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<ul class="summary-list"><li>Chinese property giant <keyword id="11893545" type="UNKNOWN" weightage="60" keywordseo="evergrande" source="Orion">Evergrande</keyword> is teetering on the brink of collapse, with $300 billion in <keyword id="12012706" type="UNKNOWN" weightage="60" keywordseo="debt" source="Orion">debt</keyword>.</li><li>The Chinese government is likely to step in to manage the company's unraveling, experts say.</li></ul><a href="https://www.businessinsider.com/china-housing-market-explainer-cost-debt-wealth-evergrande-impact-2021-9">China Evergrande's</a> <keyword id="12323783" type="UNKNOWN" weightage="60" keywordseo="debt-crisis" source="Orion">debt crisis</keyword> has investors on edge.If the property developer defaults, it could send the world's second-largest <keyword id="11893570" type="UNKNOWN" weightage="100" keywordseo="economy" source="Orion">economy</keyword> — and the <a href="https://www.businessinsider.com/china-economy-xi-jinping-evergrande-debt-american-world-fallout-2021-10">rest of the world</a> — into a financial crisis. But experts say the Chinese government is likely to step in to manage the situation, in the shadows or otherwise."Evergrande is too big for the Chinese government to ignore," Warut Promboon, head of credit research at research firm Bondcritic, wrote in a note published last month on the Smartkarma research platform.To get a sense of how the rest of Evergrande's debt drama could play out, we took a look at how the Chinese Community Party has managed the collapse of three too-big-to fail private companies in the last five years.<h2>Anbang got absorbed into a new entity set up by the government — which is still trying to sell it off</h2>Company: AnbangSector: Car insurance turned conglomerateAt its peak: Anbang started as a regional car insurer in 2004 but — thanks to an aggressive debt-fueled shopping spree — grew so much in a decade that it managed to snap up the storied <a href="https://www.reuters.com/article/anbang-waldorf-idUSB9N0TO01420150202">Waldorf Astoria hotel in New York</a> for about $2 billion in 2014.It was well-connected, too. Founder Wu Xiaohui was married to a granddaughter of late Chinese leader Deng Xiaoping, who is credited with reforming China's economy. By 2018, Anbang claimed to have about two trillion Chinese yuan ($313 billion) in assets, <a href="https://www.reuters.com/article/us-china-anbang-regulation-idUSKCN1G7076">Reuters reported.</a>The collapse: Anbang's downfall was swift and sudden. <a href="https://www.reuters.com/article/anbang-group-chairman/even-before-anbang-chairman-detained-some-banks-halted-its-products-idUSL1N1JC1T8https://www.bbc.com/news/world-asia-china-40269462">Wu was taken away</a> by the police from his office in 2017. The next year, <a href="https://www.reuters.com/article/china-anbang-trial-idUKB9N1SG006">he was sentenced</a> to 18 years in jail for suspected economic crimes, including fundraising, fraud, and embezzlement.The government's intervention: By the time Wu was sentenced, <a href="https://www.reuters.com/article/us-china-anbang-regulation-idUSKCN1G7076">Chinese regulators</a> had already taken over Anbang and started a <a href="https://www.reuters.com/article/us-anbang-restructuring-idUSKCN1HB06V">state-led restructuring</a> of the technically insolvent insurer.As part of its restructuring, Anbang's core insurance and asset management businesses were transferred to a new state-owned company, <a href="https://www.reuters.com/article/us-china-anbang-dajia-idUKKCN1U6055">Dajia,</a> in 2019. <a href="https://www.reuters.com/article/us-anbang-group-divestment-property-excl-idUSKBN1K917X">Some other assets were sold</a> off to raise cash.<a href="http://www.xinhuanet.com/english/2020-02/22/c_138809153.htm">Last year,</a> the Chinese insurance regulator ended its two-year takeover. During the time it was in charge, the troubled insurer managed to pay short- and medium-term financial insurance issued on time with no defaults, said China's <a href="https://www.cbirc.gov.cn/cn/view/pages/ItemDetail.html?docId=891334&amp;itemId=915&amp;generaltype=0">insurance regulator.</a><a href="https://www.reuters.com/world/china/china-puts-controlling-stake-revamped-anbang-block-52-bln-2021-07-17/">The Chinese government</a> is now trying to sell its stakes in Dajia, which two state investors put up for auction in July. It hasn't found a buyer yet, and for what it's worth, it's holding onto the <a href="https://www.bloomberg.com/news/features/2021-10-08/waldorf-astoria-inside-the-renovation-slated-for-condos-hotel-owned-by-china">Waldorf Astoria.</a><h2><keyword id="12597293" type="UNKNOWN" weightage="60" keywordseo="baoshang-bank" source="Orion">Baoshang Bank</keyword> underwent a government-managed restructuring and repaid most debts before it was allowed to go bankrupt</h2>Company: Baoshang BankSector: FinanceAt its peak: Baoshang was a small, obscure Chinese bank based in Inner Mongolia with conglomerate Tomorrow Group as its major shareholder. The bank had <a href="https://www.reuters.com/article/us-china-banks-baoshang-breakingviews-idUSKCN25608S">assets</a> of 576 billion Chinese yuan ($90 billion) in 2017, when it published its last annual report.The collapse: In May 2019, the Chinese government took over the small lender suddenly, <a href="https://www.reuters.com/article/us-china-banks-idUSKCN1T011G">citing serious credit risks.</a> It was China's first state bank seizure in more than two decades, and the move sent shockwaves across the country's banking system. <a href="https://www.reuters.com/article/us-china-banks-idUSKBN1X90SX">Regulators</a> said Tomorrow Group had made improper and illegal use of significant bank funds.The government's intervention: While Baoshang was a far smaller company than Evergrande or Anbang, <a href="https://www.reuters.com/article/us-china-banks-idUSKCN1T011G">the troubles at Baoshang</a> ignited global concerns about bad loans at small lenders in China, the systemic risks in hundreds of such lenders in the country, and the domino effect of a financial crisis from the world's second-largest economy.Under a government-led restructuring, parts of <a href="https://www.reuters.com/article/us-china-banks-baoshang-idUKKBN22C1RW">Baoshang Bank's assets, liabilities, and businesses were taken over</a> by a newly formed bank — Mengshang Bank — and Hong Kong-listed Huishang Bank.State investors such as a national deposit insurance fund and the Inner Mongolia government entered the restructuring process, injecting funds into the new entity through a facility that provided liquidity.This allowed 90% of debts owed to large creditors to be repaid, <a href="https://www.reuters.com/article/china-banks-baoshang-idUSL4N2F847M">Reuters reported,</a> citing the People's Bank of China. Without the injection of public funds, the average repayment rate for creditors would be less than 60%, according to the central bank.In August 2020, Baoshang was finally <a href="https://www.reuters.com/article/china-banks-baoshang-idUSL4N2F847M">allowed to file for bankruptcy</a> and to liquidate its remaining assets. The new Mengshang Bank is still operating.