Yesterday, when reporting on the latest development in China's ongoing under-the-table stealth nationalization-cum-bailout of insolvent enterprises courtesy of a proposed plan to convert bad debt into equity, we noted that while China has already managed to convert over $220 billion of Non-performing loans into equity, concerns - both ours and others' - remained.
We have reported for years that Russia and China have been doing everything they can to displace the use (and influence) of the US dollar.
The US of course, either oblivious or too arrogant to care, has continued to bring Russia and China together by annoying both equally with its incessant meddling. Recall that recently both China and Russia have had to warn the US about its insistence on flying reconnaissance planes too close to their borders.
Two months ago we were amazed to read that according to the latest "deus ex machina" proposed by the PBOC, China would "sweep away" trillions in bad loans by equitizing them in the form of debt-for-equity exchanges. This is how we tried to explain this unprecedented move on March 10 when Reuters first hinted it was coming:
Not only is China facing a significant risk of an economic hard landing, but, as we have noted on many occasions, the country is also facing what perhaps may be an even greater risk: social unrest.
Just over a week ago, we pointed out that China's great credit growth stimulus from early 2016, when the PBOC injected $1 trillion in new credit in the first quarter of the year, had come to a screeching halt in April, confirmed by the lack of growth in China's broadest credit aggregate, Total Social Financing, which had just dipped to a negative growth print year-over-year.