Over the past year, two recurring China-related themes have generated substantial media attention: the first is what we dubbed in early March, China's wave of bizarro M&A, or what passed for "China's most innovative capital outflow yet." As we explained then, in China's relentless eagerness to transfer funds and capital abroad (and thus, away from the domestic banking system which locals are well aware just how precarious it is), numerous Chinese corporations were engaged in seemingly idiotic deals with zero cost-discrimination, just so they had a legal basis to funnel cash abroad.

We presented some examples:

Take Zoomlion, a lossmaking Chinese machinery company that is partially state-owned: its total debt stands at 83 times its EBITDA .

. Or how about Fosun, a serial Chinese acquirer that spent $6.5bn on stakes in 18 overseas companies during a six-month period last year, had a a 55.7x total debt/EBITDA in June 2015. "Fosun has bought brand names such as Club Med and Cirque du Soleil as well as a host of other assets including the German private bank Hauck & Aufhaeser."

"Fosun has bought brand names such as Club Med and Cirque du Soleil as well as a host of other assets including the German private bank Hauck & Aufhaeser." Or maybe the highly publicized purchase of China Cosco Holdings of the Greek Piraeus Port Authority for €368.5m. Cosco has promised to invest €500m in the Greek port despite having total debt at 41.5x its EBITDA!

Or Cofco Corporation, which recently reached an agreement with Noble Group under which its subsidiary, Cofco International, would acquire a stake in Noble Agri for $750m (in the process preventing the insolvency of the biggest Asian commodities trader), has total debt equivalent to 52 times its EBITDA!

Or how about Bright Food, which bought the breakfast group Weetabix for $1.2bn last year, and has total debt at 24 times EBITDA!

Which brings us to theme number two: when it comes to offshore M&A activity, nobody had come anywhere close to one of China's biggest conglomerates, Anbang Insurance Group. The relatively obscure Anbang is best known for two things: being the company which tried to buy Starwood Hotels, and pulled out in the last moment without providing a reason (as it turned out, it could not provide a legitimate source of funds). The other reason behind Anbang's fascination is because so very little is known about it.

Actually, that is not exactly true: over the last few months, there have been several insightful exposes on the mysterious sources of cash behind Anbang's quiet facade, the latest such report coming from the NYT which last week posted a must-read two piece report on the conglomerate (we urge readers to skim both "Behind China’s Anbang: Empty Offices and Obscure Names" and "A Chinese Mystery: Who Owns a Firm on a Global Shopping Spree?").

However, what especially attracted our attention was not so much the narrative of Anbang's cash provenance, but a tangent explaining why China's upper echelons are all so eager to quietly transfer their local funds and park them abroad, whether in Vancouver housing, in US corporations, or any of the other "8 Things The Chinese Are Scrambling To Buy In America." It was the following:

Luo Yu, the son of a former chief of staff of China’s military, said China’s most politically powerful families had been transferring money out of the country for some time. “They don’t believe they will hold on to power long enough — sooner or later they would collapse,” said Mr. Luo, a former colonel in the Chinese Army whose younger brother was a business partner with one of Anbang’s founders. “So they transfer their money.”

As a recent VOA interview with Luo Yu explains, he "has a special status. He is a princeling who knew Xi Jinping personally. His father was Luo Ruiqing, one of the ten Grand Generals (ranking lower than ten Marshalls but higher than other Generals) that China conferred in 1955, after the Chinese Communist Party (CCP) took over in China."



Luo Yu, son of revolutionary Chinese at an interview with Epoch Times and NTD TV

To be sure, If anyone is aware of the thinking behind the scenes of China's grand capital flight, especially among China's top power echelons, Yu is likely one of them. Which is disturbing, because what he told the NYT is that it is only a matter of time before China does what it tends to do every so often: have a revolution, and as such the oligarchs of the current regime are urgently moving their cash away from the mainland.

And while they are able to circumvent with ease the traditional capital controls like China's limit of $50,000 in outbound cash, the bigger concern is that the broader population, which holds tens of trillions in deposits in China's banking system will likewise do the same, leading to the worst case scenario for China's banking system: a bank run.

Finally, if the surge in capital outflows over the past year has been any indication, and if Yu is correct, the "collapse" which China's rich and powerful families are preparing for, appears to be getting perilously close.