2016-10-31

Beijing Tries to Mandate Home Prices, Limits Ability to Sell

Beijing is trying a new strategy for capping home prices: mandating them. Four plots of land up for sale in Beijing have been amended to include limits on home prices:
October 28 afternoon, the City Planning and Land Committee to the end of September listed four blocks release second supplementary announcement, commodity housing sales price Haidian District Yongfeng three plots no more than 53,400 yuan / square meter, the highest price no more than 56,100 yuan / square meter, the average selling price Daxing Huangcun Lot no more than 55,800 yuan / square meter, the highest price is not more than 58,500 yuan / square meter.
Given all the other regulations put in place over the past month, this additional one will probably work. By itself it will only create more affordable housing, since developers will have no incentive to increase building costs. Assuming they can't find a workaround.

Another more important regulation: buyers of homes on these plots will not be able to sell for 5 years. The aim is to force investors away from speculation and towards renting.

iFeng: 北京四宗地限制未来房价 房价将不超6万元

MoH Takes Lead in Regulating Internet Finance

The Ministry of Housing has taken the lead in ending the illegal flow of Internet finance into the housing market.
iFeng: 住建部牵头 整顿互联网金融资金违规入楼市
The above already has this going to work for the basic characterization, is to 'straighten out'." October 26 morning, a local housing and urban construction system insider told the "China Business" reporter, the Ministry of Housing We are taking the lead in preparing for Internet banking, P2P illegal funds into the real estate market special rectification work.

The work will be in conjunction with the Department of Housing and the People's Bank, China Banking Regulatory Commission, local financial office, the Ministry and other functions, to carry out the regulatory authorities. Department of Housing recently been in housing and urban construction within the system, in many ways, this information has been communicated, and related work arrangements.
Aside from this coordinated effort led by the MoH, various ministries and departments will continue carrying out other credit tightening measures.

2016-10-30

Presidential Race Tightens

The presidential race was tightening before the latest FBI revelations and the FBI reveal didn't materially impact the market, at least as far as the Iowa Electronic Market is concerned. The Trump rally experienced a pullback the day after the news hit the wire and it drifted lower. Unless there was an FBI agent with inside knowledge of the news bidding away to make a few thousand dollars, the evidence suggests the market doesn't care about the news.
The Mexican peso did tumble on the news though, as Mexico faces significant economic complications if Trump wins. More than 2 percent of GDP comes from remittances alone.

The wildcard is the Chinese yuan, currently in spitting distance of a technical breakdown.

2016-10-28

Beijing Existing Home Sales Slide, Slide, Slide

Beijing weekly home sales have been steadily falling since peaking in September ahead of new buying restrictions. In the latest full week, sales were 70 percent below the peak.
From Homelink Beijing's actual transaction data, "9.30" since the New Deal, the second-hand housing transactions will cool down significantly, 41 weeks (October 3 - 9 May), 42 weeks (Oct. 10 - 16 ), 43 weeks (October 17 --23 days) of signing of the continuous decline, when compared with the high point in September has declined by about 70%. Meanwhile, the new contracts in October have almost halved from early September over the same period.
iFeng: 新政席卷北京二手房:成交量猛降 卖方报价松动

Trump Odds Reverse On Heavy Volume

Trump contracts are bid at 35 cents currently. Heavily volume has lifted the price from 9 cents over the past couple of days.

The End of the GOP

LA Times: GOP dead zones: You won't find any Republicans to vote for in big areas of L.A. County
In this GOP “dead zone” — spanning parts of five congressional districts, five state Assembly districts and one state Senate district — not a single Republican candidate made it on to the November ballot.

Instead, all but three of the candidates in those races will be Democrats. In two races voters can choose Libertarian Party candidates who mounted successful write-in campaigns during the primary. And in an East Los Angeles congressional race, an Air Force medic is mounting a bare-bones campaign as an independent against Lucille Roybal-Allard.

This scenario is the result of California’s relatively new, voter-approved primary system in which the two candidates who finish with the most votes in the June election go on to the general election — even if they are from the same party.

...For the first time in a statewide contest, voters have two Democrats only to choose between in the open U.S. Senate contest between California Atty. Gen. Kamala Harris and Rep. Loretta Sanchez.

But for those 818,000 voters in parts of Los Angeles County, such as the San Fernando Valley and Central Los Angeles, the dearth of GOP options stretches much further down the ballot, according to an analysis of voter registration conducted for The Times by Political Data Inc.
If Trump wins it is possible (though very unlikely) demographic changes are halted or reversed. If not, the GOP will disappear from Texas within the the next decade, and along with it any chance of winning the Presidency and likely the House of Representatives. Then it will become a regional party in the South, Midwest and Mountain West, with only the Senate available to block Democrat legislation. The same position as Southern Democrats decades before the Civil War.

Next will come states refusing to implement universal healthcare, gun control regulations and various other laws. Economic warfare has already begun as corporations and states refuse to do business with North Carolina over its bathroom bill. State and municipalities already ignore federal laws, such as those applying to immigration and drugs such as marijuana. The path to dissolution is underway and if this is a long-term decline in social mood, it will eventually break the United States into component nations.

2016-10-27

Moody's: China Shadow Banking 82pc of GDP

SCMP: China’s shadow bank lending balloons to 58trn yuan, as focus shifts to risks from fintech platforms

Credit Tightening: PBoC Increases Oversight of WMPs

Caixin: China's Central Bank Boosts Oversight of Wealth-Management Products
China's central bank has stepped up risk assessment efforts that will oversee fast-growing, off-the-book wealth-management products, but analysts say the impact will be limited.

Several sources from a sub-branch of the People's Bank of China (PBOC) and commercial banks told Caixin that they had received a notice from the central bank confirming that off-balance-sheet wealth-management products will be incorporated into the Macro Prudential Assessment (MPA) system, a framework adopted by the central bank at the beginning of this year to gauge risks in bank-credit exposure.

The MPA system takes into account several factors, including banks' capital adequacy and leverage ratios; the quality of assets, liquidity and foreign debt risks; and interest-rate pricing. Wealth-management assessment falls under "broad credit loans," a term the MPA adopted to represent loans, bonds, equities and certain other investments.
There's no effect on banks yet, but it paves the way for tougher regulations down the road.

2016-10-26

Global Dollar Shortage aka Deflation

Carmen Reinhart at Project Syndicate: The Return of Dollar Shortages
But, because numerous countries employed the same tactics in an environment in which a broad array of capital controls was in place and official exchange rates were pegged to the US dollar, a parallel currency market flourished. The black market’s premium (relative to the official exchange rate) in most European countries (and in Japan) skyrocketed through the early 1950s, reaching levels that we now tend to associate with “unstable” emerging markets.

Today, seven decades later, despite the broad global trend toward more flexibility in exchange-rate policy and freer movement of capital across national borders, a “dollar shortage” has reemerged. Indeed, in many developing countries, the only thriving market for the past two years or so has been the black market for foreign exchange. Parallel currency markets, mostly for dollars, are back.

This time, the source of the dollar shortage is not the need for post-conflict reconstruction (though in some cases that is also a contributing factor). Rather, countries in Africa, the Middle East, Central Asia, and Latin America – most notably Venezuela – have been hit very hard by plunging oil and commodity prices since 2012.

Jeffrey Snider of Alhambra comments in What Progress Looks Like
The world is finally waking up to its dollar problem, though in reality it is much, much more than that; it is a full “dollar” shortage. What will likely be most shocking to those who had subscribed to the Bernanke view is that this “dollar” condition is nearly a decade old, actually explaining why Bernanke should have been dismissed at least by the time Bear Stearns failed. The FOMC in every way demonstrated conclusively its utterly criminal incompetence because money wasn’t what they thought it was – even though that was the one task they were supposed to be totally unchallenged by.

...Central banks, especially the Fed, don’t have a printing press in their “toolkits.” They had been using the myth of the money tree to some effect for decades, Alan Greenspan the most prominent accidental “genius” maybe in world history because of it. When it counted the most, however, meaning since August 2007, a money tree has proven exactly as useful as it sounds. The “rising dollar” is and has been a euphemism for “dollar” shortage but only the latest stage of it, finally proving even to (some of) the previously obstinate orthodox faithful they have no idea what they are doing.

