You're watching...
“The Coming Collapse of China” author Gordon Chang on the Fed allowing Chinese state-controlled banks to buy U.S. banks.
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
Meantime China -- our debt now are banks what's next on their shopping spree a big turn here joining me now Gordon Chang.
Author of the coming collapse of China.
So Gordon it you know this -- highly controversy -- China and Chinese companies are buying things all over the country now setting their sights.
An American bank what's your objection we'll be objection here is that in order to grant the approval for -- the Fed had to certify.
That these banks have adequate supervision and home and they don't.
Because the China banking regulatory commission supervises banks for their implementation of government policy.
Not necessarily for their soundness and we saw this in 2009 when premier when job out.
Force these banks lower their Prudential standards go on extraordinary lending sprees to support government policies.
And the CB -- you didn't hear repeat when these banks but a trillion dollars -- so bad loans on their books.
This is really a black box I mean you really don't know what is going on with this Chinese banks -- I mean it's and bearing different standard their meeting in their country.
-- our banks meet video last.
Here at the end of last year 2011 this China banking regulatory commission said that the nonperforming loan ratio for these banks was zero point 96%.
But that's an extraordinarily great.
But we know that they've got all of these hundreds of billions of dollars at least a bad loans on their books that they're not owning up to.
And so clearly they're not in that good financial -- situation.
In the end of the 1990s we had a similar situation where we -- the bank regulators say that they -- and PL ratio of 1%.
When it was later determined that there and PL ratio was like 3540%.
Nonperforming loan ratio -- So -- -- the things I find interesting we have stopped some deals from going through and it's largely because there were issues with national security.
Let's show that listed Chinese companies that have -- and it's actually American companies that Chinese companies wanted to buy it includes 3COM relief systems unit cow.
So we -- down this road before and we've said no wire and we not saying no this time.
I think there must've been some sort of political deal last Thursday and Friday at the strategic and economic dialogue I don't know what the horse trading is.
But you know for the Fed to make this certification is just contrary to the facts so.
You know maybe we want them to buy American banks but let's be honest about it because this certification just isn't real.
What kind of backbone what kind of spine.
Q we have with China when China is the largest holder among other countries our debt.
Well it doesn't really give them that much leverage and the reason is that they're buying our debt because they're becoming more dependent on our economy.
Last year -- 190 point 5% of China's overall trade surplus related to sales to the US.
As credible by our debt but we buy their products we buy their products but they it right now especially with their economy going to low single digit growth in reality not the eight point 1% that they claim.
There in real trouble now especially those numbers that came out last night in Beijing show that their economy is faltering and -- really need us more because they're having so many problems in Europe Europeans are not buying their goods.
-- I -- you believe that that their economy is very very rocky and certainly very different than what their government tells us it is.
But when you look at the amount of investment this country has done across the planet not just here.
Africa Australia you name that Europe they've been everywhere buying all kinds of assets everything from energy to land you name it.
What do you make -- this what is it gonna mean in the long term and specifically what does it mean for our country.
I think what's happened is that you know the Chinese economy hit an inflection point you know clearly in the past -- inflection point inflation -- -- turning down but it now it's turning down and I think what they've done is they've bought too much oil.
Copper iron ore and they're probably gonna have to dump this stuff on the markets later because they're not gonna have the need for -- manufacturing is contracting at this moment that we can see that from purchasing managers index surveys.
And clearly what we've got right now is China stockpiled a lot of this stuff that they probably are not going to need.
You know we -- talking about this individual bank that a Chinese banks wanted to buy.
What does it tell you that the door is wide open -- when it comes to this.
The door is wide open because that's one of the things that the Chinese have been hammering the Obama administration and the Bush Administration before it.
And and really what they want to do is is really have more access to the American economy and in certain cases that's not a problem in other cases it is.
In ten years.
-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- Japan was going to be the world power that we would all -- to.
And I at -- you know they bought I think Roxanne -- that we're buying -- major landmarks in this country everybody was worried about it.
And then they had ten years of economic recession depression.
What do you say.
-- you know essentially we're gonna we're living in the Japanese Centre right well China is doing the same thing with its bubble that Japan did with -- so you basically in China you're gonna get the same result which is decades of recession or recession -- stagnation.
Because the Chinese aren't really willing to deal with the fundamental problems in their economy.
And now that the global situation has changed they're really ill adopted they just are at this point not gonna be able to produce that growth and we've seen it now because when you look at some of the underlying data coming out of the Chinese economy it says low single digit growth.
Well it's a fascinating story and you are the preeminent expert on China's economy.
Thank you today for helping us out with the story really appreciate it thank you.
