A Wall Street Genius’s Final Investment Playbook

Meanwhile, Vice Premier Liu Weigang was struggling to hide his inner agitation.

This meeting was going in a completely different direction than he had expected.

‘I thought they would use the exchange rate as leverage to demand money...’

The Vice Premier had anticipated that Ha Si-heon would propose a secret collusion.

For example, something along the lines of, "Let’s lower the exchange rate by only 5% and stop there," so that both sides could coordinate the extent of the rate cut. In that scenario, it would appear on the surface that the Chinese government and Ha Si-heon were at odds, but in reality, the two sides would stage a show, stopping the drop precisely at 5%.

That was the scenario China wanted the most.

However.

Ha Si-heon surely knew this as well, so it was highly likely he would demand an enormous sum in exchange for such "collusion."

‘I must obtain evidence of it.’

That was why the Vice Premier was recording the entire negotiation process with Ha Si-heon.

Before boarding the yacht, both parties had thoroughly checked each other for any bugging devices.

However, the Vice Premier’s glasses frame contained a top-secret bugging device developed by China’s Military Science and Technology Bureau.

‘If he demands a ransom…’

At that moment, Ha Si-heon would become a criminal blackmailing the state’s economy.

Using a nation’s exchange rate as leverage to extort money is a serious crime.

If he could secure evidence of the crime, they could either imprison Ha Si-heon or use the evidence to control him as a puppet for China’s needs for the rest of his life.

And so, with a perfect script already written in his mind...

One word from Ha Si-heon shattered all of the Vice Premier’s calculations.

"I know about the Shadow."

He was so shocked he almost stopped breathing.

Seeing the Vice Premier’s reaction, Ha Si-heon smiled and said.

"You speak English, don’t you?"

Since the Vice Premier had visibly reacted even before the interpreter spoke, it was an obvious deduction.

However, the Vice Premier concealed his embarrassment and answered in English.

"How did you know? That I am fluent in English, I mean."

His tone suggested that his earlier fluster was not because of the Shadow, but simply because his English proficiency had been exposed.

Ha Si-heon smiled in return and replied.

"I observed your expressions during the interpretation. You looked bored when hearing again what you already understood, but when your words were being interpreted, you looked like a teacher grading homework."

"I see, clever. Then can you also guess why I pretended not to know English?"

"Well, there could be several reasons."

"And what might those be?"

"It could be a psychological tactic to gain an upper hand, or a way to leak less information. After all, a lot can be inferred from a person’s tone or choice of words. Or, you might simply want to use the pause during interpretation to collect your thoughts."

"Impressive insight."

In fact, the last point Ha Si-heon made was the most accurate.

It was about buying time.

And right now, the Vice Premier had brought up this topic for the same reason.

Since Ha Si-heon had mentioned the ‘Shadow,’ he needed time to decide how to respond.

‘For now… it’s probably just a probe.’

Perhaps he had only a small clue and was using this opportunity to gauge the Chinese government’s reaction.

If that were the case, there was only one thing to do.

Appear indifferent.

If he acted as though he didn’t care, Ha Si-heon would likely stop pressing, thinking it wasn’t important.

After all, there was no way Ha Si-heon truly knew the Shadow’s real identity.

However.

"Aren’t you curious about the Shadow I mentioned?"

Ha Si-heon pressed the point again.

It was too obvious now—pretending ignorance would seem unnatural.

"Shadow... such a vague term. I’m not sure how to respond. It could refer to slush funds or to political figures working behind the scenes..."

Ha Si-heon smiled lightly and began to speak slowly.

"Soon, the Delphi Institute will publish a report on the Chinese economy. More precisely, it will be about China’s Shadow Banking."

The Vice Premier’s heart nearly sank.

But with the composure he had built through decades of navigating politics, he kept a calm expression and muttered casually.

"Shadow Banking, huh..."

"It refers to unofficial lending that doesn’t appear on financial statements."

"Of course I’m familiar with that concept. But why should I be particularly concerned about it?"

He gestured as if discussing a trivial issue.

Ha Si-heon smiled knowingly and replied.

"Oh, is that so? I’m glad I asked first. I was worried that releasing our report might somehow offend China. It’s a relief to hear there’s no issue. In that case, we’ll proceed with publishing the report worldwide as planned..."

The casual tone was infuriating.

But indifference would no longer work in this situation.

Reluctantly, the Vice Premier asked.

"Still, I should hear it just in case. What exactly does it contain?"

***

"Are you familiar with the recent popularity of WMPs (Wealth Management Products) in China?"

"WMPs... of course I know. They’re investment products, aren’t they?"

The Vice Premier was still feigning ignorance.

Understandable.

That is the instinctive reaction of someone whose weakness has been exposed.

But I couldn’t just let him off the hook.

I needed to show him how much I knew to strengthen my position for persuasion.

"As you know, WMPs are investment products sold by banks. While typical savings account interest rates are around 2% annually, WMPs offer an average of 4-6%, with some yielding over 8%, making them extremely popular."

"And what does that have to do with this Shadow Banking or whatever?"

Ha Si-heon smiled faintly.

As if to say, just listen a bit more.

"Many investors view WMPs as just higher-interest savings, but they are not deposits or savings. Strictly speaking, they are investment products. There’s a risk of losing the principal, and no one guarantees compensation if it’s lost."

In other words, deposits receive a certain level of protection, but WMPs do not.

Yet people fail to understand this.

Why?

Because they’re sold by state-owned banks.

And if those banks promote WMPs as safe and high-yield products, people naturally believe they are government-backed.

Anyway.

"Do you know how large the WMP market is?"

