's foreign exchange reserves steadily rose as the central bank bought US dollar assets to prevent China's yuan from appreciating too much, allowing exports to remain cheap.

But over the last 10 years, China's reserves stopped rising, which is puzzling as China's trade surplus has continued growing, and currently stands at an all-time high, he said.
Setser, who previously was deputy assistant Treasury secretary for international economic analysis and is now senior fellow for international economics at the Council on Foreign Relations, has an idea of what's going on.
"Just as China has 'shadow banks' — financial institutions that act like banks and take the kind of risks that a bank might normally take but aren't regulated like banks — China has might be called 'shadow reserves.' Not everything that China does in the market now shows up in the PBoC's balance sheet," he said.

China's state banking system is the main way Beijing hides its reserves, Setser said. That includes state commercial lenders like the Bank of China, Industrial & Commercial Bank of China or ICBC, China Construction Bank, and the Agricultural Bank of China as well as policy banks like the China Development Bank and the Export-Import Bank of China.
China's State Administration of Foreign Exchange did not immediately respond to Insider's request for comment.

The vast amount of China's reserves carries enormous weight in financial markets and represents a risk.

For example, Setser said China's earlier accumulation of US Treasurys and agency bonds — such as Freddie Mac and Fannie Mae securities — helped give rise to the 2008 financial crisis, by pushing investors further into riskier mortgage-backed securities.

"China's lack of transparency here is a bit of a problem for the world," he said. "China structurally is so central to the global economy that anything it does, seen or unseen, will eventually have an enormous impact on the rest of the world

 

[k1976]

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Explainer: What China keeps in its secretive commodity reserves​

By Tom Daly and Shivani Singh
August 5, 202111:38 AM GMT+8Updated 2 years ago

An employee operates a crane to lift aluminium wires at a warehouse in Zouping county, Shandong province, China April 18, 2018. China Daily via REUTERS
Aug 5 (Reuters) - For the first time in a decade, China has released some of its strategic metal stocks to try to dampen a price rally hurting manufacturers. It has also released coal and imported corn reserves to cool prices, while buying pork to prop up that market.
China is the world's largest user of commodities and has built up vast reserves. The following are details of key commodities and estimates and assessments of strategic reserve levels:






METALS
Based on past stockpiling activity, analysts estimate China's strategic reserves hold 1.5 million to 2 million tonnes of copper, 800,000-900,000 tonnes of aluminium and 250,000-400,000 tonnes of zinc.

The reserves administration also stockpiles key battery metal cobalt, of which industry sources estimate China is holding some 7,000 tonnes. It also keeps nickel and other metals including antimony, indium, germanium and molybdenum oxide.

It is not thought to hold any tin or lead, according to The International Tin Association and International Lead and Zinc Study Group, respectively.


GRAINS AND MEAT

China's grain reserves are sufficient to feed its 1.4 billion citizens, with the storage capacity exceeding 650 million tonnes, Xinhua reported in April, but did not specify how long the reserves could feed the population.

Grains stockpiler Sinograin will start building 120 storage facility projects, totalling 10.85 million tonnes of capacity, official media reported in July.

Stocks of rice and wheat are enough to meet more than one year of the country's consumption, Liang Yan, deputy head of the reserves administration, told a news conference in April.

Wheat and rice make up about 70% of China's state grain reserves, which are held both centrally and at local levels, state TV reported in August 2020.

The country's meat reserves held almost 1 million tonnes of pork by 2019, according to a South China Morning Post report at the time citing an analyst.
Pork needs to be regularly rotated to ensure it does not spoil.

China's state corn reserves were estimated at around 200 million tonnes in 2017, according to market consensus, and have been whittled down to almost zero by 2020 as the agency sold off ageing grain.

Beijing sold more than 56 million tonnes of corn from its reserves in 2020, according to Reuters calculations, based on statements released on the website of the National Grain Trade Centre.

China stepped up imports of pork for its reserves after African swine fever reached the country in August 2018 and wiped out 50% of the country's pigs within a year.

State-owned Cofco's meat division said in 2019 it was more than doubling the amount it would spend annually on procuring meat for the central reserves to a maximum of 1.48 billion yuan ($228.6 million) in 2020 and 2021.

That would buy about 115,000 tonnes, based on a cost of around $2,000 per tonne for imported pork, according to Reuters calculations.

ENERGY

China's SPR sites currently hold 220 million barrels of crude oil, equivalent to 15 days of demand, consultancy Energy Aspects estimates.

However total crude oil inventories, including the SPR, commercial storage and those at oil firms, are estimated to be able to cover 60 days of consumption, said Liu Yuntao analyst at Energy Aspects.

 

[laksaboy]

China is so fucked.

 

[k1976]

$10 Billion Property Bond Defaults Are Just Around the Corner​

Chinese local governments are tightening their oversight of developers’ pre-sales process.

Not out of the woods yet.
Bloomberg
By
Shuli Ren
+Follow
19 May 2023 at 05:24 GMT+8

You would think the worst credit events in China’s modern corporate history are behind us. In late 2022, the government vowed to stabilize the housing market, and reopened the economy after three years of harsh pandemic restrictions.

Despite these tailwinds, defaults are back. On May 14, Guangzhou-based KWG Group Holdings Ltd., one of the few developers that obtained a state guarantee for its latest yuan note issue, said it had failed to make a $119 million redemption payment, thus triggering a cross-default of all its $4 billion dollar bonds.

Meanwhile, notes issued by Powerlong Real Estate Holdings Ltd. have plunged in recent days, as traders see little chance of the Shanghai-based builder repaying a $15.9 million coupon due later this month.

