Rumor PBoC Governor Has Defected From China After Half Trillion US$ Losses

[JohnQPublic]

Rumor PBoC Governor Zhou "John Meriwether" Xiaochuan Has Defected From China After Suffering Half A Trillion In UST-Related Losses (http://www.zerohedge.com/article/rumor-pboc-governor-zhou-xiaochuan-has-defected-china-after-suffering-half-trillion-ust-rela)
Submitted by Tyler Durden on 08/30/2010 10:57 -0500



Today's stunning if true news comes from Stratfor which has just issued a blast notifying of circulating rumors "in China that People’s Bank of China (PBC) Gov. Zhou Xiaochuan may have left the country." If proven true, this will be the proverbial first rat bailing on the sinking ship. It gets scarier vis-a-vis prospects of US bonds: "The rumors appear to have started following reports on Aug. 28 which cited Ming Pao, a Hong Kong-based news agency, saying that because of an approximately $430 billion loss on U.S. Treasury bonds, the Chinese government may punish some individuals within the PBC, including Zhou." Um, $430 Billion in losses? Hopefully this explains why next month's TIC report won't show any incremental increase in Chinese holdings of Treasuries (and most likely quite the opposite). Stratfor continues: "Although Ming Pao on Aug. 30 published a report on its website indicating that the prior report was fabricated by a mainland news site that had attributed the false information to Ming Pao, rumors of Zhou’s defection have spread around China intensively, and Zhou’s name has been blocked from Internet search engines in China." Even if Zhou is safe and sound in Beijing, the fact that China has experienced nearly half a trillion in losses on its UST holdings is shocking, and means that the US Treasury bubble may be approaching the popping phase.

From Stratfor:

STRATFOR has received no confirmation of the rumor, and reports by state-run Chinese media appeared to send strong indications that Zhou is in no trouble at the moment. However, the release of this rumor and its dispersion throughout the public is significant, particularly as the Communist Party of China (CPC) is preparing for a leadership transition in 2012.

Chinese state-run media and official government websites have run several high-profile reports about Zhou, which should be seen as a move to refute the rumors. The PBC website published two articles on its homepage reporting on Zhou’s meeting with visiting Japanese Financial Services Minister Shozaburo Jimi during the third China-Japan high-level economic dialogue as well as a meeting with an Italian delegation. Xinhua news agency reported that Zhou told the PBC Party Committee Enlargement Meeting on Aug. 30 it should “continue to implement justice, and strengthen legislative work in the financial system.” Prior to this news, Zhou appeared at the 2nd annual conference of the heads of the Chinese, Japanese and Korean central banks held on Aug. 3, and his most recent public appearance was Aug. 10 for China’s Financial System Anti-corruption Construction Exhibition.

Zhou is known to have lofty political ambitions and is believed to be a close ally to former Chinese President Jiang Zemin, as well as a core figure for Jiang’s “Shanghai Gang.” There has been no shortage of rumors about Zhou’s possible dismissal in the past five years, as he is believed to be associated with several high-level financial scandals. For example, Zhou was rumored to be under “shuanggui,” a form of house arrest administered by the CPC, during the massive crackdown of Shanghai Party Secretary Chen Liangyu in 2006, which was perceived in the country as a crackdown of the Shanghai Gang and part of Hu’s effort to consolidate power ahead of the 2007 power transition. There was also a rumor that he might have been detained following the investigation and arrest of Wang Yi, the vice governor of the China Development Bank, along with several other officials in the financial circle. Currently, several financial scandals are still under investigation, and it is likely that Zhou, as PBC governor and one of the most powerful economic players in the country, could be associated with some cases. Therefore, whether or not the rumor is true at this time, the leaking of this news is very likely to be associated with a power struggle within the Communist Party’s economic hierarchy.

We will bring you more as we get it on this potentially groundbreaking development.

Some math:

Assuming average 6 Year duration on holdings (completely arbitrary), and a 2% drop in rates, means $430 billion is 12% of total notional, so somehow China must be short $3.5 trillion in notional or synthetically. Not good.

