We came across a nice Bloomberg article that talks about cow being collateralized in China for bank loans. Here are some parts of the article:

“China Huishan Dairy Holdings Co., which operates the largest number of dairy farms in the country, is selling about a quarter of its herd -– some 50,000 animals -- to Guangdong Yuexin Finance Lease Co. for 1 billion Yuan ($152 million) and then renting them back.”

This company has been using cash to pop up its share in such a way, that since July its share prices rose 72%, despite a sell rating over the shares and 22% drop in Hang Seng. Shares have also been pledged to avail loans, now if share prices drop it will have to put more collateral.

Huishan has Yuan 10.4 billion bank loans, half of which due within a year.

This is a nice example from Bloomberg, showing how complex china’s debt universe has become, so entangled to equities and commodities. Collateralization of cows is not only uncommon but complex, it is associated with high storage costs and risks including prices of milk and beef.

China’s banking segment, like we said before, poses biggest risk to global financial market as they are largest in the world with $30 trillion assets. So even a 10% hit of bad loans would be catastrophic.