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Number 6

Boom goes the dynamite

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For all intents and purposes a Chinese province has just gone into bankruptcy. Tewoo SOE just defaulted massively on US denominated bonds 36B.

 

I'm sure that will be limiting tourists from Tianjin pretty much forever.

 

Just wonder the next dominoes. The Communist government now refusing to prop up these charades.

 

https://www.bloomberg.com/news/articles/2019-12-12/most-investors-accept-haircut-in-china-s-tewoo-bond-revamp?srnd=fx-center

 

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China is a interesting subject in more ways than one, but as far as this subject is concerned it's economic model  is best described as a hybrid and as such difficult to apply western standards.

 The Chinese government controls the banking system and is able to choose winners and losers based on their internal need, by allowing some to fail for reasons that fit their "Long Game" and propping up others. This strategy is a "ponzi scheme" and can only be successful as long there is bottom up income to support it.

It would be interesting to watch, but certainly not a "dynamite" event yet IMO.    

Edited by sirineou
typo

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That article says that a state owned company, is restructuring some debts and that they default on other debts. Nowhere it says that a province is bankrupt. Besides that there probably will be people losing their jobs, I don't see what it has to do with tourism. 

Edited by FritsSikkink

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17 minutes ago, FritsSikkink said:

That article says that a state owned company, is restructuring some debts and that they default on other debts. Nowhere it says that a province is bankrupt. Besides that there probably will be people losing their jobs, I don't see what it has to do with tourism. 

It's 36B USD in default. The company is essentially the government, an SOE. Bond holders will be taking a massive haircut I think it was 35-70%.

 

The corporation not only was a huge SOE but a conglomerate.

 

It will affect everything and everyone near and far. That province is toast.

 

Perhaps 18B will be paid somehow, sooner or later. Another 18B up in smoke.

 

I'm thinking holidays prospects not looking up for these folks.

 

36 billion dollars US

Edited by Number 6

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8 minutes ago, Number 6 said:

It's 36B USD in default. The company is essentially the government, an SOE. Bond holders will be taking a massive haircut I think it was 35-70%.

 

The corporation not only was a huge SOE but a conglomerate.

 

It will affect everything and everyone near and far. That province is toast.

 

Perhaps 18B will be paid somehow, sooner or later. Another 18B up in smoke.

 

I'm thinking holidays prospects not looking up for these folks.

 

36 billion dollars US

Nowhere near 36 billion dollars:

"Tewoo Group’s investors take losses on $1.25 billion of bonds"

"dollar bond investors representing 57% of the the total $1.25 billion have agreed to be paid just 37 to 67 cents on the dollar," 

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49 minutes ago, sirineou said:

China is a interesting subject in more ways than one, but as far as this subject is concerned it's economic model  is best described as a hybrid and as such difficult to apply western standards.

 The Chinese government controls the banking system and is able to choose winners and losers based on their internal need, by allowing some to fail for reasons that fit their "Long Game" and propping up others. This strategy is a "ponzi scheme" and can only be successful as long there is bottom up income to support it.

It would be interesting to watch, but certainly not a "dynamite" event yet IMO.    

It may be considered "hybrid" but not that far off from the actions of the US Govt. in 2008.  Talk about selective bailouts!!

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1 minute ago, Nyezhov said:

China is a House of Cards.

What place isn't? at least IMO China has a long game in mind, where in the west we are only concerned with the next election cycle . I am not sure which house of cards will collapse first, but given China's ability to game the system, unfortunately, because all my eggs are in the western basket,

my money's on China. I hope I am wrong.

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Our problem is this:- China's economy is the second largest in the world. When China sneezes, the whole world catches a cold.

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1 hour ago, FritsSikkink said:

Nowhere near 36 billion dollars:

"Tewoo Group’s investors take losses on $1.25 billion of bonds"

"dollar bond investors representing 57% of the the total $1.25 billion have agreed to be paid just 37 to 67 cents on the dollar," 

I stand corrected. I read this in another lengthy article but found the Bloomberg to paste the link. It's far more concise.

 

The assets of the company are 38B.

 

The corporation along with another are heavily intertwined with the province which was said to already be deeply in debt.

 

So, there it's more like a firecracker I guess.

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53 minutes ago, sirineou said:

 

my money's on China. I hope I am wrong.

You are. Their long game is meaningless because their culture is not conducive to them becoming the big dog.

 

They need to just survive at this point. I see the Mandate of Heaven leaving.

Edited by Nyezhov

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1 hour ago, Nyezhov said:

You are. Their long game is meaningless because their culture is not conducive to them becoming the big dog.

 

They need to just survive at this point. I see the Mandate of Heaven leaving.

 I am not making any value judgments. but they were the big dog a thousands of years, Why not now. IMO their system has a better chance of surviving than ours, simply because the can react pragmatically where we must react politically. Our politicians know what need to be done they are smart people, but they can't because it is not politically feasible, they don't have this problem at this time Perhaps as they develop they will also , not now IMO.

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