The next step is appreciating that they never did.
Take this view of the U.S. dollar system in deflation since 2007-ish. Then consider the renminbi has been inflating almost non-stop since then. A shortage arises when demand outstrips supply, but there are large dollar reserves in places such as China. China created massive amounts of credit all of which acts a a potential conduit for U.S. dollar flows out of China. The world needs dollars, China has them, the dollars flow, the renminbi depreciates.

Chinese Homebuyers Must Prove Source of Funds

For homes valued at 5 million yuan or more, banks will require homebuyers show where their money came from. This will throw a wrench in down payment loans from various sources. Banks are also strengthening checks of income and cash, creating a blacklist for fraudulent borrowers who put fake information on applications. Violators will be banned from ever borrowing from any bank ever again.

iFeng: 楼市又出大消息!以后买房要说清楚钱从哪来

Nanjing Home Sales Cut in Half

Average daily housing turnover is 205 units in October, down from 440 in September before the implementation of buying restrictions.
Caijing: 南京楼市限购满月 10月日均成交量已腰斩

2016-10-25

Silicon Valley Has Peaked

Silicon Valley is no longer concerned chiefly with building the best technology products, a sign that technology is close to a peak and the stock market may be ready to turn.

Bloomberg: Peter Thiel’s Politics Become a Deal-Killer in Silicon Valley
Dismay over the billionaire venture capitalist’s stance on the Republican candidate has been showing up all across the technology landscape -- from a startup founder saying he regrets taking a Trump backer’s money to a prominent diversity group refusing to work with any company associated with Thiel. In one recent case, it also throttled the flow of cash into a fledgling VC fund.
On the other side are technology start-ups specifically designed to replace the overly political censorship of firms such as Twitter (with Gab.ai already launched), Wikipedia (Infogalactic has launched) and eventually Facebook and others. To say nothing of growing overseas competition in places such as China.

Last Round of Swing County Polls Shows Hillary Lead

Final polling from Axiom Strategies. The counties below are those that have predicted the statewide outcome going back several election cycles.
Looking at the latest results compared to statewide polling, utilizing the same methodology, it appears all of the normally predictive counties remain consistent with statewide results with the exception of
Luzerne County, PA. Trump greatly outperforms his statewide performance in this particular county. This is where you can see local issues, such as Luzerne’s struggling economy, break the county from their predictive nature.

All other counties show three points or less difference from the statewide polling.

As of this moment we find a presidential campaign where Hillary Clinton has the clear advantage over Donald Trump, but we do not find a presidential campaign that is out of reach for Trump. The odds are stacked against Trump, as our data and data from most reliable sources shows, but he has slim leads or is within the margin of error in his must-win states. Trump would need to overcome a deficit in Colorado, break through a current tie in Florida and maintain small leads in Nevada, North Carolina and Ohio to have a chance to accumulate 270 electoral votes. Virginia, Wisconsin and Pennsylvania appear to be out of his reach as he is at least three points behind in each of those states in the closing weeks of the campaign. A pathway has been charted, but data also shows that Trump could also be the victim of a clean sweep in these states.
Assuming Trump gets a few breaks that go with the swing polling, this is the dead heat possibility, where a single congressional district in Maine could swing it to Clinton victory or a 269-269 dead heat. It requires he flip Pennsylvania though.
Strictly as a speculation, the odds on a Trump bet look decent for anyone who thinks the polls are not accurately measuring 2016 turnout.

The decision by establishment Republicans to distance themselves from Trump likely lost not only the Senate, but the GOP as well because Trump voters are aiming to boot these members out of Congress by withholding votes.

Worst Asset of the Next Decade: Renminbi?

The headline asks if the yuan will be the worst investment over the next ten years. Answer: yes. Not solely a depreciation story, but rather an inflation story.

Also: bypass China's stock market and invest in India's.
5. the RMB

The next 10 years may be the worst of assets. This is determined by the nature of fiat money, is also China's national conditions. For over 30 years, the average annual purchasing power of RMB decreased by 10%, down 7% annually recent years. Difficult to control in the future decline of 5 percentage points per year or less.
iFeng: 又一轮财富洗牌!人民币或是未来十年最差资产?

China Youth Population Tumbling: Which Regions Will Live, Which Will Die?

An evergreen topic in financial media is the collapse in youth population as the younger cohorts rise. The latest article asks, which cities and provinces still have a future?

Top tier cities such as Beijing and Shanghai have horrible fertility, but they are IQ shredders like Singapore, ever pulling in talented youth. They can get by as long as they can attract migrants. They, along with Tianjin, appear in green on the chart below. The Y-axis is cumulative GDP growth over the past 6 years, while the X-axis is the proportion of 0-19 age cohort in the last census.

Way out to the upper right is Guizhou and Tibet. Minorities are more than one-third of Guizhou's population and Tibet is mostly populated with Tibetans. Minorities in China were allowed two-children while the one-child policy was in effect.

In the lower left are the Manchurian provinces of Jilin Heilongjiang and Liaoning, the latter of which is expected to show another contraction of GDP in Q3.

At bottom, in red, are outliers Hebei and Shanxi, hurt by the downturn in commodities.

One of the provinces headed over a demographic cliff is Jilin, with a large population set to retire and a steady collapse in population all the way down the population pyramid. Jilin is second on the left below. Red is the provincial population pyramid, in all cases blue is the nation.
Another 5--10 years, the annual number of retirements will be the new Jilin 2.5 times the number of workers to participate, and this situation is very scary.
The article goes on to discuss the demographic war set to unfold. Provinces rich in youth look to keep them at home with attractive urban development, while first-tier and eastern cities try to lure them away.
From the above comparison of several groups of the population structure, we can see that most parts of the country, the reserve population 20 years of age compared with 80 population peak has a sharp decline, but the magnitude of decline in all regions is different. The foreseeable future, "the young demographic battle" will be the first-tier cities in addition to the provinces and cities of the norm. From the global experience, young workers tend to be more of a large metropolitan area, population and therefore the battle, also depends largely on the degree of development of the various regions of the core cities, urban band.
The rest of East Asia likely provides a decent roadmap:
In a serious aging problem of Japan, Korea and Taiwan, for example, while small towns are dying, and the other side is in Seoul, Tokyo, Taipei metropolitan area has grown. South Korea, half of the population of 50 million people concentrated in the Seoul metropolitan area, Japan's 120 million people, nearly one-third of the population concentrated in the Tokyo metropolitan area. If the country's population of more than 90 after 80 after playing six fold: it might not be discounted mega-cities, cities hit 6 fold, the county hit 3 fold, leaving only 1 rural areas may fold.
Possible winners include Shenzhen and Dongguan, while Zheijiang and Jiangsu (cities such as Hangzhou, Suzhou, Nanjing) could stagnate due to the drop in youth population:
For developed regions, with the roll-out of labor-intensive industries, the cage for birds, attracting high-population, has become the key to the continued vitality. On this point, deep Wan is doing quite well, and now the Shenzhen and Dongguan has become the core of the global smart phone and only hardware chain. Shenzhen is also the introduction of a large number of well-known university campuses and hospitals to make up for their lack of education and health care. Wando deep rapid industrial upgrading also brings speed up housing prices.

Jiangsu and Zhejiang look at: In addition to the rise of electronic business, and now are faced with the entire Zhejiang traditional export products of light industry recession, the emerging high-tech industry shortage, Zhejiang has become the bank's bad debt hardest hit. Similarly, Sunan future is not optimistic, Suzhou , Wuxi, as the representative of the heavy chemical industry, stagnation and transferring electronic processing industry, Rongsheng Heavy Industries, Suntech's huge losses, reflects the post-industrial era these traditional industrial city transition embarrassment.

Jiangsu and Zhejiang in the southeast coast as a proportion of the young population reserve lowest province in the next 10 years, becoming a Premium Edition, version southern Liaoning, dragged down by the sharp slowdown in economic aging, it may be a high probability event.
Zhejiang and Jiangsu have seen population growth slow rapidly, and may even be starting to see outflows:
Some people will say: Jiangsu and Zhejiang as the coastal provinces, there will be a large number of young migrants inland to solve the problem of its younger population. But really the case?

