Dispose The Npl Strengthen The Economy

Greek PM survives – as expected; China Trouble? | The Big Picture

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Hi there,

Credit Suisse has recently issued an excellent report on Chinese banks

- basically downgraded them (ex ICBC) and the sector to “underweight”.

Basically they cite “asset quality concerns” – too true mate. The issues include:

Massive off balance sheet financing – credit to GDP has rocketed; Non financial companies have the lowest (since 2008/9) interest rate cover; Credit costs will rise; To summarise they remind readers that NPL’s were some 20% – 25% in the past.

BoA is likely to sell its approx 10% shareholding in CCB;

China’s National Development and Reform Commission forecast that inflation would rise above 6.0%. No surprise there. Indeed, actual inflation is likely to be above that number even now – however, Chinese statistics, well……..;

China’s response to its neighbours re Oil exploration in the South China seas “you are playing with fire”. China wants bilateral negotiations – no chance. In addition, they state that US involvement may end up making the situation “more complicated” ie go away. They add it would be better for the US to leave disputes in the South China Seas to the claimant countries – no chance;

Liquidity is proving a problem in China. Money market rates have risen to a 3 year high. The 7 day repo rate has doubled in less than a week.

The PBoC policy of hiking RRR ratios is clearly impacting;

Fitch stated yesterday that a Sovereign debt swap and/or a rollover of maturities, EVEN A VOLUNTARY ONE, will be deemed a default.

The FT refers to Article 125 of the Treaty on the Functioning of the European Union. It quote extracts from the relevant paragraph.

“A Member State shall not be liable for or assume the commitments of central governments, other bodies governed by public law, or public undertakings of another Member State”.

Just to remind you, the German Constitutional Court meets on 5th July to consider whether the present bail outs are legal !!!!!!!;

The Greek PM survived the confidence vote. Great, now he has to pass legislation through Parliament (on 28th June) to authorise a package amounting to some E78bn of spending cuts and revenues (the mythical privatisation proceeds). There are subsequently other hurdles.

Unions are calling for more public strikes etc – essentially the same old. same old.

Look Japan

The Japanese economy

China & world economy

Balance sheet recession, Japan's struggle with uncharted economics and its global implications

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