China Will Never See a Bank Fail. It will See a System CollapseMonday, July 11, 2011 19:54
Riding the metro this morning, I was once again reminded by the fact that in China systems fail.. on a regular basis.
I realized this while trying to go up an escalator to get out of the metro, but alas it was “being maintained”.. apparently a very common site around town now after a couple of escalators a couple of thousand miles away malfunctioned.
It reminded me of a conversation that I have had a number of times I China. That when things start to go wrong, systems come down fast. Remember when 17 provinces lost power in 2008… system failure. Remember when 300,000 kids ended up in the hospital for drinking melamine laced milk… system failure.
System failures that required complete rebooting, a few weeks of time, and a few heads to roll… before “confidence” returns.
Which brings me back to the point of the post.
The Chinese believe in “the system”, and at any time that a problem occurs, it is seen as a issue with the system itself vs. what may very well be an isolated incident… which leads people to often act in mass to rumors (remember the recent Japanese radiation scare? or perhaps the ATM line in HK on July 3, 1997?)
In the current environment, where the Chinese banks are already admitting that they have taken on too much debt (and Beijing is trying to play down the size and impact) and the likelihood that China’s banking system be called into question will rise…