Chinese banks now owe more dollars than they are owed. In short, China’s Banks Are Running Out of Dollars.

The combined dollar liabilities at the big four commercial banks exceeded their dollar assets at the end of 2018, their annual results show—a sharp reversal from just a few years ago. Back in 2013, the four together had around $125 billion more dollar assets than liabilities, but now they owe more dollars to creditors and customers than are owed to them.

Bank of China is by far the greatest contributor to the shift. Once the holder of more net assets in dollars than any other Chinese lender, it ended 2018 owing about $70 billion more in dollar liabilities than it booked in dollar assets. The other three lenders actually finished the year with more dollar assets than liabilities, though Industrial & Commercial Bank of China IDCBY -3.24% had a deficit at the end of 2017.

No Trust in the Yuan

The Chinese banks are covered by the Bank of China (China's central Bank), currency swaps, and off balance sheet funding.

The Bank of China has over $3 trillion in reserves, so the current liability looks small in comparison.

But this masks the true state of affairs: There is no global trust in the yuan and the Eurozone is a basket case.

Spain Needs Another Bailout

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Note that Spain Seeks Another Bailout as Deficit Skyrockets.

Very Deflationary Outcome Has Begun

A Very Deflationary Outcome Has Begun: Blame the Fed

Yet, Hyperinflationists Come Out of the Woodwork Again.

This is all too familiar, and amusing.

For further discussion, please see Inflation or Deflation? Collapse in Demand Trumps Supply Shocks

Mish