For several years, investors have watched the price of copper soar from sales to China, attributing the rise of the metal's price to China's infrastructure boom and electronics manufacturing sector.

All the while, reports grew after sightings that the metal was stored for long terms in bonded warehouses along China's import zones, including Shanghai, Guangzhou, Ningbo, Lianyungang, Rizhao, Qingdao, Tianjin, and Dalian.

Since the beginning of this year, the answer has become clearer as China began a probe to determine whether copper, along with other metals such as iron ore and aluminum, were being held as collateral for illegal loans.

For a long while, investor have used copper imports as an informal measurement of China's economy -- the more it imports, then investors believed the country was growing.

But with China experiencing its lowest growth quarter since the financial crisis in 2008, investors are questioning the value of copper and other metals as a measurement of China's success.

Informal Banking Sector

For years, China's government has tried to rein informal loans. With government stimulus shut-off in China, businesses of all sizes have struggled to obtain traditional loans to keep their businesses running. The exception are state-owned enterprises that have no problems obtaining state-backed loans. Instead, businesses have turned to using copper as collateral for informal loans.

With a $14.2 trillion corporate debt bubble -- surpassing the United States -- how China will pay-off this debt remains a question, especially debt that is untracked by the government.

On March 7, 2014, China experienced its first corporate debt default when Shanghai Chaori Solar Energy Science & Technology Co. paid only 4 million yuan ($650,755) on an 89.9 million yuan on a 2017 bond coupon.

Investors fear other so-called zombie firms in China will never be able to repay their debt.

With the current slow-down in China's economy and high interest rates to restrain credit growth, companies are piling on more debt to pay their debt.

With copper at the heart of the informal banking industry, Las Bambas copper mine in Peru was sold to a Chinese consortium for $5.85 billion in April 2014 -- the largest acquisition by a Chinese company in years.

But with lackluster economies around the globe, copper prices are tumbling and, therefore, China's corporate debt worsens.

That's why copper has changed its color from a barometer of China's success to the dull patina of growing debt that may never be repaid.

Find below images of coppers stored in bonded warehouses throughout China's east coast.







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Larry Ewers is a natural resources expert based in Corpus Christi, Texas with a focus on Texas oil and gas investments and Mongolian mining projects.

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