China discovers $15B in false loans


China's national chief auditor has discovered $15.2B worth of loans connected to falsified gold transactions. The loans date back to 2012, and were borrowed from numerous banks.

Chinese traders and investors are known to borrow against commodities such as gold, copper and soybeans, and most of it is valid trading. However, the Chinese audit office has found many gold processing firms that borrowed based on fake transactions in the gold market.

Further investigation may result in new restrictions on commodity financing.

ETFs: GLD, IAU, SGOL, AGOL, OUNZ, TAO, CHIX

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Comments (12)
  • bbro
    , contributor
    Comments (11195) | Send Message
     
    Heads will roll....literally...
    26 Jun 2014, 07:47 AM Reply Like
  • cdq5410@yahoocom
    , contributor
    Comment (1) | Send Message
     
    What does this mean to us and the price of gold? anyone have an answer. I don't think it will mean anything,
    26 Jun 2014, 08:53 AM Reply Like
  • Philip Marlowe
    , contributor
    Comments (1547) | Send Message
     
    This will pressure the price of gold down. There will be new stricter rules to using gold as collateral for loans which will reduce the practice of using gold as collateral and thus will reduce the demand for gold in China. A similar thing will happen to copper.

     

    A lot of gold and copper demand in China is because companies can just store the stuff in a warehouse and use the same gold and/or copper multiple times as collateral for multiple different loans.
    26 Jun 2014, 09:50 AM Reply Like
  • th3decider
    , contributor
    Comments (477) | Send Message
     
    It means that a lot of gold that people thought existed, actually doesnt. And this is only what has been discovered so far...
    26 Jun 2014, 11:20 AM Reply Like
  • jcellison1988
    , contributor
    Comments (2) | Send Message
     
    If this means $15B of gold we thought existed DOESN'T--shouldn't that decrease in estimated supply, therefore increasing the price of gold?
    26 Jun 2014, 08:28 PM Reply Like
  • june1234
    , contributor
    Comments (4262) | Send Message
     
    Falsified gold transactions increases concern over commodity fraud in a country already heavily leveraged in copper deals.
    26 Jun 2014, 08:58 AM Reply Like
  • 6151621
    , contributor
    Comments (1172) | Send Message
     
    Long-term this is positive for Chinese market. Short-term may cause pain for Chinese companies and those doing significant commodities business with China.
    26 Jun 2014, 01:28 PM Reply Like
  • Shaduc
    , contributor
    Comments (2909) | Send Message
     
    What this discovery indicates is increased financial regulation in Cn (something absent during the George Bush Jr's terms)!
    26 Jun 2014, 07:55 PM Reply Like
  • 6151621
    , contributor
    Comments (1172) | Send Message
     
    @Shaduc: Yeah, I agree totally that it means that China is more serious. China has lots of rules but that doesn't matter -- It's more important what they actually enforce. It seems they are looking to clean up the shadow banking some by allowing these stories to get out and allowing defaults / bankruptcy! It's good long-term.
    28 Jun 2014, 12:56 AM Reply Like
  • Shaduc
    , contributor
    Comments (2909) | Send Message
     
    "to get out and allowing defaults / bankruptcy"

     

    15 years ago there were 2 bankruptcies occurred in Guangdong: GITIC and Guangdong Enterprises Holdings.

     

    The Cn Govt began testing with bankruptcy law and liquidation in Wuhan in 1995.

     

    By the end of the millennium, Shenyang was a successful in reorganising and selling bankrupt SOEs.

     

    What is reality is arbitrary though!

     

    Sorry, google search is blocked:
    http://yhoo.it/1t10VPh;_ylt=AwrBTz8bu65TXCEA...
    http://econ.st/1pAFBRD
    http://bit.ly/1pAFBRE
    http://bit.ly/1pAFANN
    Worried Chinese Bosses Try to Save Jobs : Bigger Profits Can ...
    http://nyti.ms/1pAFB41
    28 Jun 2014, 09:07 AM Reply Like
  • whiff
    , contributor
    Comments (940) | Send Message
     
    Business as usual in the gold market ...
    27 Jun 2014, 06:30 AM Reply Like
  • maui1
    , contributor
    Comments (56) | Send Message
     
    no problem......china's central bank can just 'print' more yuan to cover the loss......

     

    really everyone.......just because 'gold' is in the conversation, it makes gold bad?

     

    gold (or the idea of gold) was used because gold has value.....and this fraud only proves that there is not enough gold to support all the fiat paper that is being 'printed' every minute of every day.
    27 Jun 2014, 04:17 PM Reply Like
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