Here is the 2000, 2010, 2015 Jiangsu, Zhejiang and the resident population and household population changes. Can be seen from 2010 to 2015, both in Jiangsu or Zhejiang, the average annual growth rate of the resident population are far and compared to 10 years ago, and the growth rate is higher than the resident population from the household population growth becomes low in the household population growth. This shows that in the past few years, Jiangsu and Zhejiang native population growth stopped and even showed a slight net outflow of state.

Thus, in the country of young population greatly reduced labor-intensive industries and coastal premise, even wealthy as Jiangsu and Zhejiang, can no longer be filled by the native population of young workers, the future can only rely on their endogenous young population.
Zhejiang is on top in the chart below, Jiangsu underneath. The top number is the total population, the bottom number is registered households (natives). From left to right are the 2000, 2010 census totals, 2000-2010 average growth, 2015 census, 2010-2015 average growth. The slowdown in non-resident population is evident:
Another group of winners and losers are those going for broke with a single megalopolis development strategy to keep youth from heading to first-tier cities.
For the Midwest, many provinces such as Hubei, Henan, Anhui, Hunan, Sichuan, Guizhou, in the past few years, have taken to abandon small cities, give the province to build the core metropolitan area mode. When a large decline in the young population, which abandoned the vehicle and insurance handsome, rapid culture practices of mega-cities, is also an inevitable choice. Because only large metropolitan area, in order to become a gathering place for modern industrial chain and high-end services. Wuhan and Chengdu, for example, although the provinces where they face greater aging crisis, but two of the province's first high metropolis, has become a highlight of the regional development across the country in recent years, in the Midwest on industrial upgrading, at the forefront.
Other provinces which developed earlier and have multiple major cities, may be headed for trouble:
Liaoning, Hebei, Shandong, all provincial capitals and coastal cities of dual-core and even multicore development typical example, Shenyang and Dalian , Shijiazhuang, Tangshan, Jinan, Qingdao, Yantai, the results of multi-core development is the core of each are not competitive enough, it is difficult to attract high-end industry and population.
The conclusion:
For individuals and real estate investment configuration, based on the above analysis, need to do is:

1. Do not buy property in the county town and underdevelopmed areas —— the houses in these areas will become mostly uninhabited concrete monuments

2. Do not worry that high priced assets in the city center will depreciate in the center of the city: such as Chengdu, Zhengzhou, Wuhan, Hefei

3. Capital cities with high youth reserve population have a high potential: such as Guiyang, Nanchang, Nanning, Changsha

iFeng: 轻人口锐减,哪些省市还有未来?

2016-10-24

Steel Firms Set to Hit Production Cut Targets

Many SOEs are expected to hit their targets by the end of October, with several provinces ahead of annual targets as higher prices blunt the cost.

In addition to the central level, a number of provinces and cities are iron and steel production capacity to start end road sprint. Jiangsu provincial government said recently, before the end of October will be completed ahead of the year to 3.9 million tons of steel production capacity. It is reported that, "Thirteen Five" period, Jiangsu Province will Yajian crude steel production capacity of 17.5 million tons before the end of 2018 70% of the total schedule. Click to view the progress, however, the next two years, Jiangsu Province, the pressure can be enormous pressure to cut.

Sichuan Province this year will be fully Yajian steel production capacity of 4.2 million tons at the end of October. According to the "Sichuan Daily" 18, 2007, six main steel-making equipment, Sichuan Province signed target responsibility of three companies (production capacity of 4.2 million tons) have been removed.

Some relatively minor tasks to the capacity of the provinces has been completed ahead of the annual target in the third quarter. Hunan Provincial Development and Reform Commission published in August, CERI (Xiangtan) Heavy Equipment Co., Ltd. 50-ton electric furnace was sealed shut, marking the province's 2016 steel production capacity to the task has been completed. In early September, the Commission by letter of Shandong Province issued a document that, in 2016, Shandong Province, the steel industry has been completed Yajian 2.7 million tons of pig iron, crude steel production capacity to 2.7 million tons of tasks related to business equipment has been shut down to exit and begin deployment in 2017 capacity to work plan.

The most difficult task of the steel city of Hebei Province also plans before the end of November this year exceeded plan. "Hebei Province in 2016 to resolve the overcapacity of steel monthly schedule" shows, is expected to the end of November, Hebei Province, the cumulative phase-out 18.4 million tons of iron production capacity, 16 million tons of steel production capacity, 17.26 million tons more than the original iron Yajian , 14.22 million tons of steel production capacity target.

Official statistics show that as of the end of August, 28 steel-producing regions and the central enterprises total exit capacity of 34.68 million tons of crude steel, accounting for about 77% of the amount of the annual task

iFeng: 钢铁去产能年终冲刺:央企预计10月底完成任务

Mainland Buying Restrictions Sends Giant Ball of Liquidity Into Hong Kong

港媒:内地资金涌入香港买楼避险 或推高香港房价
Hong Kong media said that since the yuan since joining IMF Special Drawing Rights (SDR) basket of currencies, the RMB has continued the trend of depreciation; plus more than 20 cities in the Mainland, have introduced market regulation policy, more and more mainlanders Hong Kong to buy property hedge against inflation, is expected to push up the Hong Kong property market.

According to Hong Kong "Economic Daily" reported on October 20, according to Bloomberg quoted the Hong Kong Inland Revenue Department data show that last month, the non-permanent Hong Kong resident buyers total 250 transactions, rose to a new high since 14 months, compared with June to September higher than the average of 36%; Stamp Duty September non-Hong Kong permanent resident buyers paid up to HK $ 506 million, 26% higher than the average of the past four months.

Hong Kong Inland Revenue Department did not provide the nationality of these buy property in Hong Kong non-residents, but the industry believes that, from the mainland.

Ryan Lam Research Shanghai Commercial Bank in Hong Kong director, said, "Investment in non-resident investors in the property market in Hong Kong, mainland buyers is definitely the protagonist, they recently purchased property in Hong Kong is accelerating pace. Under the expected devaluation of the renminbi, the mainland buyers are decreased by RMB exposure to dollar assets is a good choice hedge. "

Home Sales Plummet Across China

Buying restrictions are working for now in the hot second-tier cities:
From a national perspective, sales fell last week versus the three-month average sales rate, in which Suzhou, Jinan, Xiamen, fell over 70%, while Foshan, Nanjing, Nanchang, fell more than 40%.

iFeng: 10月全国楼市或迎拐点 部分城市成交量速冻

This Chart Looks Familiar

From a good article on China's overseas buying spree.

Bloomberg: How China's Dealmakers Pulled Off a $207 Billion Global Spree

What happened in 2014?

Not Yuan Weakness, Dollar Strength

I expected a breakdown in the yuan not only because of inherent imbalances between credit inflation and accumulated reserves, but also due to U.S. dollar strength. Weakness in the yuan is due to the latter at the moment.

First on the imbalances. There was enough inflation baked into the Chinese monetary system for a double-digit depreciation several years ago. The situation only grows worse with the Chinese economy growing at 6 percent and credit growth at double-digits. The theoretical target price (as opposed to market price) for USDCNY is ever rising until these trends change.

China is pouring credit into a saturated market,. Like pouring water into an already filled bowl, the overflow goes somewhere, in this case into housing and outflows. As the U.S. dollar rises in relative value against other fiat currencies, the yuan rises with it. The valuation gap between Chinese assets and foreign assets widens as the currency appreciates versus much of the world, and this is on top of the high domestic inflation of prior years which has yet to be accounted for in the currency market.

The outflows to date are still mostly the result of fundamentals. Chinese investors are buying overseas assets because they're cheap and they will keep buying as long as they remain cheap. Depreciation expectations have yet to play a major role in outflows. The PBoC would like to keep it that way, but the wildcard is the U.S. dollar.

China has effectively said currency appreciation is over. The yuan flatlined versus the euro following the adoption of the currency basket at the end of 2015, and the two move in near lock-step since, albeit with less volatility for the yuan.