<h2><keyword id="12597294" type="UNKNOWN" weightage="60" keywordseo="hna-group" source="Orion">HNA Group</keyword> asked for help and got taken over by the government</h2>Company: HNA GroupSector: Starting out as an airline in 1993 in the southern China region of Hainan, HNA Group grew to become an aggressive dealmaker snapping up trophy businesses around the world using ultra-loose credit available in the 2010s. At the end of June 2017, <a href="https://www.reuters.com/article/us-hna-group-creditors/chinas-hna-targets-16-billion-in-asset-sales-in-first-half-bloomberg-idUSKBN1FK0WC">HNA had assets</a> of 1.2 trillion Chinese yuan ($187.7 billion.)At its peak: Its global acquisitions — worth more than $50 billion, according to <a href="https://www.reuters.com/business/finance/chinas-hna-restructuring-plan-approved-by-creditors-2021-10-23/">Reuters</a> — included sizable stakes in Hilton Hotels and Deutsche Bank, as well as luxury properties including skyscraper 245 Park Avenue in Manhattan. Many of its acquisitions were made at a high premium, according to <a href="https://dealogic.com/insight/hna-unwind/">Dealogic</a> in a note.At its peak, HNA employed 400,000 people around the world, according to <a href="https://www.nytimes.com/2021/09/24/business/china-hna-evergrande.html">The New York Times.</a>The collapse: HNA's debt-fueled acquisitions started to come under the microscope of the Chinese government. Its unravelling came in a similar fashion to <a href="https://www.businessinsider.com/evergrande-pays-some-bondholders-148-million-avoids-default-again-2021-11">Evergrande's</a> — by way of <a href="https://www.reuters.com/article/us-china-conglomerates-hna-idUSKBN1AH3A8">government measures introduced in 2017</a> that aimed to minimize private domestic companies' risk exposure.The government's intervention: HNA came under regulatory scrutiny and banks that once dealt with its investments <a href="https://www.bloomberg.com/news/articles/2017-07-24/china-banks-that-funded-hna-s-growth-are-said-to-halt-new-loans-j5hnmp3f">halted loans</a> to the group, causing a massive liquidity crunch, in turn hitting HNA's ability to pay off its debts. It started selling assets to raise funds, including stakes in <a href="https://www.reuters.com/article/us-hilton-wrldwide-secondary-offering-hn-idUSKBN1HG1KX">Hilton</a> and <a href="https://www.reuters.com/article/us-hna-group-deutsche-bank-idUSKCN1LN0TM">Deutsche Bank.</a> Foreign governments, including <a href="https://www.reuters.com/article/us-global-eagle-ent-m-a-hna-group-idUSKBN1AB0BE">the US,</a> also scrutinized deals the company was making, citing concerns like national security.<a href="https://www.scmp.com/business/companies/article/2144073/hna-will-ditch-vanity-purchases-aviation-logistics-and-tourism">HNA</a> started selling off most of its assets unrelated to its original businesses, saying in 2018 it would focus on aviation, logistics, and tourism — but the pandemic hit last year, impacting those sectors. This prompted <a href="https://www.reuters.com/article/us-china-hna-idUKKBN20N0AJ">HNA to seek help</a> from the Hainan provincial government, which took over the company. <a href="https://www.reuters.com/article/us-china-hna-idUSKBN20N0AJ">Officials</a> from China's civil aviation administrator and China Development Bank, the country's main policy bank, also got involved.HNA was placed in <a href="https://asia.nikkei.com/Business/Markets/China-debt-crunch/Chinese-court-puts-HNA-Group-into-bankruptcy-administration">bankruptcy administration</a> in February 2021 and <a href="https://www.reuters.com/business/finance/chinas-hna-restructuring-plan-approved-by-creditors-2021-10-23/">just last month,</a> creditors of the company voted to approve the company's restructuring plan involving 1.1 trillion Chinese yuan ($172 billion) worth of <a href="https://www.caixinglobal.com/2021-10-27/bankrupt-hna-clears-creditor-hurdle-in-170-billion-debt-restructuring-101791973.html">debt.</a>It has also been <a href="https://www.scmp.com/business/companies/article/3149400/hna-group-be-broken-four-independent-units-chinese-conglomerates">broken into four independent units</a> focusing on aviation, airport, financial, and commercial.<h2>Evergrande will likely go the way of HNA Group, says a <keyword id="6368266" type="UNKNOWN" weightage="60" keywordseo="bond" source="Orion">bond</keyword> specialist</h2>Evergrande, China's second-biggest property developer, has <a href="https://www.businessinsider.com/evergrande-private-jets-50-million-debt-china-property-crisis-2021-11">$300 billion in debt</a>. The Chinese government is likely to manage a controlled implosion of the company, keeping the fallout as minimal as possible, said Warut. Stakeholders have few options.The political system in China empowers regulators with "heavy hands which will force collaborations among issuers, investors, and intermediaries" who are often owned or influenced by the government, he said.<a href="https://www.businessinsider.com/evergrande-unit-stake-sale-fails-chinese-officials-seeks-calm-2021-10?utm_source=markets&amp;utm_medium=ingest" target="_blank" rel="noopener">Chinese officials</a> have sought to calm nerves about the debt crisis. They <a href="https://www.bloomberg.com/news/articles/2021-08-19/china-regulators-tell-evergrande-executives-to-solve-debt-risks" target="_blank" rel="noopener">have publicly</a> chided Evergrande, telling the company to resolve its debt problems and instructing the country's real-estate developers to <a href="https://www.ndrc.gov.cn/fzggw/jgsj/wzs/sjjdt/202110/t20211026_1300964.html?code=&amp;state=123=123" target="_blank" rel="noopener">pay their overseas bondholders.</a>Evergrande will likely go the way of HNA, having to sell down assets and managing risks step by step, eventually resulting in "a smaller Evergrande," Warut told Insider. Going by precedence, the entire process is likely to be long-drawn and may take years, he added.Authorities have already asked government-owned firms and state-backed property developers to buy some of Evergrande's assets, <a href="https://www.reuters.com/world/china/china-asking-state-backed-firms-pick-up-evergrande-assets-sources-2021-09-28/">Reuters</a> reported.It has also dropped instructions to Evergrande to contain the fallout. Bloomberg, citing people familiar with the matter, reported that Beijing has told Evergrande's billionaire founder, <a href="https://www.businessinsider.com/meet-billionaire-at-head-evergrande-the-worlds-most-indebted-company-2021-9#hui-ka-yan-was-worth-277-billion-in-march-though-hes-lost-a-substantial-amount-of-that-wealth-since-2?utm_source=markets&amp;utm_medium=ingest" target="_blank" rel="noopener">Hui Ka Yan</a>, to use his own money to pay the company's debt. He seems to be complying with the directive, reportedly pumping in $1.1 billion from fire sales of assets including art and two Hong Kong apartments to pay down some of the debt.

