Gustavo Ballvé on August 20th, 2010
Banks, Corporate Governance, Food for thought, Home, Industries, Portfolio Management, Risk management

Economies, in the plural, since two recent articles have dealt with the “unofficial” sides of the Chinese Economy. First there was a Bloomberg article on Chinese banks getting the order to move their off-balance sheet stuff to the books. The “not-meant-to-be-funny-but-still-funny” part goes like this: “They want to strengthen their monitoring of the systematic risk related to off-balance sheet management of bad debts,” said Wang Qing, Hong Kong-based economist at Morgan Stanley. “In the near term, the impact on banks’ earnings will be quite limited.” It makes us wonder who still trusts short-term bank earnings in China. We suggest a “translation” to the funny part inside, along with the second article.

Repeating the sentence: “They want to strengthen their monitoring of the systematic risk related to off-balance sheet management of bad debts.”

The translation to that sentence could be: “they know they have been lending recklessly (oh the power of incentives…), don’t have a clue about the true size of the mess and are praying for the inefficiencies of the economy/ transmission channels to dampen the multiplier/ domino effect of this huge but untraceable/irreconcilable collective irresponsibility – and yet want to sound ‘in control’ and ‘knowledgeable’ about it as long as they can”.

The second article is a LEX on China’s “grey” economy, mentioning research by Credit Suisse (which can be found here). In it CS researches China’s “real” wealth distribution, and surprise surprise, it looks more like South than North America. Why? Because incomes may be as much as 90% higher than official stats – please note that stats can be used to tell any story, we know nothing of what sample they used, the questions they asked, etc.

Would the real China please stand up?

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