The U.S. dollar is fully in control here. An appreciation of less than 1 percent will push USDCNY past 6.83, erasing all yuan appreciation since the re-peg ended in 2010. Depreciation expectations have not played a large role in the market to date, but once 6.83 is taken out, technical traders will look for a breakdown. Even without any shift in expectations, if the U.S. Dollar Index moves past 100 and on to new highs, USDCNY will climb past 7. A move towards 105, 110 or even 120, and the yuan could be down 5, 10 or 20 percent without any need for depreciation expectations.

Note that if Trump wins the presidency, China will not be able to count on the U.S. export market and will have little incentive to hold down USDCNY appreciation.


Related: ‘Something’ In ‘Dollars’; August

2016-10-23

Trouble Brewing For Land Kings

The headline in Caijing reads in part: dark horse weapon turns into hot potato.

Centaline's Zhang Dawei summarizes land king risk into one sentence: if prices don't rise 50 percent in the next year, many land kings will lose money on their land purchases.

Buying restrictions have seemingly ended rising prices, but we won't know for sure until credit growth adjusts. Presumably it will slow because most of the credit growth was demand side driven by homebuyers.

Caijing: 调控进行时 地王或从黑马利器沦为烫手山芋
In the history of Chinese real estate development, some radical developers played a "dark horse" role. With their high leverage, high debt ratio and bold action get high success, going from regional enterprises to become the country's leading enterprises. In the current round of real estate regulation, the "king" would from the "dark horse weapon" become a "hot potato"?

China Slams U.S. Activities in the South China Sea

China will never allow US to run amok in South China Sea: People’s Daily
A US Navy guided-missile destroyer, the USS Decatur, sailed through Xisha Island waters, part of the South China Sea as Chinese territorial waters, on Friday without the approval of Chinese authorities. The Chinese government resolutely opposes such provocative behavior and will take a series of effective counter-measures.

In the statement of the Chinese government on the territorial sea baseline issued in May 1996, China clarified the baseline of the Xisha Islands. The Law of the People's Republic of China on the Territorial Sea and the Contiguous Zone and other international laws also stipulates that all foreign warships need to gain approval from the Chinese government before entering Chinese waters.

The illegal entry of US warships into Chinese waters without permission seriously violates China's sovereignty and security interests, breaches both Chinese and international laws as well, and poses threats to peace, security as well as order in the relevant waters.

What the US did aims to encroach upon the sovereignty, security and maritime interests of regional countries in the so-called name of a "freedom-of-navigation operation." But such provocative acts once again expose the negative energy of its "Rebalance to Asia" strategy, and at the same time verify the US' role as a real trouble-maker in the South China Sea.

2016-10-22

Coup Threat Pushes Philippines into Russia-China Camp

Less than a month ago: US mood hardens as leader of ally Philippines stokes outrage
"I think it would be a serious mistake in a democratic country like the Philippines to underestimate the power of the public's affinity for the U.S. That's people power," Assistant Secretary of State Daniel Russel told The Associated Press.

Russel did not draw a direct comparison, but past Philippine presidents have been toppled by popular protests dubbed "people power," including former dictator Ferdinand Marcos, who was ousted in 1986.
Now: In China, Duterte announces split with US: 'America has lost'
In a state visit aimed at cozying up to Beijing as he pushes away from Washington, the Philippine President announced his military and economic "separation" from the United States.

"America has lost now. I've realigned myself in your ideological flow," he told business leaders in Beijing on Thursday. "And maybe I will also go to Russia to talk to Putin and tell him that there are three of us against the world: China, Philippines and Russia. It's the only way."
A de-Americanized world is coming. America doesn't know how to deal with it yet. At the moment it faces a choice between an anti-globalist who will shore up American power through strategic retreat, or a globalist who will accelerate American military, political and economic decline.

2016-10-21

Twilight of the Neoliberals

ZH: Germans Are Leaving Germany 'In Droves'
More than 1.5 million Germans, many of them highly educated, left Germany during the past decade. — Die Welt.

Germany is facing a spike in migrant crime, including an epidemic of rapes and sexual assaults. Mass migration is also accelerating the Islamization of Germany. Many Germans appear to be losing hope about the future direction of their country.

"We refugees... do not want to live in the same country with you. You can, and I think you should, leave Germany. And please take Saxony and the Alternative for Germany (AfD) with you.... Why do you not go to another country? We are sick of you!" — Aras Bacho an 18-year-old Syrian migrant, in Der Freitag, October 2016.

A real estate agent in a town near Lake Balaton, a popular tourist destination in western Hungary, said that 80% of the Germans relocating there cite the migration crisis as the main reason for their desire to leave Germany.

"I believe that Islam does not belong to Germany. I regard it as a foreign entity which has brought the West more problems than benefits. In my opinion, many followers of this religion are rude, demanding and despise Germany." — A German citizen who emigrated from Germany, in an "Open Letter to the German Government."

"I believe that immigration is producing major and irreversible changes in German society. I am angry that this is happening without the direct approval of German citizens. ... I believe that it is a shame that in Germany Jews must again be afraid to be Jews." — A German citizen who emigrated from Germany, in an "Open Letter to the German Government."

"My husband sometimes says he has the feeling that we are now the largest minority with no lobby. For each group there is an institution, a location, a public interest, but for us, a heterosexual married couple with two children, not unemployed, neither handicapped nor Islamic, for people like us there is no longer any interest." — "Anna," in a letter to the Mayor of Munich about her decision to move her family out of the city because migrants were making her life there impossible.
It is amazing how quickly Germany changed, like flipping a switch. Merkel's migrant policy was never going to be positive for Germany, but if it ends up pushing out more native Germans in the process it will rapidly accelerate the collapse of the welfare state. Furthermore, it has rapidly shifted social mood, from one of acceptance of migrants to Germans now believing their own government is their enemy.

It is hard to over emphasize how destructive Merkel has been for Europe. Germany was likely to be the least radical power during the shift towards authoritarian, anti-immigration government in Europe. Now, Germany appears as if it might shift further right than National Front in France. Meanwhile in France, FN is riding the same wave as Mr. Trump in the United States.

FT: How France’s National Front is winning working-class voters
After deindustrialisation came the FN’s victory in 2014, when Hayange became one of 11 towns captured by the far-right party, prefiguring the populist wave that has shaken the continent, notably with Britain’s June vote to leave the EU.

Today Hayange, which in its heyday lured in immigrants from Italy and elsewhere, has become staunchly Eurosceptic.

The FN has built much of its success over the past two years on an effort to gain the support of working class voters. Whether Ms Le Pen can defy the pollsters who predict she will ultimately lose the presidential contest, or at least do better than expected, will largely depend on whether she can mobilise disenchanted blue-collar voters, whose turnout has tended to be low.

“The FN has become the party of the working class,” says Bruno Cautrès, a political sciences researcher at Paris-based Sciences Po Cevipof. “The party offers a double explanation for their malaise: Europe has failed to protect their jobs from globalisation and failed to protect their way of life from Muslim immigrants.”
Bloomberg: Nationalists and Populists Poised to Dominate European Balloting
In the coming 12 months, four of Europe’s five largest economies have votes that will almost certainly mean serious gains for right-wing populists and nationalists. Once seen as fringe groups, France’s National Front, Italy’s Five Star Movement, and the Freedom Party in the Netherlands have attracted legions of followers by tapping discontent over immigration, terrorism, and feeble economic performance. “The Netherlands should again become a country of and for the Dutch people,” says Evert Davelaar, a Freedom Party backer who says immigrants don’t share “Western and Christian values.”

Even Europe’s most powerful politician, German Chancellor Angela Merkel, is under assault. The anti-immigrant Alternative for Germany (AfD) party has drained support from Mrs Merkel’s Christian Democrats in recent state and local elections, capitalizing on discontent over Germany’s refugee crisis. In Austria the far-right Freedom Party has a shot at winning the presidency in balloting set for Dec. 4, after an election in May that the Freedom Party narrowly lost was annulled because of irregularities in vote counting. The populists are deeply skeptical of European integration, and those in France and the Netherlands want to follow Britain’s lead and quit the European Union. “Political risk in Europe is now far more significant than in the United States,” says Ajay Rajadhyaksha, head of macro research at Barclays.
Nick Rowe sums up the inherent problem for the neoliberal order in the West. As their economic models ignore debt and thus lead to massive debt crises, the neoliberals also believe in the Blank Slate and treat people as widgets, assuming no change in social, cultural and political institutions from mass migration. As with debt, it leads to a total system collapse.