How China handled 3 high-profile corporate meltdowns, including companies considered too big to fail — and what that could tell us about Evergrande's future

<div class="KonaFilter image-container display-table"><div><div class="image on-image">AP</div></div></div><ul class="summary-list"><li>China just took over Baoshang Bank, a small bank in Inner Mongolia that purported to have a pretty clean balance sheet. It's the country's first public bank takeover in two decades.</li><li>There are three reasons China could've taken it over - because it was part of a huge "gray rhino conglomerate;" because it was a "credit risk" as regulators said; and/or because policymakers are trying to introduce moral hazard into China's debt-laden financial system.</li><li>If the last two are correct, hold on to your hats.</li></ul>The question isn't why the Chinese government took over Baoshang Bank - a small commercial bank in Inner Mongolia - but rather why the government told us it took over the bank at all, and what that rare disclosure means for China's banking system at large. The Baoshang takeover is the first public government takeover of a Chinese bank since the country's financial crisis in the late 1990s, but it's certainly not the first takeover in general. Over the last two decades the government has many times recapitalized struggling banks or forced them to merge with state banks or other trusted corporations. When it has done this, though, it has done it quietly.That's what makes this Baoshang situation so strange. The fact that regulators are injecting some fear into the market."One of the more unusual aspects of the Baoshang drama is that it's been reported - not only that, but high-level authorities have publicly expressed concern that there may be bank runs and financial institutions that 'disappear,'" J Capital Research, a China-focused investment firm, wrote in a note to clients."This is peculiar for an economy that claims to be growing at 6.5%, have average NPL rates under 1.5%, and that has buoyant construction and property markets."<h2>What a fool believes</h2>As J Capital notes, if you buy the statistics - China's financial system shouldn't have a problem. Perhaps in the same way, if you look at Baoshang's latest numbers, it shouldn't really have a problem either. The bank hasn't published an annual report since 2016, but back then it showed a non-performing-loan (NPL) rate of 1.68%, according to the investment bank Nomura. That's up from 1.41% a year before - so not terrible on paper, especially not with $60.8 billion in assets and $27 billion in deposits.This certainly does not appear to be a bank that poses "credit risks" as the Chinese government cited in its takeover decision.But there are other peculiar, and perhaps equally important, things to note about Baoshang too.<ul><li>It was part of a massive conglomerate called Tomorrow Group, which is controlled by a fund manager named Xiao Jianhua.</li><li>In 2017, Xiao, who used to run money for China's elite, was arrested for fraud and embezzlement in Hong Kong. Right after that, Baoshang's credit rating was downgraded.</li><li>China has cracked down on similar huge financial conglomerates (like Anbang Insurance) over the past few years. These are so-called <a href="https://www.wsj.com/articles/look-for-gray-rhinos-not-black-swans-in-chinas-financial-zoo-11553245710">"gray rhinos"</a> that the government believes are so large and opaque that they can hide issues. </li><li>One source told Chinese business publication <a href="https://www.caixinglobal.com/2019-05-25/chinese-government-takes-over-fallen-tycoons-bank-101419763.html">Caixin</a> that Baoshang functioned as a "cash machine" for Tomorrow Holdings, and another said that it had helped Tomorrow put together at least $21.7 billion in funding through shadowy practices.</li></ul>So is this takeover about Baoshang's parent company? Or Baoshang's balance sheet? Or is it about messaging to China's financial sector that moral hazard has been introduced? How about a little of all three?<h2>A wise man has the power to reason away</h2>If the Baoshang takeover is about the parent company, consider this a continuation of the detangling of opaque "gray rhino" conglomerate assets that the government has been undertaking for some time. It is not, then, some kind of warning of some potential cataclysmic financial event.If it's about Baoshang's balance sheet then consider it yet another example of the most dangerous tension in China's debt-riddled financial system. To keep the system growing, banks have to continue to extend more and more credit, but not all of that credit is going to be good. As J Capital noted, Baoshang "is involved in literally thousands of lawsuits seeking repayment of delinquent loans, with interest as high as 18%, or 24% with penalties, generally secured in side agreements." What this tells us is that the balance sheets of Chinese banks are not to be trusted. On paper (at least the latest ones available for the public/media to see) Baoshang is healthy. The government is acknowledging that papers lie - a dangerous notion to introduce in a country where economists already question basic gross-domestic-product data.Lastly, if this is about moral hazard, then perhaps regulators are telling the market to prepare for some losses. As Nomura pointed out, "regulators did not state they would guarantee all the liabilities of Baoshang Bank," adding that depositors and creditors with over 50 million Chinese yuan of assets at the bank "will need to negotiate with the takeover task-force for repayment."Before you chock that up to China's trade war with the US, remember that the Chinese economy has been slowing for some time. At the end of last year and into the beginning of this year, <a href="https://www.businessinsider.com/chinas-economy-is-terrible-without-the-trade-war-2019-1">policymakers were legitimately worried</a>, and Xi Jinping has for months been warning that things were going to <a href="https://www.scmp.com/news/china/politics/article/2183541/communist-party-ideology-chief-wang-huning-raises-risk-alarm?utm_source=mailchimp&amp;utm_medium=email&amp;utm_content=190129&amp;utm_campaign=GME-O-TradeWar&amp;MCUID=55a0465e77&amp;MCCampaignID=ffed176bf2&amp;MCAccountID=7b1e9e7f8075914aba9cff17f">get more difficult economically</a>. Trade war or not, deleveraging the financial system was going to be painful for China.So perhaps policymakers are telling the market that there are too many balls in the air now, and some of them are going to have to hit the ground. Point is, at least they're letting us know. <div class="margin-top"> <h3>NOW WATCH: <a href="https://www.businessinsider.com/ingredients-processed-foods-red-bull-twinkies-doritos-kraft-cheese-2016-10">This stunning visualization breaks down all the ingredients in your favorite processed foods</a></h3> <div> </div> </div>

