More China thoughts

More information is coming out about the China Aviation Oil collapse.

I want to reiterate my thoughts on the disconnect between what people know about China and what people think they know. That country is an anomaly in the world today with virtually zero transparency on any subject and least of all on its financial situation. People that live in China are not allowed to read the news unfiltered and if you remember SARS you remember that the official reaction was to lie, lie and lie some more. The Chinese government is living in a time machine and most of the world, for whatever reason, either does not know that China is different or chooses to ignore that fact.

The implications of this are absolutely huge if you are a company like GM and have bet a large portion of you companies growth on China. My first thought on reading about CAO was to the Bre-x gold scandal. The net effect in the short-run will be that risk managers will perform due diligence on every similar counter-party in the region and I doubt that process will lead to increased lines for anyone.