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China is desperately trying to resist the crisis by also changing the rules of the game: after those of the stock market, from opening times to the discounted fees to be paid for each operation, it is now trying to draw on the additional basket of high tech blue chips destined, in the intentions of the architects of the financial markets, to reflect changes in the real economy. But it is the massive flight of capital that intensified at the end of the year that is frightening, as well as the 11% decrease recorded by the volumes of the Chinese stock exchanges in the year just ended while the USA received a +24 percent. Since yesterday also the liquidation of Zhongzhi, queen of shadow banking linked to real estate and the sales of the indebted Country Garden.
Shadow banking at the end of the line
More than the magic of such adjustments, the difficulties stand out, such as the request for liquidation of Zhongzhi, the trust giant declared insolvent for 64 billion dollars against assets of 200 billion yuan, accepted by a Beijing court . According to the court, Zhongzhi filed for bankruptcy because he could not pay the debts owed and his assets were insufficient to pay all the debts. The first signs appeared in July when Zhongrong International Trust Co, a leading trust company controlled by Zhongzhi, missed payments on dozens of investment products linked to the crisis-ridden brick and mortar company.
In August, Zhongzhi told investors it was facing a liquidity crisis and would conduct a debt restructuring. Management admitted that the “self-rescue” plan it envisioned through restructuring, with a focus on debt collection and asset liquidation, was a weaker option than bankruptcy, which prevailed.
The hemorrhage of sales
Bad news also from Country Garden, once the leading Chinese real estate, then overtaken, six years ago, by the equally faltering Evergrande: the company had to communicate to the authorities of Hong Kong where it is listed with rapid sales of around 6.61 billion yuan, equal to 866 million euros, and a surface area of 680 thousand square meters. At the end of June, Country Garden’s debt amounted to 33 billion euros. That accumulated by Evergrande, whose hearing – restructuring or liquidation – has been postponed to the end of the month, reaches 300 billion dollars.
It matters little that the new CSI A50 includes Kweichow Moutai, the most coveted liquor in the world, the electric batteries of Contemporary Amperex Technology Co, the chipmaker Semiconductor Manufacturing International Corp and the pharmaceutical giant Jiangsu Hengrui. JPMorgan has already launched new funds linked to the index even if so far the new benchmark has fallen by 2.6.