There are 3 reasons China just took over a bank for the first time in 20 years, and 2 of them are a huge deal

<ul class="summary-list"><li><a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/1203/2021120302119.pdf">Evergrande</a> said on Friday there was "no guarantee" it would have enough funds to meet <keyword id="12012706" type="UNKNOWN" weightage="60" keywordseo="debt" source="Orion">debt</keyword> repayments.</li><li>The 8 p.m. announcement triggered a coordinated response from various Chinese authorities.</li></ul>Chinese authorities have moved in swiftly to address <keyword id="11893545" type="UNKNOWN" weightage="60" keywordseo="evergrande" source="Orion">Evergrande</keyword>'s troubles after the embattled real-estate giant warned it might not be able to repay its debts. This comes after <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/1203/2021120302119.pdf">Evergrande</a> said in an announcement on the Hong Kong Stock Exchange there was "no guarantee" it would have enough funds to meet debt repayments."In light of the current liquidity status of the Group, there is no guarantee that the Group will have sufficient funds to continue to perform its financial obligations," Evergrande said in its announcement, adding that creditors may demand accelerated repayment if it does not.The filing — made at 8 p.m. Hong Kong time on Friday — triggered what appear to be coordinated responses from the <a href="http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/4406998/index.html">People's Bank of China,</a> <a href="https://www.cbirc.gov.cn/cn/view/pages/ItemDetail.html?docId=1021947&amp;itemId=915">the country's Banking and Insurance Regulatory Commission,</a> and its <a href="http://www.csrc.gov.cn/pub/newsite/zjhxwfb/xwdd/202112/t20211203_409372.html">Securities Regulatory Commission</a> on the same day.<a href="https://www.reuters.com/markets/rates-bonds/china-evergrande-gets-260-mln-guarantee-demand-2021-12-03/" target="_blank" rel="noopener noreferrer"></a><keyword id="11892748" type="UNKNOWN" weightage="60" keywordseo="china" source="Orion">China</keyword>'s Guangdong province also summoned Hui Ka Yan, the chairman of China Evergrande Group, the <a href="http://www.gd.gov.cn/gdywdt/gdyw/content/post_3693340.html">local government</a> said on Friday.In its statement, the provincial government said it would — at Evergrande's request — send a working group to the company to oversee risk management, strengthen internal controls, and maintain normal operations. The move is to "resolve risks, protect the interests of all parties, and maintain social stability," the local government added.The Chinese real-estate industry continues to be rocked by Evergrande's <keyword id="12323783" type="UNKNOWN" weightage="60" keywordseo="debt-crisis" source="Orion">debt crisis</keyword> as the embattled real-estate giant struggles to pay off its $300 billion debt pile. Investors are worried over whether the fallout could spill over and hit <a href="https://www.businessinsider.com/china-economy-xi-jinping-evergrande-debt-american-world-fallout-2021-10">global markets.</a> <a href="https://www.insider.com/evergrandes-impending-collapse-forcing-chinese-millennials-reconsider-life-plans-2021-10">Chinese millenials</a>, too, are grappling with an existential crisis over home ownership due to concerns over whether Evergrande will be able to deliver apartments buyers have paid for.The country's banking and insurance regulator said in its Friday statement it would boost support for guaranteed rental housing. The securities regulator said any spillover from Evergrande's fallout was "controllable" and that it would continue to support funding for property developers.The People's Bank of China acknowledged in its <a href="http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/4406998/index.html">statement</a> that the Guangdong government is now in charge, explicitly saying it supports the move to send in a working group."The PBOC is making it clear this is the problem of the Guangdong government. The central government is watching, but if someone takes the heat for people losing money, it will first be the Guangdong government. This is not that problematic," said Travis Lundy of Quiddity Advisors in a note published on the <a href="https://www.smartkarma.com/insights/the-evergrande-quantum-kitty-living-its-ninth-life">Smartkarma</a> platform."This is going the way of every major government restructuring takeover of a heavily over-indebted conglomerate in the past few years," added Lundy in his note.<a href="https://www.businessinsider.com/evergrande-crisis-how-china-handled-too-big-to-fail-companies-2021-11">High-profile corporate meltdowns</a> in the last few years that have taken similar paths include Anbang Insurance, Baoshang Bank, and HNA Group.In its filing to the Hong Kong Stock Exchange on Friday, Evergrande said it had received a demand from creditors to pay about $260 million. It already missed paying $82.5 million in coupons due on November 6 and has a 30-day grace period— that's till the end of today — to pay up before it officially defaults.Evergrande shares on the Hong Kong Stock Exchange are down 12% on Monday — an 11-year low.

