Shadow bank Wanxiang next to fall

Another shadow bank falls, and with it thousands of unhappy clients. The pressure builds; when this class of people gets large enough there will be serious problems.

It is notable that China’s domestic media is covering this story, and South China Morning Press made a video about some of the many jilted home-buyers. This sends a signal, I suppose, but the question is what signal.

We should not expect SCMP to in any way try to even inch up to the line set by the government, not after all that’s happened. As it is another (female) reporter from SCMP has been swept up in China, Minnie Chan is incommunicado and we all know what that means. ‘Her family’ has asked for all of us to respect ‘her privacy’.

Perhaps the deeper problem is that the government is going to approach this as a criminal matter. In which case, assets will be stripped from the entity and disappeared into the system. This is a major factor with all of the insolvent companies, where likely the same thing will happen. Assets will be seized, projects will be delivered to other entities.

What will happen to the clients, the suppliers, the holders of corporate debt? There are no answers now, other than the concept that the government will backstop. Whether and how that works remains to be seen.