In November of last year, we set forth the four candidates that would trigger China's downfall and expose the Potemkin village economy as nothing but a facade...

It might be Anbang - the acquisitive insurance behemoth – see “Anbang Just Became A ‘Systemic Risk’: Revenues Crash As Its Chairman Is “Detained” It might be China Evergrande – the developer of “ghost” properties and described by J Capital’s, Anne Stevenson-Yang as “the biggest pyramid scheme the world has yet seen” – see “Stevenson-Yang Warns ‘China Is About To Hit A Wall”. It might be HNA. The highly-leveraged Chinese conglomerate, which has been on an overseas acquisition binge, is paying more for a 363-day dollar loan than serial defaulter, Argentina, paid on a 100-year loan earlier this year. Or It might be Dalian Wanda, which established itself building and operating commercial property, luxury hotels, culture and tourism, and department stores. While the company has its roots in property and infrastructure, it recently begun to push in a bold new direction: investing in all six of Hollywood's major studios.

And now we know

A day after banning VIX, it appears China has finally reached its "Minsky Moment," or in the case of echoing America's demise, its "AIG Moment."

According to the China Insurance Regulatory Commission website, China regulators to take control of Anbang Insurance from Feb. 23, 2018 to Feb. 22, 2019.

Additionally, former Chairman Wu Xiaohui (who, as a reminder, is married to Deng Xiaoping's granddaughter, and was in talks with Jared Kushner for stake in 666 Fifth Ave) will be removed and prosecuted for alleged economic crime.

China’s insurance regulator said Anbang violated insurance rules in fund use, according to the statement.

“In view of the fact that Anbang Group acts in violation of the provisions of the Insurance Law and may seriously endanger the solvency of the company, in order to maintain the normal operation of the Anbang Group and protect the legitimate rights and interests of insurance consumers, CIRC decided in accordance with Article 144 of the Insurance Law of the People’s Republic of China to take over Anbang Group,” stated the announcement.

The conglomerate has almost 2 trillion yuan ($316 billion) in assets and owns businesses spanning life and non-life insurance, asset management, financial leasing and banking, according to its website.

As we detailed in June of lat year, while largely ignored on the list of potential Chinese risk factors, Anbang's troubles could soon become systemic.

In early May, Chinese insurance regulators ordered Anbang to stop selling two investment products. One, they said, was improperly marketed as long-term insurance while a crucial application for the other lacked an actuary’s signature. By that point, Anbang was already in trouble. Questions about Anbang’s financial strength had begun circulating on social media in China in March and April, as Chinese officials publicly raised questions about sales of wealth management products by some insurers. If the drop in revenue is steep enough, Anbang could eventually be forced to liquidate assets. A big factor will be what happens with its existing policies and investment products, which comprise China's shadow banking system. As the NYT adds, Anbang’s annual report provides little information on the monthly tempo at which its previously issued investments are maturing. The company might need to pay them out if they are not rolled over into further investments with the company. The company’s policies do have very stiff penalties on early redemption to discourage holders from turning them in early for cash. Anbang could raise money by selling some of its investments, but that could take time. Additionally, the conglomerate, which over the past 3 years was nothing short of the world's most aggressive "roll up" has been an active investor in Western hedge funds, in addition to making outright acquisitions of overseas companies. And those terms tend to impose severe limits on Anbang’s ability to ask for its money back quickly. That said, a firesale of Anbang assets, which include the Waldorf Astoria, should be a fascinating event. The biggest risk from a potential unwind of Anbang, however, is the fate of its billions in WMP "assets" and whether any troubles at the insurer lead to investor impairment, and a potential run on China's $8.5 billion "shadow bank" considered by many as the Achilles heel of China's massively overlevered financial system.

All of which explains why Chinese regulators have finally stepped in, removed and prosecuted Wu, and bailed out the beleagured behemoth with a capital injection aimed at restructuring the organization.

Illegal operations at Anbang could have “seriously endangered” the company’s solvency abilities, prompting the government to take control of the insurer, according to the statement.

Additionally, as Bloomberg reports, China Banking Regulatory Commission told several banks to continue providing working capital to HNA Group (another massively systemically dangerous Chinese conglomerate) and not to accelerate loans, Risk Event-Driven and Distress Intelligence reports, citing two unidentified people.

The instruction was sent to some banks in the form of so-called “window guidance”, or informal administrative advice. China Development Bank, Export-Import Bank of China, Bank of China, China Construction Bank and China Citic Bank were reportedly among those that were told to support the company.

As a reminder, President Xi Jinping and his top economic deputies have vowed to make controlling financial risks their priority, a pledge renewed at the Communist Party’s twice-a-decade leadership congress last year.