China's government is stepping in to help Evergrande deal with its debt, as it has with previous large-scale corporate clean-ups

<div class="KonaFilter image-container display-table"><div><div class="image on-image">Reuters</div></div></div><ul class="summary-list"><li>China's GDP for the second quarter grew at its slowest rate since the global financial crisis in 2008, 6.2%.</li><li>This weak print is the result of a combination of factors - China's trade war with the US, deleveraging, and structural weakness in China's banking system.</li><li>And while some economic data started trending more positively in June, the weak GDP print is a sign that policymakers will soon have to be more aggressive about stabilizing the economy. </li></ul>China's GDP grew at 6.2% in the second quarter, its slowest growth rate since 1992. And while there was some positive economic news in the month of June - the last month of the quarter - this GDP print means that soon policymakers will have to act in order to keep the economy growing, according to analysts.In short, Q2 was bad. And there's a chance Q3 will be less bad, but it's not a signal that China's economy is stabilizing yet. For the past few months policymakers have been engaging in targeted easing. Instead of just spraying credit everywhere, they've tried to get it where it's needed most - to households and to the struggling private sector, for example.Analysts have been saying for some time now that those measures aren't enough to blunt the force of the trade war and China's own domestic issues working against growth though. And despite a few bright-ish spots in June's data, that still stands.Here's a rundown of a few happier June data points, some of which - according to analyst Wei Yao over at Societe Generale - simply don't make much sense.<ul><li>Industrial production (IP) accelerated from 5.0% in May to 6.3% in June. Yao said this reminded her of a trend in 2017 when IP would rebound toward the end of a quarter only to disappoint immediately after.</li><li>Fixed asset investment bounced up from May's 4.4% to 6.3% in June - Yao chocks that up to infrastructure growth, part of the country's targeted easing measures.</li><li>Retail sales for June came it at 9.8%, up from 8.6% in May. To Yao this one's the real head scratcher. Yes, some of it was helped by tax cuts and an online shopping festival in June. But some of the data is murky. For example, Auto sales data for the month differ widely between government figures (which put sale sup 17.2% in June) and the Chinese Association of Automobile Manufacturers, which shows sales contracting by 9.6%.</li></ul>"The latest data are not yet convincing that the targeted approach alone is enough to cushion the economy from trade-war and deleveraging blows," wrote Societe Generale analyst Wei Yao wrote in a note to clients on Monday. "Even though an imminent policy easing move may be put on hold again because of the June rebound, we maintain our view that the PBoC will resume headline easing at some point - likely in August."<h1>So now what?</h1>The case for dramatic action from Chinese policymakers is still very much in play. China's trade war with the US is not over, and it doesn't look like negotiations are progressing any faster than they were before. So relief in the form of increased US exports isn't on the table yet.The same goes for China's most pressing domestic economic problems. Chief among those is uncertainty in the banking system. Ever since the government's May <a href="https://www.businessinsider.com/china-baoshang-bank-takeover-why-it-matters-2019-5">takeover of Baoshang Bank</a> - a small regional bank in Mongolia - the banking system has been on tenterhooks. Baoshang looked healthy on paper but it wasn't, and now policymakers are spanning the country digging into the books at small and/or regional banks to figure out what's really going on. This introduced risk into the interbank lending market, and all of the sudden funding for these small and/or regional banks started drying up.This has also hurt the private sector, which had already been struggling since the economy's <a href="https://www.businessinsider.com/chinese-consumers-debt-load-worsens-slowdown-2019-1">harrowing dip down at the end of last year</a>. A lot of small and medium sized enterprises (SMEs) got their funding from these regional banks, and when they were thrown out of whack, so were the SMEs. Yao called this issue "the source of under-appreciated risk for the global economy" in a note to clients last month.This is why Yao ultimately expects policymakers to turn toward more broadbased easing. It could come in the form of an interest rate cut, or a cut in the reserve requirement ratio - which would lower the amount of money banks have to keep on hand. Either way, more easing is coming and no one is out of the woods yet. This is an <keyword id="6356002" type="UNKNOWN" weightage="100" keywordseo="opinion">opinion</keyword> column. The thoughts expressed are those of the author(s). <div class="margin-top"> <h3>NOW WATCH: <a href="https://www.businessinsider.com/taylor-swift-net-worth-singer-millionaire-makes-spends-money-wealth-2019-4">Taylor Swift is the world's highest-paid celebrity. Here's how she makes and spends her $360 million.</a></h3> <div> </div> </div>

China's growth has ground down to a 27-year low, and its economy probably can't go on like this

