Alternative thinking on chinese banks… chinese debt… and chinese accounting challenges

May 26, 2016 10:09 AM

“Given that the economy is still relatively closed, it should be within the power of policymakers to maintain a monopolistic environment for the banks to earn their way out.” 

That’s Red Cliff Asset Management.

William Lee’s hedge fund is taking the other side of the standard bearish stance on Chinese banks shared by the likes of Kyle Bass and George Soros…

Why the contrarian stance? 

Organic growth. 

It’s an interesting case… until one realizes just how much debt these banks are sitting on.

“These issues point to China’s need for reforms to slow the growth of bad debt and encourage productivity growth.”

That’s a trio of writers at Newsweek, highlighting just how serious the debt problem is over in China. Debt is exploding at a time that its GDP is slowing down.

The Chinese government needs to get out in front of this right now… though the implosion wouldn’t come tomorrow, there are increasingly troubling signs on the corporate debt markets.

“Projects in third countries most often arise from long-term and existing relationships in China.

The One Belt, One Road scheme is heating up, and China is attempting to attract investment in what is one of – if not the most ambitious global economic efforts ever conceived. That makes sense, since this massive project that is suppose to span across multiple continents is not going to be cheap. 

Here’s the background.

“I felt very well prepared for the event. Even though I did not have a finance background, I never felt overwhelmed.”

That’s anonymous student and member of Point72’s new recruitment efforts to attract top talent. 

Steven Cohen’s fund has launched the inaugural Sophomore Summit, a hedge-fund university that will handpick 20 college sophomores and fast-track them for management through an education platform. 

The project comes not long after Cohen said that he was “blown away by the lack of talent” available to the industry today. In an interview with Yahoo Finance, Jonathan Jones discusses the customized training program.

"This matter is ongoing, and, as with any regulatory proceeding, we cannot predict when it will be concluded."

Finally, that’s Alibaba Group Holding (BABA), responding to news that the firm is under SEC investigation. The company issued a statement, and Jay Somaney went banana sandwich on the federal agency while pumping the long-side argument for BABA stock.

Here’s what we know: The federal agency is looking into the company’s accounting practices and the way that it reports sales on the massive e-commerce deal event known as “Singles Day.”

Barron’s hopped on Alibaba’s accounting numbers a lot last year, and U.S. auditing firms haven’t been allowed to look at the books of Chinese companies. 

"The accounting at Alibaba is some of the most questionable I've ever seen" for a major company,” Jim Chanos recently said. 

Oh, come on… we can totally trust China. 

So, wait… you’re telling me… let me get this straight…. You’re telling me… that the accounting practices of the ecommerce industry in China are suspect? 

You’re telling me… that the country that built a fake copy of Disneyland and made counterfeit copies of Disney’s trademarked characters… would allow something unethical?

You’re telling me… that a company from a nation that has fake iPhone stores…

Hold on… you’re telling me… wait… that the nation with fake medicine and fake eggs, and copycat restaurants with names like "Pizza Huh," "Bucksstar coffee" and "McDnoald's…”

You’re suggesting… that a Chinese firm might be doing something shady.

I don’t believe it… It’s just “inconceivable.”

Now someone fetch me a bottle of Jack Daniels – 

Just make sure that none of it was made in China.


About the Author

Garrett Baldwin is the Managing Editor of the Alpha Pages and the Features Editor of Modern Trader. An author and Baltimore native, he earned a BS in journalism from the Medill School at Northwestern University, an MA in Economic Policy (Security Studies) from The Johns Hopkins University, an MS in Agricultural Economics from Purdue University.