Importing people is not like importing apples


Worthwhile Canadian Initiative:
Importing people is not like importing apples.

It's not just "labour services" and "consumer demand" that crosses the border; it's people. And there's a lot more to people than just bundles of labour services and consumer demands, where tariffs and transport costs make the only difference to whether they are inside or outside the borders.

"Total Factor Productivity" is not some geological feature like the Canadian shield. There has to be a reason why some countries are rich and other countries are basket cases, and unless you are lucky enough to find yourselves sitting on great reservoirs of oil that someone else will pay you to pump out of the ground, that reason seems to have something to do with social/economic institutions, and social/economic institutions seem to have something to do with people.

If you have a model which treats Total Factor Productivity as exogenous, then yes, if "resources" flow from places with low TFP to places with high TFP, as they will if the invisible hand is allowed to operate, that would be a Good Thing. But you need to stop and ask: "Hang on. I wonder why TFP is higher in some places than in others?" Which should lead you to the next question: "I wonder if TFP really would be exogenous to the sort of policy experiment I'm using my model for?". Which should lead you to the next question: "I wonder if social/economic institutions really would be exogenous to the sort of policy experiment I'm using my model for?"

How exactly will social/economic institutions change when we import people? God only knows. They might change for the better; they might change for the worse. It depends on them; it depends on us. But they almost certainly will change. And if you can't even see that question, and wonder about it, then you really are missing something that even the great unwashed uneducated rabble can see. And the great unwashed uneducated rabble are going to put even less credence on what you intellectual elites are telling them they ought to think.
There will be no moderation. The behavior of the establishment across the West shows it will only increase current policies to punish the unruly electorates, and the electorate will respond by picking ever more radical candidates. The West is about to descend into civil conflict once more.

USDCNY Slides to 6.76, 1pc Away From Red Line

Markets are about to break out of their four-month calm if USDCNY takes out 6.83, only a 1 percent move is needed.

Crackdown on Illegal Housing Practices Could Cut Developer Profit in Half

Some real estate developers invented various fees and charges for home buyers that may have doubled profits. With the government now cracking down on housing violations, these developers could see their profits halved.

Recently, a series of media exposure of some of the alleged violations charged "buy rate", "electricity supplier charges" and other real estate funds.

According to the "Daily Economic News" reporter investigation, these additional fees for developers can save 3% to 5% of the marketing costs, but additional costs of such a violation is canceled, the developer or sales profits will shrink.
One example:
Housing prices listed in a Property located in Shanghai Sijing example. The real estate unit price of 40,000 yuan / square meter (decoration), 8% of the net profit margin is calculated, priced at 3200 yuan net profit. It broke the news to the media buyers, the real estate on the basis of first Fuwu Cheng additional 400,000 yuam renovation costs. According to a rough calculation of 100 square meters of housing, the developer sold a suite per square meter can be overcharged 4,000 yuan, deduct 10% tax per square meter can be little more 3600 yuan. Profit from the unit price visible, surcharges a close, the project profit nearly doubled.
iFeng: 房价真相:去了“苛捐杂费” 楼盘利润腰斩!

Lower-Tier Cities Begin De-Urbanizing

Rural households are digesting housing inventory in some third- and fourth-tier cities, but they aren't changing their household registration. Top first- and second-tier cities remain the preferred destination for those switching from rural to urban hukous. The result is some cities are beginning to see de-urbanization as the rural population fails to supplement urban outflows.
iFeng: 三四线城市去库存背后:农民买房但不一定落户
21st Century Business Herald was informed that, to encourage farmers to respect the people of Hubei Xiangyang, Meishan, Sichuan and other four-tier cities has made great achievements, buy subsidies, farmers can fund loans, these regions housing inventory to digest quickly.

However, local farmers into urban household registration is not much. It is worth pondering, like Chengdu, Chongqing and some other large cities, large urban farmer households enthusiastically, just one year alone hundreds of thousands of households. Meishan and other places housing digest quickly, the total number of urban household registration was in decline. This policy and the State to encourage farmers to three or four lines, it seems that some divergences.
One example from Meishan, Sichuan province:
However, these areas migrant workers to buy real home is not much. In Meishan, for example, at the end of 2014 registered a total population of 3.53 million, of which non-agricultural population of 1.0064 million. To the end of 2015 total household population of 3.49 million, of which non-agricultural population of 1.0035 million. This means that the total household population, and urban household population is declining.

M2 Slows in September

New loans soared last month, but M2 growth slowed to 0.36 percent mtm, the third slowed figure in 2016. Rolling 3-month growth also fell, while yoy growth increased to 11.6 percent.

Loan growth jumped, with 56.4 percent of new lending going to households, down slightly from the August share of 56.7 percent and well off the July shock number of 104 percent.

China's reserve coverage of M2 fell below 14 percent at the end of September, but the recent devaluation in the yuan has made up for the September growth in M2 and decline in reserves.

China Daily: China's new yuan loans surge in September

2016-10-20

It's Serious: Sept Prices Explode, NBS Delivers Mid-October Update

China's NBS released September housing prices today and they show a price explosion in September. In order to counter the shocking results, NBS took the extraordinary step of delivering a mid-month update. NBS broke out several hot first- and second-tier city price changes in October to show the world the government's housing crackdown is working.
The table shows much of the September increase reversed by mid=October, with Beijing for instance seeing a 3.7 percentage point drop versus the 4.9 base index increase in September. In other words, more than 70 percent of September's price gains were gone two weeks later.

As for the prices in September, they increased 1.8 percent nationally, an almost 24 percent annualized rate. Although NBS broke out top-tier cities for the October report, the September data shows the housing boom spread beyond these cities. The 12 hot cities I've broken out in prior months accounted for about 36 percent of the national increase, with the top-tier down to about 10 percent of the national total. Meanwhile smaller cities, such as Wuyi, saw big price explosions. Wuyi prices increased 8.2 percent in September, equivalent to about 40 percent of total price gain since the end of 2014.

NBS: 2016年9月份70个大中城市及10月上半月一线和热点二线城市住宅销售价格变动情况

Back at the start of August I posted China Must Choose: Defend Real Estate Prices or Exchange Rate

As the real estate crackdown has taken effect, the renminbi has sunk to new 5-year lows and approaches the red-line at USDCNY 6.83, with the U.S. Dollar Index also exhibiting a bullish breakout.

Xinhua Calls Housing Violators a Malignant Tumor

Even though blame for the housing bubble falls squarely on government and monetary policy, Xinhua wants everyone to focus on the symptoms of shady real estate practices.

One again unto the breach goes the central planner:
Recently, the Ministry of Housing and Urban Construction another telling standardize the real estate development enterprises, clearly listing will publish false, malicious speculation, hoarding and other nine kinds of unfair business practices severely punished according to law. In many market regulation upgrade in the background, a move no doubt is a mind thunder, that the government realized that the current real estate market regulation is urgent, determined to cut off cancer disrupt the market in order to achieve long-term healthy development of the real estate market.

Including the previous round of soaring house prices, including fluctuations in the property market, real estate market disorder are exposed is an important factor in pushing up prices, some developers to reap huge profits, accustomed to spreading false news, artificially creating panic, seriously damaging the interests of consumers, affect the healthy development of the property market.