<div class="KonaFilter image-container display-table"><div><div class="image on-image">Damir Sagolj/ReutersA woman wearing a protective mask takes a selfie amid heavy smog in Tiananmen Square, after the city issued its first ever "red alert" for air pollution, in Beijing December 9, 2015.</div></div></div><ul class="summary-list"><li>The state of the Chinese economy heading into a meeting of the G20 - where President Xi Jinping is set to discuss trade with US President Donald Trump - is stable, but weak.</li><li>Economic indicators are telling policymakers that attempts to target injections of credit into the system will not be enough to keep the economy stable in the face of increasing pressure.</li><li>That pressure is coming from not just the trade war, but China's old nemesis - corporate and financial sector debt.</li><li>Should trade hostilities worsen, China's economy could be tipped into another period of major strain, something like what we saw at the end of 2018.</li><li><a href="https://www.businessinsider.com/?hprecirc-bullet">Visit Business Insider's homepage for more stories.</a></li></ul>On the eve of the most important meeting since the initiation of trade hostilities between the US and China, the Chinese economy is staring down another wave of pressure.US President Donald Trump and Chinese President Xi Jinping are set to meet during the G20 Meeting in Osaka, Japan on June 28th to discuss trade issues between the two countries.And part of the pressure on China's economy right now does indeed stem from the trade war.But more of it stems from an old problem - the same structural issue that has plagued China's economy for years now - an over-indebted, under-productive corporate and financial sector.Chinese policymakers have been trying to inject credit into the system in a targeted way since last July, but recent data indicates that those measures will not be enough to stop a slowdown. This problem has become most evident in the financial sector, where the government has been forced to take aggressive action to help struggling banks.There are few on Wall Street, in Washington or in Beijing who have high hopes for any kind of progress in negotiations coming from this Osaka meeting. Chinese state media <a href="http://en.people.cn/n3/2019/0624/c90000-9590630.html">has been defiant</a>, blasting the US for its role in abruptly ending discussions last month and claiming to stand for international order and a rules based trade regime.<a href="https://www.wsj.com/articles/china-s-xi-to-present-trump-with-terms-for-settling-trade-fight-chinese-officials-say-11561628961">The Wall Street Journal</a> is also reporting that the Chinese delegation plans to go to the meeting with a list of demands likely to upset President Trump, like dropping a ban on Chinese telecom company Huawei.Analysts at Capital Economics told clients that the best case scenario is that the two sides come to some kind of temporary truce.That may not be enough to ease the strain on China's economy right now. And of course an escalation of hostilities - say, if Trump decides to put 25% tariffs on an addition $300 billion worth of Chinese goods as he has threatened - could wreak havoc on an economy that currently appears stable but weak.<h2>The data</h2>You'll recall that at the end of last year the Chinese economy was <a href="https://www.businessinsider.com/by-beijings-stratospheric-standards-chinese-economic-growth-just-fell-in-a-hole-2019-1">having a concerning meltdown</a> and policymakers responded by loosening credit conditions. By early spring it looked like things were stabilizing and growing again, though analyst Charlene Chu of Autonomous Research told Business Insider that to sustain that, policymakers would have to throw tons of cash at the problem, and "post in nominal terms <a href="https://www.businessinsider.com/china-economic-rebound-is-temporary-2019-4">a record flow of credit"</a> the following year.Come June it was clear the good times wouldn't last that long. The May economic data out of China was bad. Here's a selected rundown:<ul><li>Industrial production growth slowed to 5%, a pace unseen since the financial crisis in 2009.</li><li>Electricity production growth fell from from 3.8% in April to just 0.2% in May.</li><li>Infrastructure investment growth fell to 3% from 4.8% in April.</li><li>And in value terms land sales remained in a funk at -39.9% in May, only slightly better than -47.7% in April.</li></ul>So policymakers sprung into action again. Where previous actions were targeted at struggling private sector businesses, these latest measures have been <a href="http://global.chinadaily.com.cn/a/201906/21/WS5d0c2fcca3103dbf14329719.html">a more broad based rescue</a> that looks all-too-familiar in China. For one thing, the central government allowed local governments to ease housing restrictions and <a href="https://www.bloomberg.com/news/articles/2019-06-11/china-expands-use-of-local-government-debt-amid-weaker-economy">speed up the issuance of local government bonds</a> for funding infrastructure projects.And for another - as business surveyor China Beige Book noted in a recent note to clients - shadow banking, came back with a vengeance in Q2, especially in China's biggest cities."In Q2, banks retrenched and corporate borrowing fell a notch, but shadow banks returned in force to fill the vacuum," said the note. "This quarter, firms reported the highest share of shadow borrowing as a share of overall borrowing in survey history. More shadow finance typically means more expensive credit - adding repayment pressure to the second half of 2019."<h2>The small banks</h2>And then there's the current appraisal of China's small and medium sized banks now underway. Over the last few weeks interbank lending for smaller banks - and subsequently to the small and medium-sized enterprises (SMEs) they lend to - has been in its own mini-crisis.It started with the curious case of the <a href="https://www.businessinsider.com/china-baoshang-bank-takeover-why-it-matters-2019-5">Baoshang Bank bailout</a> - China's first public bailout in 20 years. Baoshang was a small, seemingly healthy bank that authorities took over at the end of May. A bank run was avoided, but not all of the Baoshang's interbank liabilities were guaranteed. Suddenly people realized they could actually lose money as counterparties. A new kind of fear was injected into the market, triggering a liquidity crisis."The interbank run has lasted for over a month now and has probably been harder to control than policymakers had hoped," analysts at Societe Generale wrote in a recent note to clients.Policymakers have been touring regional banks to get a hold of this situation (a process that could take months) and say that they're focused on <a href="http://www.xinhuanet.com/english/2019-06/24/c_138170226.htm">"supply side reform"</a> for all SMEs and the banks that lend to them. "That means taking over small banks to keep them from going bust and reducing their loan quotas to give market share to the Big Five [state owned banks]," Anne Stevenson-Yang, founder of China-focused investment firm J Capital Management, wrote in a note to clients. "The propaganda organs are working to persuade the public to avoid private financing. Nanjing Bank, for example, is conducting an 'education campaign' warning people to hold their wallets tight and not invest in 'illegal'- read, private - money-raising schemes."In that way, pressure on smaller banks is giving China's state sector more power, and crippling its still relatively nascent private sector - that's one problem. Another is the possibility that the run on smaller banks could spread to the wider financial system. Chu<a href="https://www.bloomberg.com/news/articles/2019-06-11/china-expands-use-of-local-government-debt-amid-weaker-economy"> estimates</a> that bad debt could make up as much as 20%-25% of the sector. Societe Generale called this possibility "the source of under-appreciated risk for the global economy." <h2>Breathing room</h2>The brevity of the respite that looser credit conditions provided to the Chinese economy worried analysts like Chu. She said that credit stimulus started in July 2018 but wasn't felt in the economy until the first quarter of 2019. That was bad.What's worse now is that it seems like the credit deluge is barely working. It's not providing it's normal year or two of stability, thanks in part to the trade war."We've really only had one strong quarter of credit and that's not really enough to bring the economy back at this moment," Chu told Business Insider in a recent phone interview. "If the trade war issue is not solved [policymakers] will be more predisposed to play it loose with easing. If the trade war just goes away they'll be more like they are right now - which is pretty tempered with the easing."<div class="KonaFilter image-container display-table"><div><div class="image on-image">Societe Generale</div></div></div>If the trade war goes away China has a chance to fix its problem with small and medium-sized banks, and target stimulus to ailing sectors of the economy. It could buy itself a a year or two until the next crisis, and figure out a way to restore the international financial community's confidence to bring in outside cash. If the trade war continues all bets are off. China will have to figure out how to redirect its economy away from exports as fast as possible. It will need to ratchet up credit, increasing the risk of a debt crisis, and that may not even be enough to blunt the trauma of a forced restructuring of its economy. "Is credit and restructuring binge going to be enough to fix that," Chu asked. "Probably not." <div class="margin-top"> <h3>NOW WATCH: <a href="https://www.businessinsider.com/how-krispy-kreme-doughnuts-are-made-2018-2">A single Krispy Kreme in Southern California makes 50,000 doughnuts a day - here's how</a></h3> <div> </div> </div>

China's economy has been acting especially strange heading into Trump and Xi's G20 showdown