[JohnQPublic]

Time To Prank Call Zhou Xiaochuan (http://www.zerohedge.com/article/time-prank-call-zhou-xiaochuan)
Submitted by Tyler Durden on 08/30/2010 13:53 -0500




After all, the rumors are all false, right? So he should be more than happy to pick up his phone, which Bloomberg lists as +86-10-6619-4114. The first to get the PBoC's governor shouting obscenities on tape, wins a Zero Hedge hat.


http://www.zerohedge.com/sites/default/files/images/user5/imageroot/hildebrand/Zhou%20Bio%20Bberg.jpg

[mamboni]

Ancient Chinese aphorism:

If Won Hong Lo lose $1/2 trillion, he soon become No Ting Hong.

[Joe King]

Thanks for posting JQP. I just called his number and the person who answered sounded like him, and assured me that all is well with the Treasuries but also asked me to please quit calling as he needs to keep the line free.
He kept going on about something with his refrigerator and Prince Albert in a can.
I'm not sure what that part was all about. ???

[JohnQPublic]

Where In The World Is Zhou Xiaochuan? Stratfor Provides Update As 1 Month Chinese Repo Surges By 50% (http://www.zerohedge.com/article/where-world-zhou-xiaochuan-stratfor-provides-update-1-month-chinese-repo-surges-50)
Submitted by Tyler Durden on 08/30/2010 12:51 -0700

For those seeking an update on today rumor du jour, here is Stratfor with some additional insights, if nothing definitive yet. But before we get into that, we have received the following update from our Chinese media readers across the Pacific: "Here is the link of the Ming Pao report. http://inews.mingpao.com/htm/INews/20100830/gb11502c.htm It says that "China may punish Zhou because China lost $430 billion foreign exchange on its Fannie and Freddie bond investment". It doesn't say anything about U.S. Treasury Bonds. The truth is that many Chinese thought China lost all its investment in Fannie and Freddie after they were delisted from NYSE. It is also wrong because China doesn't invest with their stocks." All in all, seems like lots of confusion pretty much everywhere, although the market is not taking any chances, with China's 1 Month Repo exploding by nearly 50%.



http://www.zerohedge.com/sites/default/files/images/user5/imageroot/hildebrand/Chinese%201%20Month%20Repo.jpg


Summary

STRATFOR is continuing to examine unconfirmed rumors that Zhou Xiaochuan, governor of the People's Bank of China, fled China to the United States. The origin of the report has been hard to track, especially due to censorship of websites discussing the rumors, so the unconfirmed rumors remain just that -- unconfirmed. However, if true, these rumors could have significant implications for China and for Sino-U.S. relations.

Analysis

STRATFOR is continuing to investigate unconfirmed rumors circulating in Chinese media to the effect that Zhou Xiaochuan, governor of the People's Bank of China, has fled China to the United States. At present there is still no confirmation.

The provenance of the rumor has proved hard to track. A report attributed to Hong Kong's Ming Pao newspaper on Aug. 28 said that Zhou might be punished for a large loss on U.S Treasury bonds worth $430 billion, and that the Chinese government might also punish others in the People's Bank of China. The report allegedly originated on an unknown but "major" Chinese discussion forum, and that forum suggested that Zhou had left the country. Ming Pao denied it had published the report Aug. 30, saying others had used Ming Pao's name without permission to distribute the rumor. STRATFOR has not yet been able to track down the original report, most likely because the Chinese government appears to be actively censoring websites discussing the rumors, deleting some web pages and blocking search engine results that involve Zhou's name and words relating to a possible defection. Rumors have continued to circulate on Chinese blogs and web forums, in particular suggesting that Zhou may have defected to the United States. The reports are still posted on the blog of a professor, Liu Bingfu, whose career experience suggests he is a notable, if minor, academic.

