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China’s bank runs have begun. At precisely the time when Chinese banks need any and all cash flow to pay for severe loan losses, the State Council demands 1.5 trillion rmb (75% of 2019 profits!) from banks to “help the economy”.
This enormous grabbing of what some are supposed to be independent publicly traded companies in China is exactly what any fiduciary should have legal problems with in the future. How does one invest in a bank stock where the regime can take profits away “for the good of China”?!
These bank runs are happening for logical reasons: 1. Many rural Chinese banks are insolvent and begging Beijing for money, 2. Chinese regulator is warning of sharp rise in bad loans and capital shortages, 3. Regulator is limiting withdrawals of “large amounts” adding panic
4. Interbank lenders got crushed in Baosheng bank’s collapse so rural interbank funding is increasingly difficult to arrange. In the end, the only “safe” banks in China are the big SOE banks and the Policy Banks. Rest of the system will be playing whack-a-HOLE for years to come.
