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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: combjelly who wrote (288773)	5/20/2006 8:53:07 PM
From: Road Walker	Respond to of 1573993

re: China could implode soon if they don't change course. Likely it will happen any way, but they can't sustain. Now what that augers for the US is another issue. One that won't have a happy ending. Some thing I hadn't considered.

To: combjelly who wrote (288773)	5/24/2006 1:27:33 AM
From: tejek	Read Replies (1) \| Respond to of 1573993

"China does from time to time redirect growth but I have not heard them say they are lowering growth." They don't have a lot of choices. According to Earnest & Young, China has $900 billion worth of underperforming loans. Now true, they later retracted that figure when China squawked, but the fact they are also an auditor for one of the state banks might have had something to do with that. Let's assume they do have 900 billion of underperfperforming loans which is really an euphenism for bad debts. Why does that lead to a lowering of the country's growth rate? China could implode soon if they don't change course. Likely it will happen any way, but they can't sustain. Now what that augers for the US is another issue. One that won't have a happy ending. Did you see this article in the Financial Times? It was posted in a blog on the subject. Probably E&Y were forced to remove the report but still, there is the possibility that E&Y screwed up. In any case, it explains why the markets have been roiled and come down so quickly in the past two weeks. I wish I had known of the report when it came out.....I would have sold most of my stocks. FT Ernst & Young withdraws China NPL report By Richard McGregor in Beijing Ernst & Young, the accountancy firm, has withdrawn a controversial report on China's non-performing loans, saying its estimate of bad debts for the country's big four state banks "cannot be supported" and "is factually erroneous." The announcement comes days after the report was attacked by the People's Bank of China, the central bank, as "ridiculous and barely understandable" and at odds with the firm's own auditing of Chinese banks. The main problem for E&Y appears to have been a conflict between the NPL report and its own auditing of the Industrial & Commercial Bank of China, the country's largest lender, ahead of an overseas listing slated for September. E&Y in its NPL report identified the level of bad debts in the big four state banks, including ICBC, as US$358bn, much larger than the official number of US$133bn. The additional US$225bn in extra bad debt was derived from a UBS research report estimate of the amount of new sour loans resulting from a surge in lending in China between 2002 and 2004. In a statement issued with the retraction of its report, E&Y resolved the conflict firmly in favour of its auditors, saying the official figure was "computed on a regulatory and accounting standard based on objective evidence of impairment." E&Y China serves as auditors for one of those banks and their audit, performed under international standards of auditing in order to form an opinion on the bank's state of affairs in accordance with International Financial Reporting Standards, supports the bank's contribution to the total of US$133bn for all four of the commercial banks,â€ the statement says. In a separate statement on Monday, E&Y said the NPL report had erred by treating "unverified forecast data compiled by others as if it were historic information." E&Y said it was clear that its own internal policies for approving such reports were not followed and procedures would be reviewed to ensure that such an embarrassing situation will not happen again. The E&Y report on bad debts took many by surprise as the market had become much more relaxed about China's NPL issue after a wave of initiatives to clean up the books of the country's big banks in particular. The timing of the E&Y report was especially aggravating for the PBoC, coming just before the launch of a roadshow to promote the US$9.9bn initial public offering by Bank of China in Hong Kong, and the preparations for the ICBC listing. The overseas listings, the first of which was late last year with the IPO of China Construction Bank in Hong Kong, are a central part of the government's plan to transform them into genuine commercial lenders. E&Y's estimate of China's total NPL liabilities of US$911bn in its report released in early May was nearly double the same firm's 2002 estimate of about US$480bn. E&Y says it plans to review the original NPL report, issued on May 3 this year, and release a revised version. Although they did not include the same high numbers as the E&Y report, both PwC, the consultancy firm, and McKinsey Global Institute, have issued reports in recent weeks reaching similar conclusions about mounting levels of new bad loans in the Chinese banking system. chinesepolitics.blogspot.com