Zhou cannot be confirmed to have appeared in public since the rumors began. The official website of the People's Bank of China has reported on Zhou's activities Aug. 30 -- such as attending meetings with officials from Japan and Italy -- in what appears to be unusual coverage, including photos, and may be an attempt to counteract the rumors. The pictures were taken from a distance but do appear to show Zhou, though it cannot be confirmed whether the photos were in fact taken on Aug. 30. Zhou's last televised appearance was on Aug. 26 on CCTV, attending a conference with Chinese Premier Wen Jiabao, and images of the TV appearance also seem to show Zhou. Zhou had attended official events Aug. 10, in which he called for China to continue developing its western regions, and Aug. 3, when he met with his South Korean and Japanese counterparts.

Therefore what STRATFOR has at the moment remains unconfirmed rumors. If the reports are false, it would seem likely that Zhou will make a public appearance soon to dispel them. Otherwise speculation will continue. There are constantly rumors that high-level Chinese officials are in danger of a downfall, especially dealing with economic policymakers amid the economic challenges in recent years -- this year alone, such rumors have touched Wen and top banking regulator Liu Mingkang. Similarly, China has undertaken an extensive drive over the past year targeting corrupt officials, and a variant of the rumors about Zhou suggests he has disappeared from the public spotlight because he is under investigation for corruption.

What makes the rumors about Zhou more interesting, beyond his position as governor of the central bank, is the specific claim that he has defected to the United States. If true, this would have serious ramifications for domestic and foreign perceptions of China's political and financial stability, as well as for U.S.-Chinese relations. Though the rumors may prove false, their emergence alone likely suggests an attempt to detract from Zhou's reputation. This could be related to his economic policies -- while the rumor of a loss of $430 billion related to U.S. Treasury bills is difficult to comprehend without more context, China has recently adjusted its foreign exchange reserve management, or Zhou may have been targeted as part of the factional struggles ahead of leadership transition in 2012. However, it is relatively rare in China for political leaders to be punished for failed policies, and more likely the consequence of scandals, misconduct or political purges.

[JohnQPublic]

Here is a machine translation of Minpao's denial of the rumor (http://inews.mingpao.com/htm/INews/20100830/gb11502c.htm):

Mainland site risk , " Ming Pao Daily News " the name of false news ( 15:02 )
Mainland site this morning, one circulating fraudulent use of Hong Kong's " Ming Pao Daily News , " the name of the false message that " as China in the U.S. two- room 』 『 loss of 430 billion U.S. dollars debt reserves, according to rumors that the primary responsibility for the Chinese people to prepare Chu Li , the People's Bank governor Zhou Ogawa , " also known as " spokesman for the U.S. Congress , Federal Reserve Vice Chairman Donald Kohn said the threat : If the Chinese handling of Zhou Xiaochuan , China's 5,000 high-ranking officials will be published in the Swiss bank deposits , which China did not answer " , the message triggered speculation that the mainland netizens Week Ogawa flee .
" Ming Pao Daily News " editorial board would like to clarify , " Ming Pao " has never made the reported cases of fraudulent use of this " Ming Pao " name to the cases of false news , " Ming Pao " strongly condemned , and will investigate complaints and to the perpetrators responsible .


Since the incident involving the unauthorized publication of false financial information on behalf of the newspaper , " Ming Pao Daily News " editorial on the 30th at the Hong Kong Police and the State CouncilHong Kong and MacaoOffice to reflect the situation , express concern and seek to help follow up the case .


" Ming Pao Daily News " editorial board


August 30, 2010

[goldmonkey]

Stratfor’s Global Forecast: Myopia or Neoconservative Manipulation? (http://www.theoccidentalobserver.net/authors/Dodgson-Stratfor.html)

[Glass]

Some math:

Assuming average 6 Year duration on holdings (completely arbitrary), and a 2% drop in rates, means $430 billion is 12% of total notional, so somehow China must be short $3.5 trillion in notional or synthetically. Not good.

HUH? I know that is from the article but there is nothing in the article to provide any one of those numbers except the $430 Bil. So basically it's jibberish.

[Horn]

So, who will he be banking with?

[SQUEXX]

So, who will he be banking with?


Probably the same place Israel keeps all the money they stole with Madoff as the front man!

[gunDriller]

i'm still not sure if this is a "where there's smoke, there's fire" thing, or a "where there is Stratfor, there is Bullshit" thing.