Nice podcast here from Grants discussing the significance of the recent Baoshang Bank default in China with Carl E. Walter, a former bank executive, coauthor of Red Capitalism:
“(Baoshang) is scaring everybody because they’re not the only one. They’re the one that couldn’t hold it together in the end, but… I’ve been trying… to figure out how many banks there are in China and supposedly there are 134 of these city commercial banks. 134 of which (Baoshang) is one, and all of these guys use wealth management products or borrowed in the inter-bank market to fund local things. Or, they borrowed in the inter-bank market or borrowed in wealth management products to support local asset management companies to hide other banks’ bad loans. I don’t think (Baoshang) is unique and I think the reason the markets are scared is because everybody knows that the emperor has no clothes. There is a lot more than just the one.”