Monday, August 31, 2009

China to renege on commodity contracts

A report that Chinese state-owned companies will be allowed to walk away from loss-making commodity derivative trades provoked anger and dismay among investment bankers on Monday as they feared it may set a damaging precedent.
The State-owned Assets Supervision and Administration Commission, the regulator and nominal shareholder for state-owned enterprises (SOEs), told six foreign banks that SOEs reserved the right to default on contracts, Caijing magazine quoted an unnamed industry source as saying in an article published on Saturday.
While the details of the report could not be confirmed, it was Monday's hot topic in financial circles from Shanghai to Singapore as commodity marketers feared that companies holding underwater price hedges could simply renege on the deals, costing banks millions of dollars in profit.

"It's like the father suddenly told the creditors of his debt-ridden son that his son won't pay any of his debt," said a lawyer from the derivatives risks committee of the Beijing Lawyers Association. (C ) Reuters


  1. Does that mean the derivatives market start to unwind?

  2. Sounds very reasonable to me, after all it was all bets based on the great ponzi financial systems and its ratings agencies
    guaranteeing everything in sight as all
    AAA kosher And the Bush and Obama crowd boasting that the fundementals were sound and the maddoff and goldman sach run banking and finance system was the best and most profitable in the world.

    Fraud is fraud why claim these contacts have legal validity?

  3. The law favors a breach of contact for economic gain. That is a basic tenent of Anglo-American contract law. Everyone wanted the chinese to start recognizing western law.

  4. Fraud and swindle protected by torte as well, but only for the perps.

  5. China is the oldest running empire in the world. Maybe there is good reason for it! They seem to be smarter than anyone else at the international politic game.
    So here is how they have played their cards. Play the Federal Reserve game long enough to capture all your rivals industry, stock pile goods, then pull the plug on the ponzi scheme. American Empire emplodes! Brilliant!

  6. no,that wouldnt be a brilliant play at all...because the dying empire,usa, or any dying empire in any era,never goes down with a wimper quietly.... the usa will bring the world down with it. I look for a pact among nations, especially china and the usa, to support each other's mutual survival through these unstable times.... because the choice is either mutual cooperation or mutually assured destruction . They have probably crafted an agreement to allow each other to 'default' on each other's debts, and call it a wash.Next year, china will come to the rescue of the crashing u.s. economy by forgiving half the loans ,something like some gigantic trade agreements, that will boost the u.s out of its crisis....and save the world in the process.
    In return, chine gets to emerge as the next Empire, eclipsing the U.S. this whole process might take the next 3 years to get into gear.

  7. I assume that there were many in the US government and banking circles who were hoping that these toxic investments would undermine China's stellar growth.
    The Chinese are a tough bunch,they will play what's best for them and not the NWO and most importantly,they are immune to and will not allow the Rothschilds and other Zionists in banking to control their currencies(like we foolishly have in the US)


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