F. William ENGDAHL
A bizarre war of words has erupted in recent days in the pages of financial media between billionaire hedge fund and color revolution specialist, George Soros, and the gigantic BlackRock investment group. The issue is a decision by BlackRock CEO Larry Fink to open the first foreign-owned mutual fund in China presumably to attract the savings of China’s new (and fast disappearing) middle income population. In a recent newspaper interview Soros called the BlackRock decision a threat to BlackRock investors and to US national security.
This seemingly absurd clash of views between two financial predator giants of Wall Street hides a far larger story – the looming systemic collapse inside China of a financial debt pyramid that is possibly the largest in the world. It could have a domino effect on the entire world economy far greater than the September 2008 Lehman Crisis.
“GLOBAL ECONOMIC TERRORIST…:”
On September 6 Soros wrote a guest Editorial in the Wall Street Journal sharply criticizing BlackRock for investing in China: “It is a sad mistake to pour billions of dollars into China now. This is likely to lose money for BlackRock customers and, more importantly, harm the national security interests of the US and other democracies.” Not like Soros to cite US national security… He went on to say, “The BlackRock Initiative threatens the national security interests of the US and other democracies because money invested in China will help advance President Xi’s regime, which is repressive at home and aggressive abroad.” BlackRock issued a response stating, “The US and China have a large and complex economic relationship… Through our investment activity, US-based asset managers and other financial institutions contribute to the economic interconnection of the world’s two largest economies. ”
At a time when the bloated debt edifice of China banks and real estate conglo-merates is collapsing almost daily, the defense of BlackRock and CEO Fink hardly ring true. It suggests there is far more behind the BlackRock-China relation as well as behind the Soros attack. Two days before Soros’ OpEd in the journal, the official China Global Times wrote a scathing article calling Soros a “global economic terrorist.” One of their charges was that Soros money financed a “color revolution” in Hong Kong in 2019 against Beijing new laws de facto ending the island’s independent status.
However, the sharp attack on Soros was far more likely caused by an OpEd Soros wrote in the London Financial Times five days earlier in which he sharply attacked Xi Jinping and the current crackdown on private Chinese companies such as Jack Ma’s Alibaba and Ant Financial. In an August 30 OpEd Soros called President Xi Jinping’s crackdown on private enterprise, “a significant drag on the Chinese economy” that “could lead to a crash.” He further pointed out that major western stock indices such as MorganStanley’s MSCI and BlackRock’s ESG Aware, have “effectively forced hundreds of billions of dollars belonging to US investors into Chinese companies whose corporate governance does not meet the required standard – power and accountability is now exercised by one man (Xi) who is not accountable to any international authority.” He urged Congress to pass laws that would limit asset managers’ investments to “companies where actual governance structures are both transparent and aligned with stakeholders.”
The curious aspect about the Soros charges against Beijing financial transparency is that they are factually correct, based on public statements by Chinese regulators as well as Wall Street managers and regulators. China’s financial markets are opaque, and rules change unpredictably as to who gets rescued and who not. The ongoing meltdown of China’s huge Evergrande real estate and financial group is only one recent instance of the high risk of investing today in China.
NOT SO EVERGRANDE
The world’s “most valuable” real estate group is also the world’s most indebted real estate group. Evergrande, based in Shenzhen, has been teetering on the edge of bankruptcy for months as it defaults on loan after loan and the major credit rating agencies lower its rating to junk status. The group owes a total of $305 billion and that debt is both offshore in dollar loans as well as domestic unregulated loans from what are termed WMPs or wealth management products. As its finances implode and unit apartment sales plunge, tens of thousands of prospective apartment owners are threatened with having paid for unfinished apartments. To date the central bank of China has not intervened but speculation grows that a state bailout of the group is days away in order to prevent a systemic financial contagion. The reason is apparently that Evergrande is only the tip of a very debt-bloated China corporate sector iceberg.
17th September, 2021
There has been an eerie downplaying of the global implications of a China imploding real estate debt bubble. The major Wall Street players including BlackRock, JP Morgan Chase, Goldman Sachs and others are desperately trying to prop up the world’s largest debt bubble economy – Peoples’ Republic of China. Because they have made literally billions in recent decades in various China-linked investments, they are doing everything to keep the debt pyramid from collapsing. The following was written in early September, 2021 when the gravity of the China real estate troubles were first beginning to be covered by world financial media. The following provides a useful background from data extremely difficult to find in Western media. Some say the recent acts of President Xi Jinping to clampdown on private companies like Alibaba of Jack Ma is a belated attempt to control at least part of the coming collapse. For readers interested in the global aspects of this crisis and why it is far worse than we are being told, my book, The Gods of Money: Wall Street and the Death of the American Century, I recommend.
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William Engdahl www.williamengdahl.com
F. William Engdahl is a political economist and founder of Engdahl Strategic Risk Consulting, providing geopolitical strategic risk advice to companies and financial institutions. He has specialized for more than thirty seven years in geopolitical analysis of global events, and is an American citizen living and working in Germany since 1985. A sample of his writings is available at www.williamengdahl.com.