Restructuring the Chinese Financial System After the CCP Collapse
Recapitalization, Repudiation, Privatization and Decentralization
There has been an unending stream of propaganda from the Chinese Communist Party (CCP), Wall Street and City of London firms, legacy media, and many think tanks and academic institutions claiming that the ‘China Model’ represents the future. In fact, the CCP is the master architect of what is on track to be the greatest economic and financial catastrophe since at least World War II, and possibly human history. The CCP is China’s shortest-lived dynasty and has an unavoidable rendezvous with environmental degradation, demographic decline, and an economic and financial system that is only capable of feeding off of itself through debt growth.
The CCP-run financial system sits atop fundamentally unstable foundations and structural defects that render it highly vulnerable to immediate collapse in the event of CCP regime instability. Non-performing loans (NPLs), misappropriately priced assets, gross capital misallocations, hidden debts and other liabilities, inaccurate profit and loss and capital reserve accounting, and a range of other issues permeate the entire financial system. This results in China’s ‘Big Four’ banks and multiple other systematically significant financial institutions being dependent upon continuous capital injections and other forms of temporary relief from the People’s Bank of China (PBOC – China’s Central Bank). This CCP-driven approach results in the scale and consequences of the abovementioned problems and others growing exponentially over time with an ever-decreasing margin for even minor miscalculations.
China’s Big Four banks are Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China, Bank of China and China Construction Bank and all have nationwide networks of bank branches, ATM machines, and other related assets. Instability at even one of these banks can generate a nationwide bank run, an event that can lead to widespread instability and suffering of innocent ordinary depositors. The primary function of major Chinese banks is to support the political and strategic objectives of the CCP and to enable the corrupt enrichment of CCP leadership at national, provincial, and municipal levels. The maintenance of financial market stability, deposit protection, efficient credit creation, and other core banking functions are distant secondary priorities.
Chinese banks are used by the CCP to reward friends and to punish enemies. They are also essential to facilitate the CCP’s illicit activities around the world, from synthetic narcotics trafficking to weapons smuggling. These banks are also key enablers of CCP capital flight out of China and into leading financial centers and property markets across the world. As such, major Chinese banks can be viewed as the ‘oxygen’ that enables the entire corrupt criminal enterprise that is the CCP to continue to breathe and operate. Following the collapse of the CCP, it will be essential to engage in targeted intervention to simultaneously prevent population-level catastrophe while also preventing the CCP from utilizing these financial institutions to reconstitute themselves.