...A healthy real estate market, there must be iron-fisted rule to maintain order. The Department of Housing and 9 kinds of unfair business practices to be clearly defined. The courage to play the competent departments should strictly enforce the law, to prevent a criminal record or fail to investigate the behavior of poor accountability shield enterprises to accelerate the real estate industry credit system construction, in the whole society Jiangyoufalie guide is formed, so that housing prices become illegal behavior "across the street mouse".
iFeng: 新华时评:剪除中国楼市的毒瘤刻不容缓

Beijing Starts Filing Charges Against Developers, Brokers

Sales are down sharply in October and the city government is adding charges against 4 developers and one real estate broker. The four developers are accused of hoarding property. 我爱我家 (Homelink) has 12 separate violations filed against it, such as for unauthorized listings.

iFeng: 京上半月楼市成交涨幅降29% 4项目被停网签

Overvalued Stock Market Has Companies Queuing For Listing

Liang Yufeng (Doctor of Economics, Fudan University, China Europe International Business School EMBA. Orient Securities served as director of the Institute for many years, in 2014 founded the Institute Shanghai Yi Investment Consulting Co., Ltd. and Shanghai Yi Jing Department of Asset Management Co., Ltd.) discusses China's distorted price signals caused by government intervention.

Like the property market, China's stock market is bifurcated at the moment, but in a role reversal, it is the blue chips which are lagging. Bank stocks in particular have very low P/E ratios and they're pulling the Shanghai market's P/E ratio to 15. Remove the banks and the P/E rises to 36. Remove the financial sector and it hits 42. Based on the most recent earnings reports, 70 percent of stocks trade with a P/E above 50, while only 11 percent have ratios of 25 or less.

There are several anomalies which underline this market distortion. Even though the market seems to be in the doldrums, there are more than 800 companies queued up for an IPO. This anomaly points to the market being over, not under, valued.

Another anomaly is the worse a company's fortune gets, the higher its stock price goes. The IPO waiting list reflects a strong demand for listings, so companies are doing backdoor listings. When a firm starts circling the drain and is headed out the door, its share price recovers as speculators see another potential backdoor listing in the making.

M & A activity is high as well, as companies look to turn low P/E assets into high P/E assets through the magic of perception. Many companies have launched their own investment funds and private equity funds in order to leverage their high stock valuation.

Another anomaly is insider selling. Normally in a bear market, large investors will take the opportunity to acquire undervalued shares. Instead, Chinese large shareholders are dumping their holdings.

iFeng: A股价格体系扭曲程度全球罕见 需破除三大迷思

Securities Exchanges Cease Debt Listings for Real Estate

No more debt for the real estate industry, at least for now. According to industry source, even qualified offerings are halted at the moment. Firms aren't so much concerned about the temporary halt as what are anticipated to be new, more stringent rules once the halt ends.

SCMP: China’s bourses suspend bond sales by some property companies ahead of tighter rules from regulator
In a move that signals a wider crackdown on bond sales by Chinese property companies, Shanghai Stock Exchange has suspended bond raising applications from developers that would be disqualified from issuing corporate debt under new guidelines expected to be issued by the securities regulator, industry sources said.
Some smaller real estate companies have failed to receive final approval for bond sales on the Shanghai exchange even after going through the required paperwork, an investment banker with a Shanghai based mid-sized brokerage told the South China Morning Post.
The 21 Century Business Herald reported on Wednesday morning that China’s stock exchanges have suspended final approval for property companies applying for bond sales.
“It seems the regulator will soon introduce new rules regulating property bond sales, and the bourses are proactivelyadopting tighter measure ahead of that,” said the brokerage source.

Caijing: 券商主承:交易所暂停地产公司债 重启后将进一步收紧
After more than a year after the fast heavy volume, the exchange issue size accounted for the largest real estate company debt, seems to usher in a hundred and eighty degree turn.

October 19 morning, a number of brokerage master Cheng Renshi 21st Century Business Herald reporter said that the real estate business exchanges suspended the issuance of corporate bonds, including've got no objection letter items.

Under the new corporate bond issuance management practices, corporate bonds project was a no-objection letter, in theory, after the release of the documents for the record, can be issued. Digital Master Cheng Renshi have said that had never hindered in part of the record, but in the near future Exchange "does not accept either the record or material received no response."

On that day, although informed sources close to the exchange securities for the matter said that the current real estate business departments according to specific financial status indicators, which developed real estate companies may issue corporate bonds, which companies need to issue prudential standards. Standards related differences in standards and relevant departments had little time to perform the audit; Since the standard will be formally issued, some financial indicators of whether the target enterprises currently exists ambiguity may be suspended reviewed, but clearly met the standard of real estate companies to issue bonds issuance unaffected.

However, at least two to accept the 21st Century Business Herald reporter interviewed Cheng Renshi main brokerage said its underwritten project is "normal class" in better qualified, "but the same has been suspended."

...Regardless of whether the Exchange suspended the issuance of all debt real estate companies, the market is more concerned that the supervision of real estate corporate bonds issued after the restart.

2016-10-17

Back Behind the Firewall

There may be no new posts until Thursday. GDP growth, fixed asset investment, real estate investment, retail sales and home prices are all due in the coming days. Will update once settled.

Identity Includes Language in China

Economist: Let not a billion tongues bloom
As for Mandarin itself, the once-artificial construct is now showing signs of becoming a living, protean thing—witness the fun around duang. That speaks to its success. But its shortfalls are also striking. The education ministry says that 30% of the population in 2014, or roughly 400m, still could not speak standardised Mandarin, while only a tenth of those who could spoke it properly.

Meanwhile, Mandarin’s supremacy is still being challenged, above all in Hong Kong. There, resentment at the spreading use of putonghua is growing. Indeed, since protests two years ago—partly in defence of a local Hong Kong identity in the face of mainland rule—Jette Hansen Edwards of the Chinese University of Hong Kong reports a sharp increase in the number of Hong Kong people who believe the local form of English, jokingly called “Kongish”, is a unique variety.

Dollar Deflation Still Hitting Saudi Arabia

Bloomberg: Saudi Bank Stress Builds as Kingdom’s Cash Injection Falls Short
The interest rate banks charge one another for loans rose by the most since August on Sunday, extending a trend that’s slowing earnings and corporate borrowing in the world’s biggest oil exporter. The increase is defying the central bank, which has sought to ease the cash crunch by relaxing lending limits, offering new borrowing facilities and injecting funds into the financial system, including 20 billion riyals ($5.3 billion) pledged Sept. 25.

America Increasingly Resembles the Weimar Republic

Hitler arrived after a long chain of historical events, more than a decade in the making. America is a long way from electing a Hitler (and will probably elect something closer to a Cincinnatus, a reform minded Caesar), but those most fearful of Hitler 2.0 are doing their best to recreate the conditions that created Hitler 1.0, including escalating political violence. Back in March it was violence at Trump rallies, now it is vandalism and firebombs.

Charlotte Observer: Firebombing ‘an attack on democracy’
Gov. Pat McCrory Sunday called the weekend firebombing of a North Carolina Republican headquarters “an attack on our democracy,” while one GOP official called it an act of “political terrorism.”

In a tweet, Republican presidential candidate Donald Trump blamed “Animals representing Hillary Clinton and Dems in North Carolina.”

Hillsborough police said somebody threw a bottle of flammable liquid through the window of Orange County’s GOP headquarters, setting campaign signs, supplies and furniture ablaze before burning itself out.

A swastika and “Nazi Republicans get out of town or else” were spray painted on the side of an adjacent building. No damage estimates were available.

“The firebombing of a local political headquarters in Orange County is clearly an attack on our democracy,” McCrory said in a statement. “Violence has no place in our society – but especially in our elections. … I will use every resource as governor to assist local authorities in this investigation.”
Bangor Daily News: Police on lookout for vandals who spray-painted cars outside Trump rally in Bangor
Police said on Sunday that no one has been charged in connection with an act of vandalism that left several cars marked with white spray paint outside Republican presidential nominee Donald Trump’s Saturday rally in Bangor.

...Paul Foster, a painter and Trump supporter from Eastbrook whose van was painted, said the rally “couldn’t have been more peaceful,” but he blamed the vandalism on Trump opponents, saying “there ain’t no thinking about it, I know so.”

“Why can’t they do a peaceful protest instead of painting cars, all of this, to make their statement?” he said.

It wasn’t just Trump supporters who were affected: A rental car driven by Tim Hanlon was painted. Hanlon, who is from California, was in town and he went to “see what this idiot had to say and should have known not to come around.”

