Bankers Implement Strictest Liquidity Controls Ever, Tell Branches "Protect Yourself"

Bankers are reigning in lending and hoarding capital as banks' cost of capital exceeds loan rates. Bankers are even delaying loan disbursement unless customers accept punitive hikes in loan costs. Banks are hoarding capital, with tight credit expected in June (MPA assessment), July (WMPs coming due) and even as far out as September (quarter end).

The article below interviews bank president Mr. Zhang, who has approved 2 billion in loans but refuses to release the funds. He tells the customers wait a little longer, but the funds are never coming unless the customer takes his hint that the cost of funds will soar.
Zhang is a member of the assets of 200 billion yuan level of the city branch of a branch of the vice president, in charge of corporate finance. It is his duty to maintain a good group of companies with a high profile contribution, but now that the loan business has given way to the second quarter of the macro-prudential assessment system (MPA) Has been dubbed the "debt shortage" of the tight liquidity trend, so that the price of capital is steep rise in the spread, so that the head office "under the death order" liquidity control.

"Bringing in capital is the top priority." Zhang told the first financial reporter, the head office has just released what they call the "history's most stringent" liquidity control program. All business units, all branches should defend themselves.
Bankers are refusing to lend to big real estate borrowers even if loans are approved. They're also telling them they can rollover their debts, but after collecting payments, refuse to lend. Later in the article, Zhang says he's received a loan quota and cannot exceed it. Effectively he cannot loan, and if the number drops, he needs to find some way to raise capital or cut lending.
If there are still funding gaps, but have to give the loan, how to do? Zhang is not frustrated to tell the first financial journalists, in accordance with the spirit of the head office, the cost of this loan will be "punitive" to add 200 basis points.

"If the cost bank capital is 5%, and this goes up again by 200 basis points to 7%, now a one-year loan was 4.35%, even if rate is hiked 50% I'm still losing money."

SHIBOR rose higher on Tuesday, climbing above the prime rate, and it's now approaching the central bank's 1-year rate.

Money isn't very tight at the moment, but bankers are hoarding capital in preparation for the MPA in June, and expect tight conditions in July and again at the end of September.
Originally, Xiaopeng they are only in the row of assets and liabilities positions under the baton, ahead of hoarding money. In other words, the tight is not the moment, but for the future will be "lack of food" is expected - 6 at the end of the year to deal with the MPA assessment, in July Xiaopeng where the bank has a group of financial maturity, the end of September liquidity Gap is not small.

You can imagine, to each point in time assessment, overnight, 7 days the price of the species is certainly more cost-effective, or even grab not, of course, Xiao Peng they will now have the first medium-term funds locked up.

And all this foreshadowing, that is, the first two years, with a number of small and medium banks as the backbone of the expansion of the table.

Waterfall is coming out. A joint-stock bank strategy researcher told the first financial journalists, from a number of bank off-balance sheet assets and liabilities, due to the existence of time mismatch, when the lever from the capital side, and the asset side "continued leverage" and strong Of the inertia, so the industry "shrink table" two pressure, this period will be mismatched.

It is also worth noting that "some banks have a long period of long-term bond assets Fukui, because the report is still in the 'hold expired' item, the outside can not be observed." For such assets, banks also need funds Continued

"To talk about it, or just against the pressure, or asset quality problems." "Debt shortage", the funds from the tight, watching the financial management (mainly refers to the non-guaranteed financial management) is about to expire, South China an industry business developed a small bank head office management said that this is he will face the "chest broken stone."
iFeng: 银行行长面临大考不敢放贷:总不能让我“倒贴”

ZH: "This Is Probably Just The Beginning" - Chinese Banks Are In Big Trouble
With the crackdown on financial system leverage underway, Chinese banks (and securities firms) are in big trouble. As we noted previously, China's bond curve is inverted, yields are surging, and Chinese regulatory decisions shutting down various shadow-banking pipelines has crushed securities firms' stocks. However, as Bloomberg points out, as China’s deleveraging efforts cut into banks’ profit margins, rising base funding costs and interbank credit risk concerns have pushed banks' cost of borrowing beyond the rate they charge customers for loans for the first time in history.

So Much for the Rally: ChiNext Hits New 52-Week Low

Two weeks ago there was a glimmer of hope in the markets after the PBoC and regulators issued a joint statement that sounded dovish. Although they pledged to increase coordination, financial deleveraging continues. The hoped for bounce in the ChiNext is gone as the index hits new post-2015 lows. More losses could come given valuations and the analog of the Nasdaq 2000 bubble.

SCMP: ChiNext stocks rebound at double the rate of benchmark, but investors see short-lived rally
The ChiNext index is valued at about 63 times the median PE ratio, well above the 40 threshold considered as the safety margin, while the Shanghai Composite is close to the multiple of 30 times which is perceived as the dividing line between safe and risky, Xun said in a research note.

The ChiNext board has been falling out of favour among investors after the stocks led a crash in mainland equities in 2015 following the regulatory clampdown on margin trading funded by illegal non-brokerage institutions. Trading has been lacklustre since then, with daily turnover down almost 70 per cent from the all-time highs in 2015.

The recent rally appears to be driven more by technical factors than fundamentals, as it followed the index’s decline to a level lower than the nadir in 2015, prompting some buyers to believe the market was over-sold and would see a quick rebound.

Social Mood at the Movies

Social mood is relatively positive at the moment, so the only blockbuster delivering at the box office in 2017 is an action comedy.

