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Wednesday, September 7, 2016

High Level General Son in China Unveils Disturbing Business

Chinese General Son
According holding Zerohedge website, in recent months, in the economic world has been discussed recurrently on the outflow of capital from China to the outside in the form of a ceaseless quest by Chinese companies for transferring funds and capital to the Foreign.
In this regard, they have highlighted the numerous Chinese companies who have dedicated themselves to all kinds of purchases of the most varied abroad (some of which have caused surprise) apparently intended to have a legal basis to channel cash to abroad.
Many of these companies made costly acquisitions, even though its total debt was very high, in many cases, dozens of times its EBITDA.
According to wikipedia:
EBITDA is a financial indicator, acronym for Earnings Before Interest, Taxes, Depreciation, and Amortization (earnings before interest, taxes, depreciation and amortization), ie, the gross operating profit calculated before the deduction of financial expenses
Regarding these acquisitions and investments abroad by Chinese companies, Zerohedge offers the following examples:
Zoomlion, a loss Chinese machinery company that is partially owned by the state: its total debt amounts to 83 times its EBITDA.
Fosun, a Chinese buyer serial milloens spent 6,500 dollars in shares in 18 companies abroad for a period of six months in 2015; had a total debt 55.7 times EBITDA in June 2015. "Fosun bought brands like Club Med and Cirque du Soleil, as well as a number of other assets, including German private bank Hauck and Aufhaeser".
China Cosco Holdings bought the Greek Piraeus Port Authority, amounting to 368.5 million euros. Cosco has promised to invest 500 M € in the Greek port despite having a total debt amounting to 41.5 times its EBITDA
Cofco Corporation, which recently reached an agreement with Noble Group in its subsidiary, Cofco International, acquire a stake in Noble Agri 750 million and has a total debt equivalent to 52 times its EBITDA.
Bright Food, which acquired the group Weetabix 1,200 billion in 2015 and has a total debt of 24 times its EBITDA.
Chinese corporate leverage
However, it has in terms of investment activity abroad, no one in China reached levels largest Chinese conglomerate Anbang Insurance Group
The relatively opaque Angbang, is known for two things:
-for Being the company that tried to buy the Starwood hotels and withdrew at the last moment without giving a reason (as it turned out, could not provide a legitimate source for funds).
-The Second aspect that fascinates Anbang is that very little is known about the group in question.
Well, actually, that's not exactly true: in recent months, there have been several interesting revelations about the mysterious sources of cash behind the quiet facade Anbang.
The last of these reports from The New York Times, which last week published a report on the conglomerate.
China Anbang Insurance
However, what really stands out in the NYT article about the origin of money Angbang is a tangential element, which puts on the table why people at the highest levels of China are so eager to transfer silent their funds to abroad, either by acquiring homes in Vancouver, US companies, or anything that the Chinese will try to buy.
What truly revelatory statements have been Luo Yu, the son of a former chief of staff of the army of China, who said that the most politically powerful families in China had transferred their money out of the country for some time.
Luo Yu
Luo Yu

"They do not believe that they will stay in power long enough;sooner or later will collapse , "Luo, a former colonel of the Chinese army whose younger brother was a business partner with one of the founders of ANBANG said.
"So they get their money from the country"
As exposes a recent interview with VOA Luo Yu: "He has a special status. It is a princeling Xi Jinping who met personally. His father was Luo Ruiqing, one of the ten major general (general outranks the other generals) China named in 1955, after the Chinese Communist Party came to power. "
Luo Ruiqing
Luo Ruiqing

That is, Yu is probably one of the few people who actually are aware of the reasons why there is this great capital flight from China, especially by people at the highest levels.
What however is more disturbing statements Yu the New York Times (if we decide to take them as true and sincere), it is that it is only a matter of time before China suffer what tends to suffer from time to time: a revolution.
And that would explain why the oligarchs of the current regime would urgently taking large amounts of capital out of China.
And while they are able to easily evade controls traditional capital, since the limit capital outflows cash in China is $ 50,000, the biggest concern is that the general population, which has tens of billions in deposits in the banking system of China, sooner or later will try to do the same, leading in the worst case to a corralito occur in China.
Finally, another conclusion can be reached, if we take as an indication of increased capital outflows last year and if Yu says the truth is that the possible "collapse" for the rich and powerful families China are preparing, it would be increasingly dangerously close.

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