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Recently, a global investment bank released a report.
The report says that China is displaying three
symptoms that Western Europe, Japan and the
US showed before the outbreak of financial crisis.
This crisis will lead to a shift of assets from the poor to
the rich, enlarging the gap between the rich and the poor.
Let’s take a look at the experts’ analysis.
Last weekend, Japan’s investment bank Nomura published
a report, saying China’s financial crisis signs are showing.
Nomura’s economists Zhang Zhiwei and
Chen Jiayao said that three signs of financial
crisis are a sharp rise of leverage, a slowdown
in economic growth and elevated house prices.
These signs are flashing over the Chinese economy.
This is the same as Western Europe, Japan and
the US, before their financial crisis took place.
The report used the “5-30 rule”, analyzing
that China’s so-called “leverage ratio” has
reached it’s highest level since 1978.
This indicates that China’s financial crisis is on its way.
Meanwhile, export shares are declining,
showing the growth rate is slowing down.
However, a rapid rise in house
prices is the last warning sign.
The report said that local government
financing vehicles, property developers, trust
and insurance companies could be badly hit.
These organs highly rely on each other.
They focus on property markets, when house prices drop,
the chain reaction will instantly cause the crisis to break out.
Chinese economist Mao Yushi spoke to Deutsche Welle.
The central government couldn’t remove these crises
factors, especially the real estate bubble is occurring.
The bubble is huge, and the Chinese Communist Party
(CCP) and financial companies don’t want it happening.
Thus they are trying to avoid it from bursting.
The outcome of the Chinese financial crisis
is that the CCP sells state-owned assets.
Xie Tian, a Professor at the Aiken School of Business
at the University of South Carolina commented.
Xie believes that the CCP would be unlikely to sell
state-owned assets to cope with a financial crisis.
Xie Tian: “Within the CCP system, state-owned
banks and companies are the best machine to be
used by CCP to plunder property from the people.
The CCP won’t easily give up these
state-owned assets, companies or banks.”
Xie predicted that the CCP will continue to issue
large amounts of banknotes to deal with the crisis.
Xie Tian: “The CCP may continue to
issue banknotes and increase inflation.
They may have already prepared
such large banknotes quietly.
They will continue to plunder people’s property and
interests to avoid the collapse of state-owned banks.”
The report also said that on the one hand, the
Chinese regime is trying to curb the banking risk.
On the other hand, it is trying to
tolerate growing “shadow banking”.
This way, it seeks to help local governments and
property developers solve financial difficulties.
Once the house prices decline, it will lead a
“shadow banking” system crisis to break out.
Lang Xianping, a Chinese economist also
made a similar prediction in a recent forum.
Lang said: “China’s financial crisis has started to break out.
The banking crisis, including the shadow-banking crisis,
which is based on private borrowing, has taken place.”
Gong Shengli, China Financial Think Tank researcher
believes that the banking industry in China is unique.
Thus stating that a “banking crisis has
broken out” needs to be scrutinized.
Gong Shengli: “China’s banking industry isn’t independent,
and they aren’t the same as Japan, the U.S. and Europe.
Loans and investments are controlled by the CCP.
Basically, they are operated under government’s control.
In western countries, especially developed countries,
banks can make decisions, thus it is very different.”
Gong also said that if China’s economy continues to
be state-owned, the risks certainly will become obvious.
Nomura’s report points out in the end that
“shadow banking” only serves the rich people.
Thus, only rich people have the opportunity to gain
interests from insurance, provided by the government.
Once the companies face difficulty, the government
will protect them, but ordinary people will suffer.
“Shadow banking” prosperity and increased moral crisis will
eventually cause assets to be shifted from the poor to the rich.