RE:If China is about to have their LehmanA lot of problems in China: over-reporting is one.
According to a statement on the statistics bureau's website dated June 14, the economic development and technology information bureau of Henglan, a town in China's Guangdong province, massively overstated the gross industrial output of large firms in the area, by as much as four times.
....indications that a local economy is sagging could reflect poorly on the prospects for promotion of local officials, and China's southern provinces have been particularly hard hit by the global slowdown in demand for the country's exports. Factories have closed, moving inland and overseas in search of cheaper labor, denting local government revenues.
A liquidity crunch:
Chinese cash rates shot through the roof last week, reaching 25% at its peak, before dropping to just over 8% on rumours that China's central bank, the People's Bank of China (PBOC), has injected cash into select banks amidst the liquidity crunch.
According to the Taipetimes:
"...the lack of cash is a problem for smaller Chinese banks and trust companies, private businesses and even smaller state-owned enterprises that may have built up significant debt in the easy money years since recession-fighting stimulus was unleashed into the economy in 2009.
The closing of the credit spigot could have a domino effect, said Zhou Dewen, chairman of the Wenzhou SME Development Association, which represents private businesses in Wenzhou, a bastion of entrepreneurship in southeastern China.
"The rate of bad loans has kept rising and liquidity is getting even tighter. This capital chain reaction could break some companies, and it will get even worse in the second half of the year," Zhou said in a phone interview."
In other words, many small to mid-sized banks in China are at a very real risk of default.
What it Means for Canada
If China's bubble bursts, a large part of Canada's GDP will be wiped out.