<div class="KonaFilter image-container display-table"><div><div class="image on-image">Reuters/Jonathan ErnstU.S. President Donald Trump salutes troops aboard the USS Wasp (LHD 1) in Yokosuka, south of Tokyo, Japan.</div></div></div>Here is what you need to know. <ol><li><a href="https://markets.businessinsider.com/news/stocks/us-china-trade-war-slashes-global-gdp-600-billion-2019-5-1028234313">The trade war could shrink global output by $600 billion</a>. The trade war could shave 0.5% off of China's gross domestic product and 0.2% off the US and the rest of the world's by 2021, according to a Bloomberg Economics study.</li><li><a href="https://www.bloomberg.com/news/articles/2019-05-27/china-s-first-bank-seizure-in-20-years-spooks-lenders-investors">China seizes a bank for the first time in 20 years</a>. Chinese regulators on Friday took over Baoshang Bank for one year due to "serious" credit risks, Bloomberg reports.</li><li><a href="https://www.businessinsider.com.au/iron-ore-futures-dalian-china-inventories-2019-5">Iron ore hits a record</a>. Sliding inventories caused Chinese iron ore futures on Monday to hit a record high of 763.5 yuan. </li><li><a href="https://www.businessinsider.com/fca-starts-nissan-renault-merger-talks-to-spark-electric-vehicles">Fiat Chrysler proposes a $37 billion merger with Renault</a>. A deal would create the world's third-largest automaker behind Volkswagen and Toyota. </li><li><a href="https://www.businessinsider.com/boeing-737-max-return-delayed-737-ng-pilot-procedure-review-2019-5">The FAA is reportedly looking into emergency procedures of older Boeing jets</a>. The Boeing 737 Max's return to the air has reportedly been slowed as the Federal Aviation Administration looks into the emergency procedures of not only the Max but also the older generations of the 737, The Wall Street Journal reported late Friday. </li><li><a href="https://www.businessinsider.com/huawei-ceo-rejects-possible-china-ban-on-apple-2019-5">Huawei's CEO is against banning Apple in China</a>. "That will not happen, first of all," Huawei CEO and founder Ren Zhengfei told Bloomberg. "And second of all, if that happens, I'll be the first to protest."</li><li><a href="https://www.businessinsider.com/private-equity-industry-investing-lessons-outlook-from-jonathan-coslet-tpg-2019-5">A private-equity pro explains how the rise of Amazon and Uber forced him to change his strategy</a>. "Every once in a while we're finding a company where their business model advantage is that they're willing to lose more money than anyone else - at least for a while," said Jonathan Coslet, chief investment officer TPG Capital, at the Milken Institute Global Conference. "That's a very dangerous thing." </li><li><a href="https://markets.businessinsider.com/indices">Stock markets around the world are mixed</a>. A late-day surge lifted China's Shanghai Composite (+0.61%) into positive territory while the Euro Stoxx 50 (-0.45%) is losing ground in Europe. The S&amp;P 500 was set to open little changed near 2,824. </li><li><a href="https://markets.businessinsider.com/earnings-calendar#date=05/28/2019&amp;name=&amp;countries=&amp;eventtypes=99&amp;tab=ALL">Earnings reporting is light</a>. Nio reports ahead of the opening bell.</li><li><a href="https://markets.businessinsider.com/economic-calendar#date=05/28/2019&amp;name=&amp;countries=us&amp;eventtypes=&amp;tab=1,2,3">US economic data flows</a>. S&amp;P Case Shiller home prices will be released at 9 a.m. ET before consumer confidence and Dallas Fed manufacturing are due out at 10 a.m. ET and 10:30 a.m. ET, respectively. The US 10-year yield is down 3.7 basis points at 2.28%. </li></ol> <div class="margin-top"> <h3>NOW WATCH: <a href="https://www.businessinsider.com/game-of-thrones-season-8-episode-5-details-missed-easter-eggs-2019-5">17 details in 'Game of Thrones' season 8 episode 5 you may have missed</a></h3> <div> </div> </div>

