Evergrande, a significant player in the Chinese real estate sector, has found itself in a financial predicament that has sent shockwaves far and wide. The company's woes have been linked to a wave of panic and a subsequent bank run in northern China, specifically in the Bank of Cangzhou. The latter widely rumoured to have granted billions in loans to the floundering real estate developer. This unsettling development trailed the revelation of the detention of Evergrande's founder, Xu Jiayin.
Evergrande's Financial Crisis Ignites Bank Panic in Cangzhou Prefecture
Evergrande, a former titan in the Chinese real estate market, sought Chapter 15 bankruptcy protection in a New York court on August 18, 2023. The company had grown rapidly during China's property boom, earning its place amongst the country's top real estate developers. However, its ambitious growth was fuelled by substantial debt, and by 2021, its liabilities exceeded a staggering $300 billion. The company's eventual decline raised alarm about significant financial repercussions, both within China and around the world.
The collapse of Evergrande is far from an insignificant event. Its impact is deeply felt within China's economic framework. Moreover, its debt has reached banks in countries such as Australia, the U.S., Canada, and the U.K.
Bank Panic at the Bank of Cangzhou
CNN and Asia Times have documented an unexpected bank panic at the Bank of Cangzhou. This event was triggered by whispers of financial contagion. Such mass withdrawals are rare in China. The bank in question, boasting numerous branches, is located in a prefecture about 100 miles from Beijing.
Social media was abuzz with the news of the bank run, as users shared photos and videos of the incident on various platforms such as X (formerly Twitter). State-run media outlet Yicai stated that several individuals were arrested in Cangzhou for spreading rumors, and police have been stationed at the bank entrances.
In an effort to quell public anxiety, the Bank of Cangzhou reassured the public of the security of their deposits. Reports suggest stacks of yuan were displayed in the bank's lobby to underline its financial health. The People's Bank of China (PBOC) reportedly stepped in to provide emergency financial support to the bank.
China's Previous Bank Runs
China's last encounter with bank panics was in April 2022, when four rural banks in Henan province put a halt on withdrawals, affecting approximately $1.5 billion in deposits. New Oriental Country Bank of Kaifeng, Shangcai Huimin County Bank, Yuzhou Xin Min Sheng Village Bank, and Zhecheng Huanghuai Community Bank initially cited "maintenance" as the reason.
However, it was not long before locals uncovered that these institutions were under financial scrutiny. In a similar vein, just before last week's bank run, news broke out about the arrest and the ongoing investigation of Evergrande's founder, Xu Jiayin.
Your Thoughts on the Evergrande Crisis
We welcome your opinions on the fallout from Evergrande's collapse and its role in triggering a bank run in northern China. Please share your thoughts and insights on this topic in the comments section below.
Frequently Asked Questions
How much tax is gold subject to in an IRA
The fair market value at the time of sale is what determines how much tax you pay on gold sales. You don't have tax to pay when you buy or sell gold. It's not considered income. If you sell it later, you'll have a taxable gain if the price goes up.
You can use gold as collateral to secure loans. Lenders try to maximize the return on loans that you take against your assets. In the case of gold, this usually means selling it. There's no guarantee that the lender will do this. They might keep it. Or they might decide to resell it themselves. In either case, you risk losing potential profits.
To avoid losing money, only lend against gold if you intend to use it for collateral. If you don't plan to use it as collateral, it is better to let it be.
What precious metals do you have that you can invest in for your retirement?
These precious metals are among the most attractive investments. They're both easy to buy and sell and have been around forever. These are great options to diversify your portfolio.
Gold: One of the oldest forms of currency, gold, is one of mankind's most valuable. It's also very safe and stable. Because of this, it's considered a good way to preserve wealth during times of uncertainty.
Silver: Silver is a popular investment choice. This is a great choice for people who want to avoid volatility. Silver is more volatile than gold. It tends to rise rather than fall.
Platinum: A new form of precious metal, platinum is growing in popularity. It's like silver or gold in that it is durable and resistant to corrosion. It is, however, more expensive than its competitors.
Rhodium: Rhodium is used in catalytic converters. It is also used to make jewelry. It's also relatively inexpensive compared to other precious metals.
Palladium: Palladium is similar to platinum, but it's less rare. It's also more accessible. This is why it has become a favourite among investors looking for precious metals.
How much gold should your portfolio contain?
The amount of capital required will affect the amount you make. Start small with $5k-10k. As your business grows, you might consider renting out office space or desks. This will allow you to pay rent monthly, and not worry about it all at once. You just pay per month.
Also, you need to think about the type of business that you are going to run. In my case, I am running a website creation company, so we charge clients around $1000-2000/month depending on what they order. You should also consider the expected income from each client when you do this type of thing.
If you are doing freelance work, you probably won't have a monthly salary like I do because the project pays freelancers. You may get paid just once every 6 months.
Decide what kind of income do you want before you calculate how much gold is needed.
I recommend starting with $1k-$2k of gold and growing from there.
Who is entitled to the gold in a IRA that holds gold?
The IRS considers gold owned by an individual to be “a type of money” and is subject taxation.
You must have gold at least $10,000 and it must be stored for at the least five years in order to take advantage of this tax-free status.
Although gold can help to prevent inflation and price volatility, it's not sensible to have it if it's not going to be used.
If you plan to sell the gold one day, you will need to report its worth. This will affect how much capital gains tax you owe on cash you have invested.
You should consult a financial planner or accountant to see what options are available to you.
- You can only purchase gold bars at least 99.5% purity. (forbes.com)
- (Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (smartasset.com)
- Gold is considered a collectible, and profits from a sale are taxed at a maximum rate of 28 percent. (aarp.org)
- Instead, the economy improved, stocks rebounded, and gold plunged, losing 28 percent of its value in 2013. (aarp.org)
- Indeed, several financial advisers interviewed for this article suggest you invest 5 to 15 percent of your portfolio in gold, just in case. (aarp.org)
- 7 U.S. Code SS7 – Designation board of trade as contract marketplaces
- 26 U.S. Code SS 408 – Individual retirement accounts
- Saddam Hussein's InvasionHelped Uncage a Bear In 90 – WSJ
- You want to keep gold in your IRA at home? It's not exactly legal – WSJ
The History of Gold as an Asset
From ancient times to the beginning of the 20th century, gold was used as a currency. It was universally accepted and loved for its beauty, durability, purity and divisibility. Because of its intrinsic value, it was also widely traded. Because there were no internationally recognized standards for measuring and weighing gold, the different weights of this metal could be used worldwide. For example, one pound sterling in England equals 24 carats; one livre tournois equals 25 carats; one mark equals 28 carats; and so on.
The United States started issuing American coins in the 1860s made of 90% copper and 10% zinc. This led to a decrease of demand for foreign currencies which in turn caused their prices to rise. At this point, the United States minted large amounts of gold coins, causing the price of gold to drop. They needed to pay off debt because they had too much money coming into circulation. They decided to return some of the gold they had left to Europe.
Because most European countries did not trust the U.S. dollar, they started accepting gold as payment. Many European countries began to use paper money and stopped accepting gold as payment after World War I. The gold price has gone up significantly in the years since. Today, although the price fluctuates, gold remains one of the safest investments you can make.
By: Jamie Redman
Title: Evergrande's Financial Woes Fuel Bank Panic in Northern China
Sourced From: news.bitcoin.com/evergrandes-economic-tremors-trigger-bank-run-in-northern-china/
Published Date: Mon, 16 Oct 2023 23:30:45 +0000