2024-01-06 12:24:00
On January 6 Mr. Palat Sirikunphisut microeconomics hand Former Secretary to the Minister of Commerce and former applicants Bangkok MP from the Ruam Thai Sang Chart Party posted on Facebook. Ta Phlat Sirikulphisut Analysis of the case of Zhongzi Enterprise (Zhongzi Enterprise Group), the number 1 Shadow bank in China, has collapsed! By stating that
Zhongzi Enterprise, Number 1 Shadow bank in China, has collapsed! Trillions worth of damage: What is the shadow bank? What impact will it have next? We will analyze it.
Zhongzi, China’s giant shadow bank, files for bankruptcy, 2 trillion baht in debt
Financial institution system in China complicated At the top of the pyramid are large banks that are international such as ICBC, Bank of China, Agriculture Bank, Construction bank 4. These banks are in the top 20 in the world, followed by national and state level. There are also Fintechs such as Ant coming in. There is a financial role in the Chinese economy. Shadow banks also play an important role within.
Shadow Bank is a company that does financial business similar to a bank (non bank) but does not have a banking license. That is, commercial banks accept deposits and lend money, but shadow banks raise money by issuing bonds. Bill of Exchange (Bill of Exchange) Notes from people who want savings higher than bank interest rates. Then let’s lend money to people who can’t get a bank loan. or want to borrow money with less difficult conditions. Shadow banks have grown to overlap with the Chinese economy. Many years ago, my elderly relatives in Hong Kong told me that He invests in deposits or buys bonds in Shadow banks. The returns are very high, around 100%+, until many Hong Kong and Guangdong people start to open their own Shadow banks.
How does the main mechanism work? Uncle said that Chinese banks are becoming strict, especially in the real estate sector. A company that borrows money from a bank cannot roll due. It must pay off the principal before continuing with the loan. These companies then borrow money from Shadow Bank to pay off the bank. The bank closes quarterly financial statements. When the national bank comes to inspect them, they are in good health. Shadow bank gets high interest and has collateral. That has been redeemed from the main bank can be called a short-term refinance, but the interest is very attractive.
Later, the Chinese government began the policy Reduce economic heat, especially the real estate sector. As a result, loans issued to the real estate sector are becoming more difficult. Various projects are started and never finished. In addition, it is more difficult for customers to buy houses. With the rules that require a high down payment and buying a second and third home is difficult to get a loan Reduce speculation Real estate companies have to rely more on shadow banks and are also issuing more bonds themselves. The Chinese government has hit the brakes this time and it will be a big hit and it won’t be time to fix it. Giants like China Evergrade, number one in real estate, are no longer able to survive. Default interest payment And there are many more to follow.
Finally, the No. 1 shadow bank, Zhongzi, lacked liquidity and defaulted on debt payments with a debt of approximately 400billion Rmb, which is much larger than China Evergrade. It’s a bank. When a bank like this collapses, the back-end refinance system also collapses. If it were Domino, a Chinese bank, there would be large bad debts. And as a result, China must accelerate reform of the banking sector. Including managing municipal debt, state government, state enterprise, including household debt, especially real estate. Fortunately, China doesn’t have a lot of consumer finance like we do, but real estate creates ghost towns, ghost buildings, and greatly undermines the people. The Chinese legal system must urgently adjust in many matters. Bankruptcy law Managing bad debt, good debt, asset management companies Secondary real estate market (in Thailand already closed) SPV, Securitization and Fintech
Consequences
1. The Chinese economy will slow down further, consumption will disappear, and private investment will stagnate.
2. Construction materials cannot be sold. Must focus on export or move factories to foreign countries
3. Businesses that need to purchase things with Finance such as cars and others will be affected. More Chinese car makers may flee to Thailand.
4. People’s savings were seriously damaged from the default.
5. Affects the direction of Chinese and world monetary policy.
6.Thailand will be affected by exports to China. and tourists
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