10 things you need to know before the opening bell

APThe coronavirus' effects could last longer than expected.<ul class="summary-list"><li>Wall Street is convincing itself that China will bounce back relatively quickly around the end of the first quarter, when it expects the coronavirus' spread to be contained.</li><li>This is banker delusion. China's economy is growing much more slowly than it was in 2003, when the SARS outbreak hit.</li><li>Plus, the financial sector is in much worse shape. It's loaded with debt, and credit conditions are still deteriorating from bailouts last year. This will all make it much harder to fund struggling businesses and local governments.</li><li>This is an opinion column. The thoughts expressed are those of the author.</li><li><a href="https://www.businessinsider.com/?hprecirc-bullet">Visit Business Insider's homepage for more stories</a>.</li></ul>The coronavirus is still spreading throughout China, but all over Wall Street, a consensus about the virus' economic influence is already solidifying.The thinking <a href="https://markets.businessinsider.com/news/stocks/ray-dalio-wuhan-coronavirus-exaggerated-effect-markets-recovery-2020-2-1028892444">goes like this</a>: China will slowly get back to work by the end of the first quarter. Investors will stay fairly steady throughout this period knowing that coronavirus will result only in a temporary knock on corporate profits and general economic activity. Ultimately, like in 2003 when SARS gripped the nation, China will rally to a V-shaped recovery - that is, a quick fall in economy activity followed by a sharp return to normalcy soon after. Markets are overreacting.This consensus is wrong. And it's wrong not just because we don't know if the consensus timeline is even remotely accurate - but also because the Chinese economy, and especially its banking system, is completely different now than it was in 2003.The country's economy is growing much more slowly now (GDP growth has recently been about 6%, according to the government, compared with 10% in 2003), and the banking system is far more fragile and laden with debt.Autonomous Research"There's no reference point at all for what it feels like when China is truly in a recession across the board because they've been on a 30-year growth binge," Charlene Chu, a senior analyst at Autonomous Research, said. "The world is underplaying what's going on in China."Chu described the coronavirus' influence on the economy as a "much deeper shock with a much different context." And in the middle of it all, local governments will still be under intense pressure to meet economic targets, and <a href="http://www.xinhuanet.com/english/2020-02/13/c_138781248.htm">businesses will be under intense pressure</a> not to fire anyone.<h2>Who will think of the banks?</h2>To understand the economic predicament the country finds itself in, you have to remember what was happening in China about a year ago completely aside from the trade conflict with the US. Last winter, you may recall, it seemed the Chinese economy might come apart at the seams, as <a href="https://www.businessinsider.com/chinas-economy-is-terrible-without-the-trade-war-2019-1">credit had dried up</a> for the private sector - which is where most of the country's growth comes from - and consumers dramatically <a href="https://www.businessinsider.com/chinese-consumers-debt-load-worsens-slowdown-2019-1">slowed spending</a>.Then in May, Chinese regulators had to bail out a bank, <a href="https://www.businessinsider.com/china-baoshang-bank-takeover-why-it-matters-2019-5">Baoshang Bank</a>, for the first time in decades. A few <a href="https://www.economist.com/finance-and-economics/2019/09/05/after-three-chinese-banks-are-bailed-out-how-many-more-are-at-risk">more bailouts followed</a>, and suddenly <a href="https://www.reuters.com/article/us-china-markets-baoshang/baoshang-failure-takes-a-toll-in-chinas-interbank-markets-as-contagion-fears-grow-idUSKCN1TM11T">banks became scared to lend to each other</a>. By June, the Chinese Communist Party was forced to gather all the banks, tell them to get their acts together, and demand that they <a href="https://www.washingtonpost.com/business/chinas-shifting-approach-to-bank-bailouts/2019/11/25/580dfa1c-0fec-11ea-924c-b34d09bbc948_story.html">take haircuts on their investments in each other</a> (a concept the bankers had lost familiarity with during the state's post-crisis credit spree). It is no surprise, then, that the creditworthiness of the Chinese banking system has been trending downward, especially at the lower end.Autonomous ResearchBecause of the coronavirus, this weakened banking system - less than one year out from being on a bit of a brink - will now have to forgive loans for companies large and small and continue financing local governments dealing with the fallout from stagnating economies and the effort to fight the coronavirus. S&amp;P research estimated that if this crisis is prolonged, bad debt in the banking system could increase from 2% at the end of last year <a href="https://www.ft.com/content/deb2f19a-4d44-11ea-95a0-43d18ec715f5">to over 6%</a>.In this environment, some kind of liquidity event could be even more disruptive than it was in the summer. "Banks will all be more sensitive to their exposure to each other. And they don't really know each other's risk," Dinny McMahon, the author of "<a href="https://www.amazon.com/Chinas-Great-Wall-Debt-Massive/dp/1328846016">China's Great Wall of Debt: Shadow Banks, Ghost Cities, Massive Loans and the End of the Chinese Miracle</a>," told Business Insider. "If there was a liquidity event, you might see a flight to safety very quickly, and how the banks define safety may be a bit more severe than it was last year."And then, of course, even if the banks could forgive loans and ease credit conditions, that would only do so much. Some businesses simply may not be creditworthy after this economic shock."Much of the talk right now is about forcing banks to cut rates, but lower rates won't solve the problem if firms are insolvent," Leland Miller, the founder of the business surveyor China Beige Book, said. "So the issue isn't cost of capital, it's whether the underlying firms are ultimately creditworthy. Depending on how long it takes the economy to get back chugging, that number now may be substantially lower than what it was before the outbreak."<h2>Then there's the private sector</h2>China's other financial-system struggle over the past year was ensuring that private-sector companies, mostly small and medium-size enterprises (SMEs), were getting adequate funding. A lot of these companies used to get financing from China's shadow-banking system, so when authorities cracked down on that in 2017 and 2018, they got squeezed.Authorities spent last year setting up funding mechanisms for them, but the system still isn't working to perfection. This is incredibly important. Chinese <a href="http://www.xinhuanet.com/english/2018-10/23/c_137552650.htm">state media reported</a> that in 2018, the private sector accounted for 50% of tax revenue, 60% of GDP, and 90% of new jobs and new firms."I think they know they're still going to have an issue getting funding to these guys," Chu said of the SMEs. "They are looking at the bond market ... but they had issues with SMEs and bank problems last summer so that isn't straightforward."Autonomous ResearchOf course, if you're an SME that has no relationship with a bank, credit relief might not help you much, McMahon told Business Insider.That is why China announced last week <a href="http://www.ecns.cn/business/2020-02-10/detail-ifztmcih6515218.shtml">measures to support SMEs</a> that have nothing to do with the <a href="http://www.ecns.cn/business/2020-02-10/detail-ifztmcih6515218.shtml">banks,</a> including asking local governments to waive taxes and administrative fees. "This isn't something the banks can necessarily fix, which is new," McMahon said. "You've got a big part of the economy that's sort of out there on its own."In January, <a href="http://www.xinhuanet.com/english/2020-01/02/c_138673542.htm">Chinese state media declared China's victory</a> over all of these issues, saying that it defused "the bomb" by taking leverage ratios down at banks. The coronavirus could reverse all of that progress, according to S&amp;P Global ratings, and take <a href="https://www.ft.com/content/deb2f19a-4d44-11ea-95a0-43d18ec715f5">leverage ratios up to levels unseen in decades</a>. In these circumstances, the government will need to be very careful about how it manages this situation. This is why China's recovery is going to be a slog, not a snapback.This is an opinion column. The thoughts expressed are those of the author(s). <h3>NOW WATCH: <a href="https://www.businessinsider.com/google-photos-apple-icloud-iphone-storage-space-2018-12">I switched to Google Photos after using iCloud for 5 years and I'm never going back</a></h3>

You Searched For "baoshang bank" and got 7 results

How China handled 3 high-profile corporate meltdowns, including companies considered too big to fail — and what that could tell us about Evergrande's future

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There are 3 reasons China just took over a bank for the first time in 20 years, and 2 of them are a huge deal

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China's government is stepping in to help Evergrande deal with its debt, as it has with previous large-scale corporate clean-ups

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China's growth has ground down to a 27-year low, and its economy probably can't go on like this

Linette Lopez

China's economy has been acting especially strange heading into Trump and Xi's G20 showdown

Linette Lopez

10 things you need to know before the opening bell

Jonathan Garber

The coronavirus could cripple China's economy for longer than Wall Street wants to believe

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