It's-A Getting Worse: China Stops Lending to U.S. Banks (Just a Rumor, Says China)

Brian Doherty | September 26, 2008

Reuters says:

Chinese regulators have told domestic banks to stop interbank lending to U.S. financial institutions to prevent possible losses during the financial crisis, the South China Morning Post reported on Thursday.

The Hong Kong newspaper cited unidentified industry sources as saying the instruction from the China Banking Regulatory Commission (CBRC) applied to interbank lending of all currencies to U.S. banks but not to banks from other countries.

Via our pals at Unqualified Offerings.

And in a completely unrelated matter, just ask any respectable master of finance, how has gold been doing the past couple of weeks? Up $140! (About 19 percent.)

UPDATE: Reuters wrong, saith MarketWatch:

China's government moved to calm financial markets Thursday and denied a report that it had ordered mainland banks to curb lending to U.S. banks, a day after rumors of financial stability led to a run on a Hong Kong institution.

The China Banking Regulatory Commission moved to quash a South China Morning Post report Thursday that said Chinese regulators have told domestic banks to stop interbank lending to U.S. financial institutions.

"The CBRC has never, through any channel, released a statement or ordered domestic commercial banks not to lend to or borrow from U.S. financial institutions," the regulator said in a statement on its Web site.

Thanks for that update/correction link to commenter "Ombudsman."

Comments

Ombudsman|9.26.08 @ 1:00AM|#

It's-A Getting Worse: China Stops Lending to U.S. Banks

From one of UO's commenters:

not really

|9.26.08 @ 1:12AM|#

Ha! Just start selling opium in south China and they'll deal with us regardless of what the central government wants!

It worked for England...

I thought the U.S. and China were deeply co-dependent -- to keep the yuan low internationally, they've been soaking up trade surpluses with Treasury Bills.

I'm real sympathetic to them wanting to stop playing that game, but aren't they cutting the value of the asset they're holding by saying "boo" to our currency? If they unload their dollar holdings, that will make the yuan rise, and they'll be too expensive for WalMart.

Maybe I've got this all backwards; it's like trying to back up with a trailer.

Or, maybe someone's shorting in Hong Kong, and this little rumor was to add excitement to the market.

|9.26.08 @ 1:29AM|#

The PRC Pawn Shop is still open to our crackhead nation--yipee!

I wish they would cut us off, but they are too smart for that.

|9.26.08 @ 1:43AM|#

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Paul|9.26.08 @ 1:50AM|#

This is the same China that just had a detailed press release of the launch of their Astronauts--- before the launch actually took place? Check.

|9.26.08 @ 1:54AM|#

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Paul|9.26.08 @ 2:07AM|#

Hey guys, I'm smiling for the first time in days.

http://money.cnn.com/2008/09/25/news/economy/deal_reached/index.htm?postversion=2008092513

Bailout talks in disarray
High stakes talks over $700 billion rescue end in chaos, one day after President Bush warns 'entire economy at risk.'

Also, I would like, for the record, to challenge a meme that keeps popping up here over the last few days. It goes something like this:

These instruments are so complex, no one knows what they're worth and how much risk exposure they have... but it doesn't matter anyway, the government can just come in and buy them for around 'x' cents on the dollar and turn a profit.

Sorry, folks, you can't have it both ways. If it's true, that these instruments are this complex (which, for the record I agree they are), then we have no idea what would turn a profit, whether this plan is effective in any way, or $700 billion is too much, or way too little. In fact, we don't even know how much of a crisis this is. Which further means that the last thing we should be doing is putting forth a bailout plan. We should be taking 30, 60, 90 days to ferret out some better idea of what we're dealing with, then decide on a plan-- if any plan at all.

|9.26.08 @ 2:08AM|#

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Paul|9.26.08 @ 2:13AM|#

I wonder if the penis enlargement industry is having a credit deflation problem?

|9.26.08 @ 2:14AM|#

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JMR|9.26.08 @ 3:19AM|#

The interesting thing is what's been happening to the supposedly-UNmanipulated silver market.

http://online.wsj.com/article/SB122231175151874367.html

Check out the graph, and note the period since July, which apparently even the CFTC can't ignore any longer. Normally, more dollars (way more...) chasing the same number of ounces of something -- especially when Russia's acting frisky in Georgia, etc. -- means the price of that something goes UP...But normally, banks are rational enough not to be so concentrated on the short side of what's basically a bet against inflation. Sigh. Why do I suspect taxpayers will pay if this bet loses?

I don\'t practice juneria|9.26.08 @ 3:22AM|#

I ain't got no crystal ball.
But if I had a million dollars, I'd lose it all,
if I would put my money in those scammers that she found
and I'd bust my bank and country as I write it down.

Chris|9.26.08 @ 7:47AM|#

Wow.

Reuters published a negative anti-American article and then were proven wrong???


That almost never happens!


Well.....maybe instead of "never" I should say "always".

|9.26.08 @ 8:31AM|#

China gets to suck it up right along with us. That's what happens, biatch! That'll teach you!

Kreel Sarloo|9.26.08 @ 9:32AM|#

"Reuters published a negative anti-American article and then were proven wrong???"

Chris, with skin as thin as yours how do you even leave your house?

|9.26.08 @ 9:50AM|#

I say the dow falls a grand today while gold rises 150-175 and oil jumps by 50 on the announcement that worldwide oil trading will now be euro based.

yours truly,
chicken little

|9.26.08 @ 11:10AM|#

The interesting thing is what's been happening to the supposedly-UNmanipulated silver market.

There does indeed seem to be something strange going on with silver. I visited my local coin shop and not only are they out of silver eagles and maples, but also all silver bars and those one ounce "silver trade units." If you visit Kitco's site, they have stopped taking all new orders for maples, eagles, and one ounce bars.

I wonder is the price of it will soon start rapidly climbing.

Chris|9.26.08 @ 11:29AM|#

Kreel,

I actually don't care about this particular article, but if you have iGoogle like me, you can watchReuters constantly update and correct their stories as the day passes by.

They never get it right the first time.