China's Mega Banks Meltdown: Bed Loan Crisis Lead to Economic Collapse! - Must Video

Epic Economist

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Facing a major meltdown, China Mega Banks are crashing at a pace that can’t go unnoticed. In today’s video, we are going to examine what has been happening with China’s banking system and why are so many high-profile Chinese banks collapsing one after the other, complexifying, even more, the level of the damages the world will have to face in this new Worldwide Great Depression.

Aligning with other global lenders to alert about the difficult economic outlook ahead, China is silently signaling that the worst is yet to come. For its part, HSBC Holdings Plc has warned that the repercussions of the sanitary outbreak is likely to induce loan losses of as much as US$13 billion this year, and JPMorgan Chase & Co have been arguing that this will be an extended period of economic contraction, stressing that the government stimulus was making it more complicated to measure the size of the economic damage. Ultimately, the China Megabanks meltdown could result in a 20 percent to 25 percent profit reduction in 2020, according to Jefferies analyst Shujin Chen, she completed by cautioning that further reductions would hurt banks’ capital even without any dividend payout and would be harmful to financial stability.” China is now trying to gradually get back on track, with President Xi Jinping boosting his efforts to make the economy more independent in the face of the ongoing confrontation with the US on many sectors, such as trade, finance, and technology. As tensions between both world’s superpowers over Hong Kong caused mutual sanctions on politicians and officials of both sides over the past few weeks, China’s biggest lenders are examining their accounts to avoid endangering their access to crucial dollar funding, especially because at the end of June, all big four banks had US$1.2 trillion in such funding, and could face fines for doing business with any of the 11 Hong Kong and mainland officials targeted by US sanctions. In conclusion, having a banking system is controlled by 4 big state-run banks, which are in control of the financial system, owning 50 percent of all loans, in that way, keeping the control of the system on the government’s hands is actually what may have disrupted the entire financial structure at the first place. This centralizing necessity to control all institutions may have been the cue to the rise for an huge shadow banking industry, filled with corruption and expensive loans. In March, the country’s total domestic debt was 317 percent of the country’s GDP, but some reports say that there are many loans off the books as well. To get to the point of allowing some players to publicly fail, China shows that their debt is too high to handle. As Wionews cleverly defined: “China’s banks are failing because the country has been fueling its growth with debt and years of borrowing has made the banks hollow. China’s banking system is a ticking time bomb and if it were to explode, it will take the Chinese economy along with it.” 

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