 

[k1976]

China Banks Offer 25-Year Loans to LGFVs to Avert Credit Crunch​

• Tension has risen in $9 trillion debt market of LGFVs
• China’s mega banks are used as key tool to support economy

By
Bloomberg News
4 July 2023 at 09:00 GMT+8

China’s biggest state banks are offering local government financing vehicles loans with ultra-long maturities and temporary interest relief to prevent a credit crunch amid growing tension in the $9 trillion debt market, according to people familiar with the matter.

Banks including Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp. have started to ramp up loans that mature in 25 years, instead of the prevailing 10-year tenor for most corporate lending, to qualified LGFVs with high creditworthiness in recent months, said the people, asking not to be identified discussing a private matter.

 

[k1976]

China Forex Regulator’s Foreign Funds Seen Topping $1.5 Trillion​

Tom Hancock
July 4, 2023, 4:19 pm

(Bloomberg) -- China’s foreign exchange regulator controls investment funds with overseas assets worth at least $1.5 trillion, some three times larger than those under the country’s flagship sovereign wealth fund.
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That’s according to Zoe Zongyuan Liu, the author of Sovereign Funds: How the Communist Party of China Finances Its Global Ambitions. The book argues there should be greater focus on China’s State Administration of Foreign Exchange, or SAFE, in assessments of China’s geo-economic strategy.
SAFE’S director is Pan Gongsheng, who this month was made the Communist Party chief of the People’s Bank of China and is widely seen as next in line to become its governor — a move that brings further attention to the agency’s governance of foreign exchange market activity. Liu said Pan has had a “clear track record” of supporting the diversification of foreign exchange reserves management.
SAFE is formally under the PBOC’s control, though its director is ranked as a vice-minister in China’s government, giving the body some autonomy.

The agency made $1.5 trillion in contributions to vehicles such as the Silk Road Fund, the China-LAC Industrial Cooperation Investment Fund and the China-Africa Fund for Industrial Cooperation between 2007 and 2020, according to Liu’s research. Its assets under management are likely much larger due to rising market values since then, she added.
The funds, which are shrouded in secrecy, were set up as SAFE worked to diversify its foreign exchange holdings away from US government securities. They also help Beijing shape the global economic environment by allowing it to take stakes in companies in strategic sectors.

By acting at the firm level to take equity stakes, Beijing can “secure access to the overseas markets, resources, and technologies necessary to propel its economy,” Liu said.
The SAFE-administered funds are larger than the overseas assets held by China’s flagship sovereign wealth fund, the China Investment Corporation. The CIC’s funds total between $365-460 billion, according to Liu, who added that estimates of China’s sovereign wealth holdings often overlook the CIC’s large domestic holdings in Chinese banks.
SAFE’s fund investments could explain why China’s official reserve holdings have remained stable at around $3 trillion in recent years, despite China running a large trade surplus. The full value of those funds is not reflected in China’s reporting of its foreign exchange reserves, as only liquid assets count toward that total.
SAFE’s move to establish overseas investment funds was partly due to an intergovernmental rivalry with China’s Ministry of Finance. That ministry was seen as having more sway over the CIC when it was established in 2007, according to Liu.
The SAFE-administered funds have focused on advanced economies such as the UK, along with industrial sectors, according to Liu. The SAFE-backed Silk Road Fund helped finance China’s Sinochem when it acquired a large stake in Italian tire-maker Pirelli & C. SpA, for example.
As the US and European governments become more wary of Chinese state-backed investment, SAFE funds have been making inroads elsewhere. The Silk Road Fund invested $12.4 billion to acquire a stake in Aramco Oil Pipelines Co. in 2021, and has taken stakes in Indonesian pharmaceutical firms.
The funds carry risks for China as they are vulnerable to sanctions. “Most of these funds’ assets reside within the jurisdiction of the United States and its allies,” Liu said. “These assets could become a strategic vulnerability.”
Compared to the CIC, “SAFE’s funds are far bigger and should get more attention,” said Brad Setser, who researches global financial flows at the US Council on Foreign Relations.
Setser, who is also a former US trade and Treasury official, also said those funds can act as a “sink” for foreign exchange sometimes acquired as the result of the Chinese central bank’s intervention in currency markets.
While its often fair not to count the funds as reserves, Setser argued Beijing should be more transparent about its funds. “China should separately report all of the foreign currency assets held by the PBOC, including its foreign currency funding of state banks and investment funds,” he said.


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[realDonaldTrump]

CNA said Goldman downgraded China's financial institutions
https://www.channelnewsasia.com/bus...s-fall-after-goldman-sachs-downgrades-3607346

 

[batman1]

China is so fucked.

What do u expect ? PRC ruled by a primary school graduate.

 

[syed putra]

Will US demand hong kong and shanghai in exchange?

 

[Devil Within]

CCP commiecunt faggot @tanwahtiu will have to sell his backside to save his master emperor Xi liao. LOL!.... Too bad no one was interested in his backside except for his master emperor Xi. LOL!....

 

[k1976]

CNA said Goldman downgraded China's financial institutions
https://www.channelnewsasia.com/bus...s-fall-after-goldman-sachs-downgrades-3607346

Less global trade after Good old Biden "derisk" initiative, sure downgrade de.

But China has already embedded into global supply chain, dominating the medium to low value added goods and services liao... There is a flooring already

 

[k1976]

Will US demand hong kong and shanghai in exchange?

Both are BFF... China also need USD so u see a lot of AMDK in HK and Shanghai, u know liao.

But few AMDK in KL and Jakatra, why like that?