Kyle Bass Warns of Debt Crisis in China

July 21st, 2016

According to Kyle Bass, a hedge fund manager, China’s $3 trillion debt market is getting worse as defaults are rising. Additionally, debt sales are slowing, with some issues canceled.

“We’re starting to see the beginning of the Chinese machine literally break down,” claimed Bass during an interview on Real Vision.

The value of Chinese corporate bond market had decreased in May as slowing economic growth and increasing defaults have scared off investors. The rising concerns over the debt market are also threatening China’s $3.5 trillion wealth management market.

Few month ago, Bass claimed that the losses of Chinese banks due to defaults could be four times bigger than those of the American banks back in 2008. If that happens, China will have its own multi-trillion dollar bailout with purchases of debt, lowering of the reserve requirements, and cutting rates to zero by the nation’s central bank. This would also affect negatively yuan, the Chinese currency.

On the other hand, claims Bass, if China could solve its debt problem before its too late, and depreciate yuan, this would create great investment climate, not only in the Middle Kingdom, but around the rest of Asia.

Kyle Bass is the founder and manager of Hayman Capital Management, a hedge fund based in Dallas, Texas. The fund focuses on event-driven opportunities around the globe. He’s famous for being one among the few who predicted the 2008 financial collapse in the United States, an event which occurred as a result of subprime mortgage defaults.

He’s also known for controversial remarks as well as questionable tactics involving short selling of companies, and then seeking to take them to court. For example, this happened with some pharmaceutical companies, which he sued for patent infringements after betting on their stock price declines.

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