As if confidence in China’s cooling economy wasn’t bad enough, big foreign banks are now worried they’ve fallen victim to an elaborate commodities scam.
When a U.S. bank decides on whether to give you a business loan, it looks at things like profitability and future cash flow. In China, banks focus on one thing: collateral.
"So that means you have something valuable and you give it to the bank provisionally, and they can take it if you don’t pay back your loan," says J-Capital’s Anne Stevenson-Yang.
Chinese companies often use things like copper or aluminum as collateral. It’s helped secure $160 billion worth of loans in the past few years. But in the Chinese port of Qingdao recently: a discovery of commodities-backed loan shenanigans.
"People found out that the same batch of copper had been taken to more than one bank to take out a loan," says Sijin Chen, commodities analyst for Barclays.
Chen says China’s government has tried to clean up this practice in the past, but "these government-driven initiatives are never going to be successful if the banks don’t think it’s a risky business."
They do now.
Foreign banks like Standard Chartered and Citigroup have sent their people to Qingdao to see if these warehouses of copper actually exist. So far, the government is too busy with an investigation to let them check. Stevenson-Yang says this fake-commodities scam is just the latest problem for China’s economy.
"China is deflating and everybody’s running around trying to make their particular asset valuable or shore up their particular loan, but the fact is it’s like taking your kickboard and holding it up against a tsunami."
Her message to foreign banks in China: You’re going to need more than a kickboard.
A section of the main conduit for Russian natural gas going to Europe exploded and caught fire on Tuesday, a day after Moscow and Kiev failed to reach a deal on gas payments.
General Motors has announced yet another recall, this time for 3.4 million vehicles with a defect in the cars' ignition switches. According to the company, the keys can come out of postion if they carry too much weight.
The seemingly small defect could have deadly consequences for affected drivers. A statement from GM said the ignition switches could switch out of the "run" position if the key has excess weight and the car "experiences some jarring event," like hitting a pothole. In that circumstance, the vehicle's engine would shut off, potentially disabling power steering and causing drivers to lose control. To top it all off, the defect could also disable the vehicle's airbags.
GM says it will fix the issue, which covers seven models from years ranging between 2000 and 2014, by issuing new keys that are resistent to the problem.
But really, how many car keys are too many? Do you have some unsusually large or heavy keyrings of your own? Maybe you make up for your lack of a key collection with some creative fobs?
Show us or tell us about your keychain by tweeting a pic to @Marketplace or commenting below.
Here are some of the responses we recieved on Twitter:[View the story "Show us your keys" on Storify]
From the Marketplace Datebook, here's a look at what's coming up Wednesday, June 18:
In Washington, a Senate Committee discusses "Aggressive E-Cigarette Marketing and Potential Consequences for Youth."
The Federal Reserve wraps up a two-day meeting on interest rates.
FedEx releases quarterly earnings.
A House subcommittee on Aviation holds a hearing on "Airport Financing and Development."
And it's a celebration of tinkerers and their cutting edge tools. Makers, innovators, and entrepreneurs of all ages are at the White House for its first-ever Maker Faire.
From ruby red tuna to turquoise lingcod, the fish we eat can span the color spectrum. Flesh color can also tell us something about where a fish came from, its swimming routine and what it ate.