China Enters Economic Chaos as Another Massive State Owned Enterprise is Defaulting !! An important Chinese State-owned enterprise is collapsing; as are multiple Chinese banks. China’s banking sector is showing signs of strain, with more than 13% of 4,379 lenders now considered “high risk” by the central bank. Something is starting to severely crack in China’s financial system. Only three days after we posted a video about the self-destructive doom loop that is lacerating China’s smaller banks, where a second bank run occurred in just two weeks – an unparalleled event for a country where up toearlier this year not a single bank was allowed to fail publicly and has so far this year no less than five banks high profile nationalizations/bailouts/runs .
China is facing the biggest state-firm offshore debt failure in 20 years.China Braces For December D-Day: The unparalleled and Unprecedented Default Of A Massive State-Owned Enterprise. Tewoo , a major Chinese commodity trader, looks poised to become the most high-profile state-owned enterprise (SOE) to default in the US dollar bond market in over two decades.
In a fresh sign that Beijing is more willing to allow failures in the politically sensitive SOE sector, Tewoo Group has offered an unparalleled debt restructuring plan that implies deep losses for investors or a trade for new bonds with considerably lower returns. Commodity giant Tewoo Group reportedly could become one of China’s all-time high profiled state-owned enterprises to default on a U.S. dollar bond. «Tewoo Group is very likely to default on its 300 million US dollar bond due December 16 » Bloomberg said in a report citing unnamed buy-side sources linked to the firm’s offshore debt manager.
Tianjin-based Tewoo has businesses in infrastructure, logistics, mining, autos, and ports, its website said, with presence in the U.S., Germany, Japan, and Singapore. In 2017, the unlisted firm reportedly generated an annual revenue of $66.6 billion and housed more than 17,000 employees.
Dollar bonds? It’s the FEDs problem then. Tianjin-based Tewoo Group Co is owned by the local government and operates in a number of industries, particularly as regards of infrastructure, logistics, mining, autos, and ports, as reported by its website.
It also has footprints in countries, including the US, Germany, Japan, and Singapore. The trader ranked 132 in 2018’s Fortune Global 500 list, higher than many other conglomerates, including service carrier China Telecommunications Corp and financial titan Citic Group Corp. It had an annual revenue of US$66.6 billion, profits of about US$122 million, assets worth US$38.3 billion, and more than 17,000 employees as of 2017, according to Fortune’s website. Sixty-six billion in revenue but only 122 million in profits ; something is wrong.
The loans are all US dollar loans, so it’s America’s problem. All companies in China are state owned. They get a 51% stake in everything. People are better off not working for the state and just growing their own food, and staying at home, let the government starve. Make them come and take 51% of your rice. The firm is neither listed on any stock exchange nor rated by the top three international rating companies.
Tewoo Group’s financial difficulties came to the fore in April when it sought debt extension from its lenders and sold copper below market rates amid a cash crunch. That month, Fitch Ratings slashed the company’s credit score by six notches in one go to B- to reflect its weak liquidity and higher-than-expected leverage. Tewoo’s likely default suggests that Beijing is finding it increasingly hard to bail out troubled SOEs, let alone private firms, after the worst economic slowdown in three decades. It also heightens issues over Tianjin, where it’s based, following a series of rating downgrades and financing difficulties endured by some of the city’s state-run firms.
The metropolis near Beijing also has the topmost ratio of local government financing vehicle bonds to GDP in China. Investors anticipate high debt levels to limit the Tianjin authorities’ capacity to lend support to the city’s distressed firms, inducing them to reject the latter’s debt. Tianjin Binhai New Area Construction & Investment Group Co postponed plans to sell a three-year dollar bond offering in July amid such concern. While bond defaults in China’s local market are approaching the record level high last year, there have been relatively fewer missed payments offshore. Fitch withdrew its rating on Tewoo Group in July due to insufficient information to maintain the ratings.
It last rated the issuer at B-. Neither S&P Global Ratings nor Moody’s Investors Service rates the firm. Bondholders must decide whether to accept the exchange/tender proposal by Dec 9 and 10, respectively, with the settlement date owed on or around Dec 17.
