senoritazhao Post time 2017-4-27 10:53:06

China's SOE VS US's "too big to fail"

This post was edited by senoritazhao at 2017-4-27 10:53

Are China's major state-owned enterprises like the US's "too big to fail" banks?

It seems that the US big companies becomes big as a result of Trust and monopoly, while most Chinese SOEs are there out of nantional strategic purpose and share more social responsibility.
The US banks are "too big to fail" because if they are perceived to be insolvent (liabilities are greater than assets) or illiquid (insufficient cash to meet short term debt/deposits), then the entire payments system and capital markets would freeze up, leading to a downward spiral of panicked investors trying to sell their assets, pushing down prices, creating more insolvency, and increasing the asset selling panic.
In China, the big SOEs are "too big to fail" only in the sense that if they are allowed to declare bankrupcy, then the resulting unemployment may result in social instability. However, the SOE reforms in the 90s suggest that it can be managed with sufficient fiscal resources and political will. Any impact on the financial system would be limited if the state makes up for the losses on the banks that lent to the SOEs.

1105852048 Post time 2017-4-27 12:48:30

The Chinese leadership would not let this happen.

Jaaja Post time 2017-4-27 13:28:13

impact on the financial system would be limited if the state makes up for the losses on the banks that lent to the SOEs.

In China this could be possible.

In most foreign countries the state can only go so far, before the citizens revolt (in next elections if not on barricades).

In China the citizens don't get to vote on such issues, and going on barricades has not worked very well in past.

dusty1 Post time 2017-4-27 16:36:14

1105852048 Post time: 2017-4-27 12:48 static/image/common/back.gif
The Chinese leadership would not let this happen.

Nothing like a government guarantee

dusty1 Post time 2017-4-27 16:36:36

Z

HailChina! Post time 2017-4-27 20:16:03

Jaaja Post time 2017-4-28 16:45:24

HailChina! Post time: 2017-4-27 20:16 static/image/common/back.gif
We revolt against capitalists and unchecked capitalism. It is us that threatened revolt so that we ...

I have not seen you (or your "us") revolting against anything, and if you also consider voting useless, then I don't know what good you are doing for any cause.

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