"That is…"

"Our estimates put it at a staggering $3.5 trillion. That’s nearly the size of Germany’s entire economy."

A brief silence followed.

The Vice Premier finally opened his mouth with difficulty.

"Is that a problem? China is an economic superpower."

"Of course, in itself, this is not an issue. The important thing is where this enormous amount of money is flowing. According to our estimates, about 60% of these funds are going to corporate loans, while the remaining 40% is being funneled into real estate and infrastructure projects. For reference—these are loans. They’re recorded as 'investment products' on financial statements, so they don’t appear in official loan statistics."

In other words, the scale of unregulated, unchecked lending is equivalent to the size of the German economy.

And this is only looking at one form of shadow banking, WMPs.

If you add in the scale of other similar "loans that aren’t officially loans," the total exceeds $8 trillion.

"However, a significant portion of these operate in a structure that is practically similar to a Ponzi scheme."

"What?!"

"Oh, please don’t misunderstand me. I’m not saying it’s a Ponzi fraud."

I waved my hands, clarifying to avoid any misunderstanding.

"WMPs are invested in real assets, so they are completely different. However, the way the funds are operated mirrors a classic Ponzi structure."

I nodded knowingly and continued.

"Frankly, it’s inevitable. WMPs usually mature within a year, but real estate projects typically take five to ten years to recover investments. So, how do they repay maturing investors before that? They are forced to cover it with funds from new investors."

Simply put, it’s a cycle of robbing Peter to pay Paul.

Once the real estate projects are completed, they will generate significant returns, but until then, they have to keep drawing in new investors to maintain the system.

However, here’s where the real problem begins.

"Well, as long as they can ultimately recover the investments, it wouldn’t be a huge issue. The problem is... the real estate market is collapsing."

After the financial crisis, China’s real estate market experienced explosive growth.

The Chinese government aggressively promoted real estate and infrastructure investments as part of its massive economic stimulus package.

The boom was so intense that home prices would sometimes double or triple within a single year.

As a result, countless developers rushed into construction projects...

But they went too far.

Supply has far outstripped demand.

Consequently, ghost cities are now appearing all over China.

Even though the market has clearly reached saturation...

Developers can’t stop.

They can’t simply abandon projects that are already underway, so they are forced to continue building, even knowing it won’t be profitable.

However, regular banks are reluctant to extend loans to such high-risk developers.

That’s why they turn to shadow banking.

And this is the problem.

"As I mentioned, while WMPs resemble a Ponzi structure, there is one key difference. Once the projects are completed, they generate actual profits. But... what happens if the projects are completed and still fail to yield profits?"

The cycle of robbing Peter to pay Paul will inevitably collapse.

At that point, it is no different from a Ponzi scheme.

"We are now at the very beginning of that crisis. In three to five years, the situation will become even more dire."

Large construction firms and small and medium-sized banks entangled in this cycle will start going bankrupt one after another.

Of course, this won’t happen immediately.

However.

"We want to warn of this impending crisis."

I spoke firmly with a tone of moral conviction.

"This is no different from a financial crisis. It’s a Ponzi scheme—sorry, that was too harsh—a Ponzi structure, where high-risk funds are recklessly poured into real estate assets."

At that moment, the Vice Premier raised his hand to stop me.

His face had turned pale.

"So you’re saying... you’re planning to officially publish a report comparing China’s shadow banking to the subprime mortgage crisis... and to a Ponzi scheme?"

"It’s a Ponzi structure, not a Ponzi fraud. There’s a difference."

"Do you think that matters right now?! Do you understand what kind of repercussions that report will cause?!" This text is hosted at novelFɪre.net

Of course I do.

If the Delphi Institute, which accurately predicted the Greek default crisis, declares this to be similar to a Ponzi, who would continue to invest in it?

WMP investors would rush to withdraw their funds en masse.

And as I’ve said, WMPs are built on a Ponzi-like structure.

If new investment stops flowing in, the cycle will collapse.

And if WMPs collapse, what happens to all those real estate developers?

Developers who already struggled to obtain loans from traditional banks and thus depended on shadow banking.

"It’s a predetermined future: a wave of bankruptcies."

Well, it was bound to happen within a few years anyway.

I’m simply saying that through the Delphi Institute, we’ll bring that timeline forward a bit.

However, at that moment.

The Vice Premier’s gaze turned cold.

"You... are you blackmailing us?"

His glare was so intense, it seemed like he wanted to strangle me on the spot.

I waved my hands with an innocent expression.

"Blackmail? I’m merely trying to inform WMP investors of the truth and help minimize potential damage..."

"Don’t be ridiculous! You’re about to spread catastrophic information—how is that not blackmail?! Is that why you called me here? To demand money in exchange for stopping this?! Do you think you’ll walk away unscathed after pulling something like this?!"

I put on an aggrieved look and spoke.

"I think there’s a misunderstanding. The Delphi Institute is a policy think tank. And we provide two types of services. First is our free service. We publish various reports containing so-called 'Black Swan' information—things the world must know—completely free of charge."

The Vice Premier frowned.

His face clearly said, ‘What nonsense are you spouting in the middle of this conversation?’

But I continued explaining without missing a beat.

"And second, we offer a paid consulting service. We provide tailored policy solutions and strategies to help nations navigate crises."

Finally, we had arrived at the main point.

The Vice Premier seemed to finally understand my true intention.

"Are you... suggesting..."

"Yes, exactly. In this current situation, I thought you might need our paid service, which is why I requested this meeting. So please, don’t misunderstand."

That’s right. I didn’t come here to blackmail anyone.

I came here to make a sale.