2016-10-16

Beijing New Home Sales Down 42pc in October

Halfway through October, Beijing new home sales are off by 42 percent yoy following strict buying restrictions, down 45 percent mtm. Existing home sales are down 41 percent yoy.

iFeng: 新政后北京楼市降温 半月成交量同比跌42%

Third Quarter GDP Better, Premier Li Announces

China is quietly approaching an L-shaped recession recovery according to some Chinese economists.
SASAC research center researcher Hu told reporters late on First Financial, PPI positive performance partly because of supply-side structural reforms began to show, on the other hand in the second half led to a number of large projects landing growth in demand, led economy With more positive data improve.

National Bureau of Statistics plans to release economic data for the first three quarters of this year the day after tomorrow (October 19), for most institutions are expected in the first three quarters of economic growth was 6.7%, consistent with the second quarter. Some economists also recently different occasions that China reached more than 6.5% of annual economic growth is entirely possible.

...Director of the Economic Research Center of Peking University Lin Yifu, the new structure on October 16, "chief economist at Fudan Forum" said that once you can maintain a moderate growth of investment, we can create jobs and increase household income, thus making consumption to maintain a relatively normal growth, "in this situation, I want to achieve more than 6.5 percent growth in 'thirteen Five' plan proposed, as long as our policies in place, is entirely possible."
Deleveraging remains the greatest challenge and risk though.
After the capacity to get good results, lowering the lever or in the next stage the main task.

Zhang Jun, president of Fudan University School of Economics on the "chief economist at Fudan Forum", said the challenges that threaten the long-term growth prospects in China, the huge debt stocks bear the brunt.

First Deputy International Monetary Fund (IMF) , president of Lipton CBN reporter had also stressed its concern for the debt in the enterprise: "The rate debt accounts for 145% GDP (2010 less than 100%), significantly higher than the international average. "

Economics and finance professor at Tongji University last year, Sun Yefang Award winner coming in Zhongning Hua recently said in an interview with CBN reporter, China's state-owned banks lending preferences may be the main reason behind this - the release of liquidity by the central bank, the state-owned banks in order to avoid risks, the steady flow of funds to lend to large state-owned enterprises, and external financing constraints smallest listed companies; on the contrary, the majority of companies do not benefit from the current monetary policy.

Zhongning Hua said that to solve the problem, we must decisively place in inefficient deleveraging. To do this, we need to continue to promote the reform of state-owned enterprises, "Guantingbingzhuan."

iFeng: 多项数据露苗头 中国经济L型拐点正悄悄走近

2016-10-14

1 Million Yuan Fine and Jail For Violating New Housing Ad Rules

今天开发商都在疯狂删稿 因为最高要罚款100万和坐牢!

Update

SCMP: Chinese government plays hardball with dishonest property agents and developers
In Shenzhen, the quality supervision commission, which usually looks after food safety, on Thursday sent 12 teams to “raid” 20 property sales offices across the city to “shock” developers and sales staff, it said. Government officials stormed into the offices and ordered employees to produce all legal documents to check against marketing claims.

One development, Qianhai Dongan, where units sell for 75,000 yuan (HK$86,500) per square metre, was found to have been dishonest about sales performance. It sold 20 per cent of the available units flats on the first day but publically claimed 90 per cent had sold out in two hours. It had “misled consumers” by putting a kindergarten sign on its model table – but the school does not appear in municipal planning records, the commission said in a statement.

Democrat Control of Congress in Play

The GOP heads for the exits.

Shandong and Hebei Provinces Winners in New Round of PPP Projects

Third PPP (government and social capital cooperation) demonstration project list, a total of 516 projects with a total investment amount planned 11,708 billion.

...According to the "Report," the number of projects from the point of view, Shandong, Yunnan, Anhui, Hebei top four, Hubei, Hunan, tied for fifth place, respectively, 42, 40, 32, 31, 27, 27 , together accounted for 38.6% of the total project area is relatively high degree of centralized distribution.
iFeng: 第三批PPP示范项目:山东河北成最大赢家

People's Daily Enjoys Watching America's Collapse

People's Daily: Commentary: U.S. presidential election chaos exposes flawed political system
People are very clear about the sour fruits of money-oriented politics, and the new U.S. president is unlikely to end political confrontation or even do much to ease discontent toward the government. As British economist Martin Wolf said, growing inequality and slowing productivity have made democracy intolerant and capitalism illegitimate.

For a long time, the U.S. has boasted that its lively election is a sign of its system’s superiority. However, the essential purpose of the election is to provide a driving force for development. The most important task for presidential nominees is not to win the election, but to eventually govern the country.

It's time for the U.S. to take a close, honest look at its arrogant democracy and flawed politics.
The Founders' didn't want a democracy because they knew the people are dominated by emotion. Trump is a distraction from the changes underway in America because he's a reflection of it: the media and political establishment can manipulate the emotion of the public at will. Had the Republicans run a Franciscan monk for president, the media would still be running a war on women campaign because that was the plan from the beginning. The presidential election is a giant marketing campaign and as the Obama administration is the culmination of the permanent campaign. The marketing never ends.

People are not rational and do not care about the issues. Voting is identity-based and emotional. It is most rational when the voting base is homogeneous because these identity issues are removed and there's a greater focus on issues, but that time is long past for America. The descent into authoritarian government has begun.

More on China's Plans to Move 100 Million Peasants

Will rural residents give up farm life and their cheap and spacious homes for unemployment/low wage work, and small and expensive apartments in crappy fourth-tier cities?

Additionally, if Chinese growth picks up, emerging market growth picks up, and food prices will start a bull market. Making farm life even more lucrative...

Caixin: Government to Move 100 Million Farmers to Cities by 2020 in Major Urbanization Push
The State Council said it plans to move at least 13 million people registered as farmers out of rural areas permanently each year from 2016 to 2020, with at least 100 million people affected after the five years. Small plots of land left behind by city-bound villagers could be turned into larger farms that use modern methods to make the agricultural sector more competitive, policymakers said.

Authorities had hoped the government-led migration could also help reduce the large stockpile of unsold homes, particularly in smaller cities, built during a property boom in recent years.

But CEBM Group, a market research agency affiliated with Caixin Insight Group, said the move will not help reduce the housing glut in smaller cities if rural workers continue to receive lower wages.

"The main problem is that most rural workers can't afford a home in cities, and commercial banks do their most not to offer home loans to them," CEBM Group said in a statement.

P2P Lending Crackdown

This is aimed at the down payment lenders.

Caixin: Central Government Releases Plans to Counter Fraud in Internet Financing

2016-10-13

PPI Deflation Ends in September

Produce Price Index

Consumer Price Index

NBS: 2016年9月份工业生产者出厂价格同比上涨0.1%
NBS: 2016年9月份居民消费价格同比上涨1.9%

State Council Tries to Crack Down on Down Payment Loans

Caixin: PBOC Orders 17 Banks to Curb Housing Loans
Several bank executives told Caixin that senior officials and lending-department managers from the 17 banks, including the state-owned "Big Five," attended the meeting, where the PBOC demanded that the banks adjust their respective lending structures, keep a tight rein on granting home loans and better manage their risks.

China's big five banks are the Industrial and Commercial Bank of China, China Construction Bank, the Bank of China, the Agricultural Bank of China and the Bank of Communications.

Sources told Caixin that regulatory authorities will take measures to keep commercial bank lending from going to the housing market, and the government will conduct more supervision and inspections of financial institutions over their issuance of home loans.

New loans in August reached 948 billion yuan ($141 billion), more than double the figure a month before, data from the People's Bank of China showed. Over 71 percent of the loans went to households.
And in July, more than 100 percent of new lending went to mortgages. In other words, if banks don't offset a cut in mortgage lending with other lending, credit creation will crater and the Chinese economy with it. Back in August I covered the situation in Depression: Residential Mortgages Account for 102pc of Lending Growth, Rate Cut Coming quoting a Chinese article:
I recently had a chat with the president of a grassroots bank, they saw the collapse of a large number of small and medium enterprises, manufacturing enterprises reluctant to borrow, demand is very weak, very worried about the outbreak of bad loans, now the only source of relief is government projects, the platform loans, he said that because in his 30 years of lending experience, the government loans never go bad, at worst they are extended, so we are all seeking to lend to government projects, and this is the reason the lending platforms have too much money, also a reason for the jump in M1.
Chinese banks want to lend to the government or for residential mortgages because these are seen as low risk. The government is telling banks to make what they see as high risk loans.