Investors are also watching closely to see if Tewoo Group’s troubles could cascade to other Tianjin companies. As well as raising concerns over the level of support state firms can expect to receive from Beijing. The Chinese bond market is invigorating itself for an unparalleled shock: a major, Fortune 500 Chinese commodity trader is assured to become the most conspicuous and highest-profile state-owned enterprise to default in the dollar bond market in over two decades. In what Bloomberg labeled the latest sign that Beijing is more prepared to allow failures in the politically delicate State Owned Enterprises sector .
Moreover that, or China is just no longer able to monitor the side-effects from its cracking $40 trillion financial system . Commodity trader Tewoo Group ; the largest state-owned enterprise in China’s Tianjin province – has offered a record breaking debt restructuring plan that involves deep losses for investors or a trade for new bonds with considerably lower returns. Being state-owned in China no more means being endorsed by the state if the case of a troubled commodities trader is anything to go by.
Tewoo Group Corp suggested Friday that investors either endure losses as much as 64% or accept overdue repayment with dramatically reduced coupons on $1.25 billion of dollar bonds. as well as another $1.6 billion worth of bonds lacking such protection, Tewoo subsidiaries have also struggled to make local debt payments, including a missed coupon for a 1.2 billion yuan note in July and another note in June. China is undergoing the worst economic slowdown in three decades, and such events signal a greater willingness by top authorities to allow state-owned enterprises to default – a stark contrast to past assumptions of implicit guarantees.
The government is already undergoing additional measures that could ease market stress, including a planned $6 billion U.S. dollar fundraising and multiple cuts to key interest rates. I bet it feels like your walking through a fireworks factory smoking a cigarette in many places in China right now. Trust is the most basic form of money. It is also quickly becoming very rare and difficult to find. It does not matter how secure someone thinks their virtual, fiat, or physical assets are without a great deal of trust in people. Everything shuts down. Another reason that the world economy is facing headwinds from all directions.
The complete reorganization of the European car industry, particularly Germany, will have consequences with less employment. Along with BREXIT kiss of death as Britain holding tons of debt paid for by Gulf States (QATAR) under pressure from Iran and Iraq in chaos. All these factors will impact the US economy; a stronger US dollar points to zero US interest rates. This is why China is pushing for the de-dollaring of the world. They want to print their own debt and dump it on the earth like they do with their cheap trinkets. The biggest problem for Red China is the Chinese Communist Party.
They have absolutely no clue when it comes to economic issues. They built this monstrosity on debt, and now that banks and businesses are failing, they are like deer in the headlights. Sure, they can bail some out, but what about the debts that reach in all directions. Will other businesses get paid on time by the one that’s about to go under. Total China printed local currency equals $37 trillion. Total US currency circulation equals $1.5 trillion. Total Global gold valued equals $7 trillion. China subsidizes everything except real property. The Chinese have painted themselves in a corner. They’ll collapse faster than a happy ending at a Chinese massage parlor.
But wait!!! Buy more cheap Chinese crap today with Black Friday’s sale prices and help save The Chinese from total despair. The way that China prints are dependent on net exports. Every unit of foreign currency that comes into China is seized by the government, and a proportional amount of Yuan is printed and distributed to the rightful recipient of that foreign currency. If their exports dry up, they can’t print anymore. Without those foreign currency reserves, they don’t have any cash to shore up their banking system nor to support their corrupt system.
This whole thing is about to explode. And this is mere smoke from the fissure. What you will not see until later is how immediate the impact on 1000’s of municipalities across China that will no longer get handouts or loans from the CCP. Already an untold number of build-out projects have been halted and left to ruin. A small bank in Austria collapsed in 1929 and led to the Wall Street crash in about two and a half months. In today’s fast action systems, the crash from China will take six working days. The Chinese real estate market (bubble) is immense.
Prices of investment flats in “empty cities” are dropping like a rock. If that bubble popping triggers a banking collapse by people walking on their second investment home mortgage, it will tube a bunch of “social scores.” And, it may trigger the worldwide market and currency reset. If China collapses, how exactly do you think that will play out. The world will probably enter into a new dark age. The global economy would almost certainly collapse without Chinese production and consumption. You would have 1 Billion+ people in chaos. There would be hundreds of millions of people moving around on a continent that already has another billion+ people on it.
There would be refugees of all kinds, and the levels of stress on surrounding countries in all ways would lead to a cascading effect of problems and almost certainly regional wars. There would be starvation on a monumental scale that would make Africa look like party planning gone wrong. The consequences would be horrific and far reaching, and if you don’t think It would cast America into chaos as well, then you’re just not thinking it through.