China’s Shadow Banking System In Trouble

October 6, 2011


The implosion of china’s grey/black lending market is getting some headlines. This was expected, as how long can triple digit lending rates be sustained – (that goes for you too, Brazil). The calls to soak the banks have already started, with premier Wen and Socgen calling for bank help and bailouts, bringing to mind this apt quote from Red Capitalism.

[Chinese] banks are passive entities that absorb all the credit, interest and market risk involved in the government’s policy decisions.

There was also this interesting quote from the article:

Since the rise of China’s private sector in early 1990s, the correlation between the frequency of news reports on corporate bankruptcies in Zhejiang province and the occurrence of macroeconomic difficulties in China in following months has been, at least, as robust as that between inverted yield curves and recessions in the US.

Along with pre-conditions of oppression, sentiment among news headlines was said to forecast the Egyptian uprising. The above was not a formal study, but it highlights another potentially interesting use of sentiment from news headlines.

Read below for more interesting tales and figures from China’s black market for loans.

Black Market Loan video

Spiraling Interest Rates in China’s Shadow Market and Hong Kong’s

“Never Own a Chinese Bank. Not at Any Price”

How Chinese Loan Shark Lao Huang Operates

Interest Rates Hit Triple Digits as Black Market Fills Void Left by


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