The crackdown on down payment loans isn't working:
SCMP: Underground down payment loans cast a shadow over government’s efforts to curb property lending
Chinese home buyers can still easily borrow down payments on properties, despite the government’s efforts to crackdown on the practise.

Various types of financial platforms continue to be used to allow down payment loans, which experts say is making it increasingly difficult to measure just how large a problem property debt has become.

...“There are a lot of loopholes in China’s credit system. Even though there are rules, people will break them or find ways around them,” Yi said.
So the State Council is trying to crackdown on the practice:

iFeng: 房地产金融继续收紧 国务院要求严打首付贷
October 13, the State Council issued the "Internet financial risk special work plan", requiring real estate development companies, real estate agencies and Internet practitioners financial institutions have not obtained the relevant financial qualifications, shall not use P2P network lending and equity crowdfunding platform platform in the real estate finance business; obtain the relevant financial qualification shall not be illegal in real estate finance-related businesses. Engaged in real estate finance business enterprises should comply with the relevant provisions of the macro-control policies and real estate finance management. Regulate the Internet "crowdfunding buy" and other acts prohibited various agencies to carry out " down payment loans," the nature of the business.

Global Trade Still Slowing, Chinese Exports Slide

Bloomberg: China Exports Fall Most in Seven Months, Adding to Yuan Pressure
Exports fell 10 percent from a year earlier in September, the customs administration said Thursday
Imports declined 1.9 percent
In yuan terms, shipments declined 5.6 percent, imports rose 2.2 percent
Trade surplus at $42 billion

With respect to commodities, through three quarters: 2016年前三季度我国外贸进出口情况
Sixth, iron ore, crude oil, copper and other commodity imports to maintain growth, the main import commodity prices remain low compared with the first half but the decline narrowed. The first three quarters, China imported 763 million tons of iron ore, an increase of 9.1%; crude oil 284 million tons, up 14 percent; coal 180 million tons, an increase of 15.2%; copper 3.79 million tons, an increase of 11.8%. Over the same period, imports of refined oil 21.5 million tons, down 7.1%; steel 9.83 million tons, an increase of 1%. Over the same period, China's overall import prices fell 5.3%. Among them, the average price of iron ore imports fell 8.6%, crude oil fell 25.9%, 16.9% decline in refined oil, coal fell 14.8%, down 11.9% copper, steel products fell 7.4%, a decrease compared with the first half were narrowed.

2016-10-12

GOP Odds of Winning Congress Collapse

The GOP establishment's attempt to defeat Trump by leaking the Access Hollywood audio has been a complete failure, as the anti-Trump candidates are now among the most likely to lose their seats. Betting markets believe it will also cost the GOP the Senate, and may even cost them the House.

Aside from the video, the GOP has been sabotaging voter registration efforts: The Inside Story of How the GOP Sabotaged Trump’s Voter Registration Drive
Washington Examiner: Florida Dems registered 60x more voters than GOP in past month


USDCNY to 6.83 And Beyond

Bloomberg: PBOC Fuels Depreciation Talk as It Weakens Fixing for Sixth Day
The next possible target is 6.83 against the greenback, with a potential Federal Reserve interest-rate increase supporting the dollar, said Shaun Osborne, chief foreign-exchange strategist at Bank of Nova Scotia in Toronto. The People’s Bank of China may need to step up efforts to prevent market fears over any sharp depreciation, according to a Scotiabank report written by Singapore-based foreign-exchange strategist Qi Gao.
The PBOC set its daily fixing at 6.7258 against the dollar, extending a six-day weakening run to 0.9 percent. The onshore yuan rose 0.05 percent to 6.7152 as of 4:57 p.m. in Shanghai, after dropping to a six-year low of 6.7230 earlier in the day, while the offshore rate climbed 0.1 percent. The Chinese currency has fallen 6.5 percent against a 13-currency index this year.
The charts below show three ETFs: CYB (yuan), FXE (euro) and UUP (Dollar Index DXY).

Prior to 2016 the yuan behaves very much like the U.S. dollar, a flat line (the base currency is always a flat-line). UUP is really a basket of short positions against foreign currencies, mainly the euro. It soars. The mirror image is the tumbling FXE.

Starting in 2016 with the shift to the basket, the yuan starts behaving very much like the euro. We also know the yuan depreciates more against a strong dollar than it rallies against a weak dollar. (See: Yuan Follows Dollar Down, But Not Up)
At USDCNY 6.70, the yuan is 1.94 percent away from 6.83, and based on the behavior in 2016, I'd wager a 5 percent depreciation in the euro would be enough to push the yuan past that line in the sand.
iFeng: 人民币下一步要跌到这 中国的“心思”又被人猜到了

For it's part, the U.S. Dollar Index is could be forming a head-and-shoulders pattern, possibly a triple top if it hits 100 again, or a consolidation ahead of a bullish breakout above 100. If the latter, the yuan will break 6.83 and the PBoC will find depreciation pressure ratcheted up an order of magnitude.

2016-10-11

CCP Wants Great Control Over SOEs, Focus on Party Building

High level officials met to discuss increasing party control over SOEs last weekend after years of Western-style reforms have weakened the party's power over these firms.

Xinhua: Xi stresses CPC leadership of state-owned enterprises
President Xi Jinping stressed the Communist Party of China's (CPC) unswerving leadership over state-owned enterprises (SOEs) during a national meeting on building the role of the Party within SOEs held here from Monday to Tuesday.

Efforts should be made to strengthen and improve Party leadership, as well as to build the role of the Party in SOEs to make them the most trustworthy and reliable forces of the CPC and the state, said Xi, who is also general secretary of the CPC Central Committee.
The Chinese article mentioned the issue of Westernization:

iFeng: 最高领导人首次出席国企党建会议 释放三大信号
The first is the Chinese Communist Party in the New state-owned development, the party's leading state-owned enterprises and state-owned enterprises to comprehensively strengthen the Party building, party building work to fully state-owned enterprises strict management, a change in state-owned enterprises over the past three years the Party Building loose soft, weakening the party's leadership SOEs and marginalized issues, indicating that state-owned enterprises party building and leadership to have a new beginning.

The second is October 24 to 27 will hold 18 Sixth Plenary Session, fully tightening party discipline will study major issues of party building and state-owned enterprises is an important aspect, it will likely be the main content of the Sixth Plenary Session of the strategic plan .

Third Party building in the new period of development of state-owned enterprises among the state-owned enterprises as well as the party's leadership in the new era of national development which accounted for an unprecedented importance. Development of state-owned enterprises to the building where the party's going to go up, this is an important signal to the world of Chinese state-owned enterprises Party building.

"Xi Jinping, general secretary of the speech is very important." COMMUNIST, said the leadership of the party and party building in state-owned enterprises reform and opening up the first three years, learn from the West in the extensive development of our modern enterprise system, the establishment of the board of directors, board of supervisors, directors will be state-owned enterprises Party building being marginalized, weakened the party's leadership, which is studying the development trend of the West, however, after 18 big since more than four years of exploration and practice in the development of state-owned enterprises, clear out of the main state-owned enterprises with Chinese characteristics that the party's leadership, China's enterprises to carry out party building, to its built-in to the modern enterprise system among Chinese.


Nasdaq Plans China Commodities Futures in Singapore

FT: Nasdaq plans China commodity futures trading in Singapore
Nasdaq is planning to give investors direct exposure to China’s freight, iron ore and crude oil markets, through offshore futures contracts traded in Singapore — joining other exchanges in a wider push into Asian derivatives trading.

Hanne Johansson, Nasdaq’s global head of commodity sales, said the exchange believes new products can help satisfy demand for offshore access to Chinese markets, in much the same way as offshore renminbi trading in Hong Kong and London does.

“We want to explore how we can actually bridge these two markets,” Mrs Johansson said, referring to mainland China and offshore derivatives trading venues.
iFeng: 商品牛市令人眼馋 外国人正准备撬开中国期货市场大门