China’s largest local commercial bank, Baoshang Bank, formerly owned by the “Tomorrow System” (Tomorrow Holdings Group), has been in official receivership by the Chinese Communist Party for nearly two years due to bad credit problems. Some commentators said that in addition to showing the intense infighting at the top of the Chinese Communist Party, the economic bubble crisis in China may trigger a wave of bank bankruptcies.
According to the ruling of the Beijing No. 1 Intermediate Court cited by domestic media, when Baoshang Bank filed for bankruptcy liquidation in November last year, its total liabilities reached about 206 billion yuan, but its total assets were less than 500 million yuan, so it was obviously insolvent; in addition, Baoshang Bank no longer had any production operations or active employees at that Time, so it obviously also lacked the ability to actually settle its debts. Therefore, the court made a civil ruling on February 7 this year, ruling that Baoshang Bank was bankrupt.
The Chinese government had already introduced the Bankruptcy Law a few years ago to prepare for the financial risks that would be brought about by the growing bubble in the Chinese economy.
The Chinese government introduced the Bankruptcy Law a few years ago, targeting local banks, which are the cash machines of local governments. Now in terms of the Chinese economy, the financial risk comes from what? Each local government is blindly debt, borrowing money, developing real estate, etc., and even engage in some speculative projects, so that the Chinese economy to talk about this bubble, bubble, now the bubble is very big. So, the bubble is a big word, first of all, the financial institutions are unlucky is these local banks. I think, this package business bank is only the first, but will not be the last. The risk is that it may trigger a chain reaction, so to speak, that will trigger the successive bankruptcy of some other local small and medium-sized banks in the city. It may trigger a wave of bankruptcy, which may have a very serious impact on the economy.
Last year, a central bank official in charge of taking over Baoshang Bank said in a media article that Baoshang Bank’s serious insolvency problem was closely related to the “tomorrow system” controlled by capital magnate Xiao Jianhua. The results of the asset verification show that the Tomorrow Group, which holds 90% of the equity of Baoshang Bank, has been siphoning off credit funds by registering shell companies since 2005, causing 156 billion yuan of non-performing loans to Baoshang Bank as of 2019, with annual interest of up to 10 billion yuan.
Xiao Jianhua, the owner of Tomorrow Group, disappeared in January 2017 after being taken away from the Four Seasons Hotel in Hong Kong by suspected Chinese Communist Party officials, and it is widely rumored that he was escorted back to China to assist in the investigation of the 2015 China stock market crash and the liquidation of his assets. The Chinese government’s political environment has changed since Xi Jinping came to power, so Xiao Jianhua, the white glove of the interest group, is in danger of escaping and has not shown up since he was taken back.
The first thing is to fight the vested interest group, the powerful class, to grab the interests of the powerful class, so some of the two sides are fighting very fiercely, so the result of this fight may be like Xiao Jianhua, the package business bank, may be a victim of their struggle. I think that Xiao Jianhua, Baoshang Bank, and the local government, they are a trinity. They use the bank’s funds to engage in some projects, it can be said that they are tapped out, tapped out the bank. However, according to reason, the bank borrowed money, should recover the money, but the money is difficult to recover after spitting out, because they have a debtor is all the local governments, these local governments they owe, but they never want to say pay back. And the government can not collapse, so to speak, these losses will eventually fall on the heads of those who invest in these depositors
The media reported that Xiao Jianhua is the white glove of the former Politburo Standing Committee member Zeng Qinghong’s Family, and that the 2015 stock market crash was an “anti-Xi coup” planned by Zeng Qinghong and other key members of the Communist Party of China’s Jiang faction. After Xiao Jianhua’s mysterious disappearance, Beijing authorities have made a major effort to cut back on the vast assets of the “Tomorrow System” group. Nine financial institutions under the “Tomorrow System” were also officially taken over in July last year. Yuan Jianbin, chairman of the former Shanghai Qixiang Network Technology Co., Ltd, said that because the government has introduced bankruptcy laws, this time the bankruptcy of Baoshang Bank, the government finally threw out the bank, once the bank went bankrupt, a liquidation, the deposit of more than 500,000 of those people were sheared, cut leeks. The white glove Xiao Jianhua was taken away from the power struggle, and has not shown up after 4 years, the fate will only be bad.
The company’s main business is to provide a wide range of products and services to the public. The economic power struggle with the political power struggle caused by the right! So the suffering is the deposit of more than 500,000 of these, whether it is business or personal, the loss is relatively large. Insurance companies are now the highest compensation to 500,000, so this round of bank failures is actually cutting the leeks! But it is cut is relatively a little money, the middle class above some of these people, the people of this piece he still have a bottom of the 500,000 deposit insurance in the side.
Hua Po also said that the Beijing authorities will let China’s largest local commercial bank of Baoshang Bank bankruptcy, but also want to take the opportunity to eliminate some bad financial institutions, especially local banks controlled by local authorities, but since 2020, the risk of China’s banking industry continues unabated, and now the overall operation of China is facing extraordinary times, the financial risk is huge.
But I think the losers are the depositors. This way, the money borrowed by the government, the money taken by the rich and powerful will not have to be repaid, and it will become a dead and dormant account, and ultimately the board will hit those innocent depositors. The bankruptcy of the Baoshang Bank is also a litmus test, a stone to see the reaction of all sectors. If it does not cause large-scale risk, the government may tolerate the failure of some other local banks one after another. The key to the bank’s collapse lies in whether the government, especially the central government, is bailing it out and watching it die. If it jeopardizes the overall economy, which is very sensitive now, this Epidemic is serious, if he feels that it jeopardizes the overall economy, the overall economy of China, the threat is very great, and may trigger a chain reaction.
On May 24, 2019, Inner Mongolia Baoshang Bank was jointly taken over by the People’s Bank of China and the CBIRC due to serious credit risks, making the bank the first commercial bank in China to be taken over in 20 years. on November 23, 2020, the CBIRC approved: Baoshang Bank entered bankruptcy proceedings. Before Baoshang Bank’s accident, many party media of the Communist Party of China, such as CCTV, People’s Daily, Economic Daily, Guangming Daily, People’s Daily Online and Xinhua News Agency, had touted Baoshang Bank.
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