This am we wrote our daily Empire alert email talking about how the 5th Chinese bank this year got a bailout just a few days ago. Harbin bank, arguably one of Chinas largest banks just had to bailout 6 shareholder positions last week to the sum of $2.1 billion USD. Now 48% government owned, Harbin manages somewhere around 680 billion yuan in assets (according to June 2019 numbers), trades on the Hong Kong stock exchange and now is the 5th bank bailout this year- after Baoshang Bank , Bank of Jinzhou, Heng Feng Bank, and Henan Yichuan Rural Commercial Bank , were all bailed out.
There is something fundamentally broken in the Chinese monetary system that the CCP has been doing its best job at hiding, after just a few weeks ago the state having to step in and bailout the Henan Yichuan Rural Commercial Bank after a bank run nearly crippled it. The total market cap of the four largest commercial banks in China show an all time low of 5.8% GDP for Q3 as total assets grew an annualized 8% in Q3, the GDP fall for all four banks.
Harbin bank it turns out was also connected to former oligarch Xiao Jianhua who disappeared not that long ago amid allegations of massive fraud, according to the WSJ. Xiao who disappeared in 2017 amid a wave of prosecutions of big private investors, also was involved in Wu Xiahui’s Anbang Insurance Group Co (now government owned) and also Baoshang Bank who was this years first bank bailout. The government takeover in May sparked a mini-funding crisis for many other small banks in China, including Harbin, sending the banks share’s sharply lower.
Here is the interesting part, according to the Q1 financial report, Harbin Bank cited deteriorating asset quality, a surge in bad loans and competition for deposits and higher borrowing costs in money markets. Yet, simultaneously, the near-insolvent lender also recorded a profit of 2.18 billion yuan or about $311.1 million USD, though that was off about 16% because of aggressive write-offs of bad debts.
This further proves the point that Chinese corporate earnings reports are about as “credible” as all other Chinese economic “data”. The oligarch Xiao who was involved in not one but two bank failures in the country so far this year, has not been mentioned by the authorities or heard of since he entered mainland China in 2017.
Let’s just pause here for a minute and imagine one of the big 4 banks in the US was caught doing this and nothing happening…. Or better yet, what if our government was building up empty cities for the last 20 years like China has to ensure high growth numbers and 6%-8% GDP? Insanity right? And they wonder why the rest of the world doesn’t trust their due diligence and numbers!
I have talked about this before, go around most Asian countries and you will see airports filled with ignorant Chinese walking around with 5-10 bags of duty free, everything from bottles of alcohol to designer hand bags, Lou Vuitton, Gucci etc, and pulling out one of 18+ credit cards to finance it. China has been spreading this toxic debt all over the rest of the world at rapid pace, and in the end it appears the banks write off the bad loans and when they default the government just comes and bails them out. The marry-go-around of easy money with 0 accountability continues.