"As China watcher Simon Hunt, of Simon Hunt Strategic Services, noted on Friday, if the initiative is successful it could pave the way for a significant boost to Chinese asset valuations as well as significantly revive Chinese commodity purchases:
The speed with which government has acted in the wake of July’s credit repercussions is not just exemplary but illustrates how deep and serious is the debt issue especially in the private sector which has been the major driver of growth and employment.
The real question, of course, is who will be the buyer for the distressed loans. One favourite will be the four AMCs established in 1999 to take-over some of the banks’ non-performing loans. Government would like the private sector to participate but for that to take place they would need significant discounts to face value.
We will keep you abreast of new information as and when it is forthcoming. However, all the initiatives that government has introduced point towards a stronger recovery to the economy that we thought possible just a few weeks ago. It fits what we have also been saying that starting sometime this autumn exponential rises will be seen in global equity and commodity markets that should last for only 6-9 months after which serious declines will be experienced."