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Beijing struggles to defuse anger over China's P2P lending crisis

reuters.com

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Re: Beijing struggles to defuse anger over China's P2P lending crisis

#11

Post by baybal2 »

atr_gz wrote: post #6
ruang wrote: post #3

So it's the responsibility of smart investors to bail out dumb investors?

The government, including Li Keqiang, was officially promoting this industry a few years ago. The government also tightly controls the flow of information in China, keeping people from seeing alternate opinions. In addition to that, tight currency controls mean the middle class is starved for worthwhile investments. I don't know whether these people should be bailed out or not (the companies definitely shouldn't be),…

>In addition to that, tight currency controls mean the middle class is starved for worthwhile investments.

But that is kind also the only reason China is not completely sank in the saving glut. They want to make it appear to people that they have no better alternative to use their money than just spending it right away.

This is one of reasons that a thing as bizarre as that bitcoin took off her.

In reality, Chicoms have no effective way to stop capital bleed. The learned that the stronger signal they send that "tomorrow it will be harder to get your money out of the country," the more money actually leaves.

All kinds of eCurrencies is one side of that, but insane loan schemes is another: the current most popular funds exfiltration scheme is following - a guy loans money to some fund in China, and in exchange gets an interest free or very low interest rate load abroad. The fund then finds more a legal front for "investing abroad" or just bangs money away inside China on pump and dump schemes.

It is borderline tragicomic that whatever seemingly makes sense,and made in good faith policies made up by Chinese government end up acting with opposite effect:

1. The 50k USD limit on foreign remittance - actually aggravates capital flight, by sending the signal that domestic capital markets are so bad that government has to resort to such extreme measures.

2. Prohibition on private ownership of major assets (real estate, land, mining licenses, ownership of private business over the revenue limit, sea ad aircraft, and on) - was made to ease saving glut, by making people rent that stuff rather than own, but... you know: an average Chinese citizen save like crazy just to get the 50 year rent.

3. Salt tax - apparently is still being kept to force people buying Iodinised salt, but everybody knows where to buy salt around the state monopoly

And on and on and on

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#12

Post by bilbo0s »

vfulco2 wrote: post #4

There is a huge structural issue when investors of all asset classes believe the central government will bail them out. It happens to a vastly lesser degree elsewhere. We saw the folly of it in the US in 2008.

I don't know if the structural issue was people believing the US government would bail them out. The issue was probably more that we actually bailed them out. I can't really blame rich and powerful bankers for thinking we were gonna do something that we normally do for them.

Stop bailing them out, and they'll stop believing they're gonna be bailed out.

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#14

Post by 21 »

In the last 5 years retail Chinese investors had massive losses in bitcoin, gold, the local stock market, bitcoin again, now P2P.

Is it fair to say that they rush from one investment fad to the next, typically buying the top? This is how it looks from far away, can someone with local knowledge comment?

http://static.atimes.com/uploads/2015/07/retail-investors.jp...

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#15

Post by tiatia123 »

As mentioned before, we (Europeans) don't have to be afraid of China's strength but only of our own weakness.

China has its' strengths but it comes with too many weaknesses. The constant cheating and screwing the other party over will work only to some extent. This is also a reason why I dislike Chinese stocks. The idea of "shareholder" value or "sharing your business profits with an anonymous investor" must sound totally absurd for most Chinese. In the end, what goes around will come around eventually.

Do you know Alibaba by the way?

https://brontecapital.blogspot.com/2015/09/job-interview-que... https://brontecapital.blogspot.com/2015/10/alibaba-yeah-righ...

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#16

Post by koboll »

bilbo0s wrote: post #12
vfulco2 wrote: post #4

There is a huge structural issue when investors of all asset classes believe the central government will bail them out. It happens to a vastly lesser degree elsewhere. We saw the folly of it in the US in 2008.

I don't know if the structural issue was people believing the US government would bail them out. The issue was probably more that we actually bailed them out. I can't really blame rich and powerful bankers for thinking we were gonna do something that we normally do for them. Stop bailing them out, and they'll stop believing they're gonna be bailed out.

If we're in a position where the options are a bailout or the catastrophic collapse of the world economy, we've already failed.

This is why regulation is necessary.

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#17

Post by stephengillie »

atr_gz wrote: post #6
ruang wrote: post #3

So it's the responsibility of smart investors to bail out dumb investors?

The government, including Li Keqiang, was officially promoting this industry a few years ago. The government also tightly controls the flow of information in China, keeping people from seeing alternate opinions. In addition to that, tight currency controls mean the middle class is starved for worthwhile investments. I don't know whether these people should be bailed out or not (the companies definitely shouldn't be),…

Just how tightly do the people in China's government control the flow of information? This poster says it's reported almost daily by Chinese media.

https://news.ycombinator.com/item?id=17744123

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#18

Post by seanmcdirmid »

21 wrote: post #14

In the last 5 years retail Chinese investors had massive losses in bitcoin, gold, the local stock market, bitcoin again, now P2P. Is it fair to say that they rush from one investment fad to the next, typically buying the top? This is how it looks from far away, can someone with local knowledge comment? http://static.atimes.com/uploads/2015/07/retail-investors.jp...

They’ve done well on real estate. The government would never let the real estate sector crash, the bubble must be maintained at all costs, or at least the landing must be soft.

Well, thats the hope anyways. I think that sector will crash eventually, but they’ve kept it going for so long.

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#19

Post by tonyedgecombe »

seanmcdirmid wrote: post #18
21 wrote: post #14

In the last 5 years retail Chinese investors had massive losses in bitcoin, gold, the local stock market, bitcoin again, now P2P. Is it fair to say that they rush from one investment fad to the next, typically buying the top? This is how it looks from far away, can someone with local knowledge comment? http://static.atimes.com/uploads/2015/07/retail-investors.jp...

They’ve done well on real estate. The government would never let the real estate sector crash, the bubble must be maintained at all costs, or at least the landing must be soft. Well, thats the hope anyways. I think that sector will crash eventually, but they’ve kept it going for so long.

The more they artificially sustain that market the harder the crash will be. It will be painful but I still hope something like that would create democratic reforms.

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#20

Post by baybal2 »

seanmcdirmid wrote: post #18
21 wrote: post #14

In the last 5 years retail Chinese investors had massive losses in bitcoin, gold, the local stock market, bitcoin again, now P2P. Is it fair to say that they rush from one investment fad to the next, typically buying the top? This is how it looks from far away, can someone with local knowledge comment? http://static.atimes.com/uploads/2015/07/retail-investors.jp...

They’ve done well on real estate. The government would never let the real estate sector crash, the bubble must be maintained at all costs, or at least the landing must be soft. Well, thats the hope anyways. I think that sector will crash eventually, but they’ve kept it going for so long.

Well, there was a number of bank/property broker runs around the country, in second tier cities and below.

The party is far from being almighty. There was a huge number of other things that people were betting CCP will not let crash at all costs, but which nevertheless crashed: from currency, to stock market, to rural lending cooperatives (google that, it think their crash had impacted close to 1 in 3 or 4 people,) and on and on

China is no stranger to totally catastrophic financial crashes. Things like 2008 in US happen here every 4-5 years, but people seem to barely notice them.

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