Not so long ago, the far-left media was pushing near-hysterical reports on the “madness” that was President Trump’s determined push-back against decades of China-led manipulations meant to allow the world’s most powerful communist regime to increase its economic footprint around the globe.
President Trump held firm, ignored the economic “experts” predictions of U.S. financial collapse, and now stands tall as China faces a potentially crippling domino effect of defaults that would push it into outright insolvency.
Once again, the president was right and all of his shrill, anti-American doubters, were wrong…
Via Zero Hedge:
China Braces For December D-Day: The “Unprecedented” Default Of A Massive State-Owned Enterprise
Something is seriously starting to break in China’s financial system.
Three days after we described the self-destructive doom loop that is tearing apart China’s smaller banks, where a second bank run took place in just two weeks – an unprecedented event for a country where until earlier this year not a single bank was allowed to fail publicly and has now had no less than five bank high profile nationalizations/bailouts/runs so far this year – the Chinese bond market is bracing itself for an unprecedented shock: a major, Fortune 500 Chinese commodity trader is poised to become the biggest and highest-profile state-owned enterprise to default in the dollar bond market in over two decades.
In what Bloomberg dubbed the latest sign that Beijing is more willing to allow failures in the politically sensitive SOE sector – either that, or China is simply no longer able to control the spillovers from its cracking $40 trillion financial system – commodity trader Tewoo Group – the largest state-owned enterprise in China’s Tianjin province – has offered an “unprecedented” debt restructuring plan that entails deep losses for investors or a swap for new bonds with significantly lower returns.
Tewoo Group is a SOE conglomerate, owned by the local government and operates in a number of industries including infrastructure, logistics, mining, autos and ports, according to its website. It also operates in multiples countries including the U.S., Germany, Japan and Singapore. The company ranked 132 in 2018’s Fortune Global 500 list, higher than many other Chinese conglomerates including service carrier China Telecommunications and financial titan Citic Group. Even more notable are the company’s financials: it had an annual revenue of $66.6 billion, profits of about $122 million, assets worth $38.3 billion, and more than 17,000 employees as of 2017, according to Fortune’s website.
The state-owned company is neither publicly-listed nor rated by the top three international ratings companies, although it does have publicly traded bonds whose performance in recent months has been nothing short of terrifying for anyone who thought purchasing a company explicitly backed by Beijing can never fail.
The fact that a state-owned enterprise such as Tewoo has just days before it defaults, in either a prepack or “freefall” form, suggests that Beijing will no longer bail out troubled SOEs, let alone private firms, perhaps due to the strains imposed by the economy which is slowing the most in three decades. It also raises concerns over Tianjin, where it’s based, following a series of rating downgrades and financing difficulties suffered by some of the city’s state-run firms. The metropolis near Beijing also has the highest ratio of local government financing vehicle bonds to GDP in China.