Wolf here: occasionally I highlight comments that add a different angle or flavor or an illustration or more depth to an article published on Wolf Street. This comment by Gil Obrero is in response to David Stockman’s article, HSBC Turns into China Stimulus Junkie
The article discussed HSBC’s call for more stimulus, though “China’s credit tsunami has unleashed a dangerous speculative mania throughout the land that has no parallel in human history,” as Stockman wrote. “Total credit outstanding (which Beijing’s red capitalists are pleased to call ‘social financing’) has exploded from $1 trillion at the turn of the century to $25 trillion today.”
By Gil Obrero:
There is a silver lining to all this, and I dropped on to it accidentally when in Guangzhou several months ago.
I knew that China had surreptitiously allowed its citizens to move cash offshore through its banks in Guangzhou, but after meeting with a friend who has some deep insight into what is happening in China we came up with a plan to capitalize on this.
Although HSBC has dropped money transfers for Chinese clients, the reality is that the Chinese government will turn a blind eye to any form or means that allows wealthy Chinese to move as much cash off shore as possible if that cash can be turned into foreign held assets – thus draining some of the liquidity in China, and especially so if those assets are solid income-producing assets.
The trick was to come up with a vehicle we could use that could enable that, and now we have a three way consortium of companies based in China, the UK, and the Philippines that is enabling our activities to proceed without the UK govt even being aware of it, as the operational side is offshore, or the Chinese government which can be easily persuaded to turn a completely blind eye.
I suspect many more will catch on soon enough, and the wealthy in China will soon be turning those poisonous bonds they hold into Western assets, first to pay the losses and then to shift inflationary pressure out of China.
And no one can accuse the Chinese banks of breaking their own laws. By Gil Obrero.
Here is the original article and comment: HSBC Turns into China Stimulus Junkie