Hollywood Reporter: Summer Box-Office Blues: Revenue Down 10 Percent So Far From 2016
Director James Gunn's Guardians of the Galaxy Vol. 2 — with its gaggle of quirky superheroes — is the only summer 2017 tentpole to live up to the hype so far. Over the weekend, the Disney and Marvel superhero sequel grossed $35.1 million in its third outing, not that far behind the disappointing debut of Ridley Scott's Alien: Covenant.

Launching to a lackluster $36 million domestically, Alien: Covenant is the second big-budget movie in a row to disappoint after King Arthur: The Legend of the Sword, helping to contribute to an early summer revenue box-office decline of 10 percent compared with 2016 and 20 percent compared with summer 2015, according to comScore.

There's still plenty of time to make up ground, but Hollywood is on high alert.

"The thing is, we already know August is pretty lean this year, so studios have to make it up elsewhere in June and July. That will put a lot of pressure on original films like Wonder Woman and Christopher Nolan's Dunkirk to succeed," says box-office analyst Jeff Bock of Exhibitor Relations.

"I think whether or not we turn things around is extremely dependent on Memorial Day weekend," he continues. "Last year was a pretty big disappointment with Alice Through the Looking Glass and X-Men: Apocalypse. Hopefully, Pirates of the Caribbean: Dead Men Tell No Tales and Baywatch will performer stronger this time around."
Both of those movies should do well given current social mood.


SHIBOR Approaches Prime Rate

The Standard: Shanghai interbank rate at two-month high
The one-year Shanghai Interbank Offered Rate rose to 4.3024 percent yesterday, up 0.99 basis point from the previous day - the highest in two months.

It is also the first time one-year SHIBOR climbed above the one-year prime loan rate of 4.3 percent.

One-year SHIBOR has been on the uptrend for a month, and has risen about 10 basis points so far. Meanwhile, five- month SHIBOR adjusted downward slightly, but rates for mid-to-long term are still on the rise. The three-month and six-month SHIBOR maintained their inverted status with one-year SHIBOR since the beginning of this year.
Merchant's Bank asks, "Is this the start or the end?"

iFeng: SHIBOR和贷款利率倒挂说明什么 开始还是结束?
On May 22, the Shanghai Interbank Offered Rate SHIBOR offered a one-year offer of 4.3024%, the highest one-year, more than 4.30% of the Shanghai interbank market's one-year loan base rate (LPR) The central bank's one-year loan rate of 4.35% is only one step away.

It is noteworthy that interbank deposits offer and interbankal one-year pledged repo rates have been on top of LPR, and the internal capital cost of banks has been generally higher than the benchmark interest rate.

SHIBOR and loans upside down, means that the bank will gradually push the pressure to the real economy, the real economy financing costs continue to rise, the economic downward pressure to increase.

...Merchant Securities: Shibor over LPR, start or end?

The LPR interest rate on behalf of the real economic financing needs and the upside down on behalf of the financial market financing costs indicate that "deleveraging" is only present in the financial system, especially the "contraction", which has not yet been delivered to the real economy.

With the "scale" to continue, the interest rate system once again "abnormal". 1-year Shibor (interbank lending) for the first time over 1 year LPR (loan benchmark), taking into account the offer line is a large bank, the departure between the two seems to reflect the debt and assets between the "spread" upside down , But can not just look at the surface, after in-depth analysis we believe that the following conclusions:

1) The change in interest rates reflects the "marginal" cost difference between commercial bank liabilities and assets. The same period of time Shibor and LPR appear upside down, which means that liabilities (mainly interbank liabilities) are tightened at the margins, while asset ends (credit assets) remain marginal and loose, the former associated with the industry "contract", the latter with the real economy Weak demand, which is in line with the current situation: supervision "to leverage" and the cycle of "illusion" burst.

2) the margin of assets and liabilities "negative" negative, does not mean that banks will shrink the table. First, the spread between the two is not large enough, the marginal "spread" negative value does not necessarily mean the average "spread" is negative, the bank still has the power to expand the assets; second, the same industry liabilities accounted for the overall liabilities Is not high (about 5% of deposits), so the marginal increase in the cost of interbank liabilities is not necessarily higher than the average cost of overall debt; Third, non-standard asset interest rates are still low, because the debt-side interest rate is not the end of the asset The pull of the yield, asset-liability mismatch brought about by the rigid debt gap is likely to be the main reason for the debt-rate rise.

3) Shibor over LPR, probably just started. As long as the average interest rate of the asset exceeds the average cost of the debt and there is no exit mechanism (the bank will not collapse), the commercial bank will rely on the "scale" to hedge the "spread" narrowing until the asset average interest rate is lower than the average cost of the debt. As commercial banks continue to increase the "relative supply" of credit, the interest rate of credit will be further upside down with the interest rate level of financial markets (non-standard transitions will also lead to the "real" risk of credit), and Shibor and LPR The spread will be further expanded.

The LPR interest rate on behalf of the real economic financing needs and the upside down on behalf of the financing costs of the financial market indicate that "deleveraging" is only present in the financial system, especially the "contraction", which has not yet been delivered to the real economy. Two possibilities:

The first is the real economy "to leverage" large-scale emergence, resulting in substantial increase in the cost of real economic financing, economic growth once again bottom, then the financial market "deleveraging" is likely to end, capital costs and bond rates may fall ;

The second is the real economy is still "stable lever", the credit average financing costs remain stable, the financial market "deleveraging" will continue to the debt gap so that the financial market triggered a liquidity crisis, local clear will lead to "leverage "A one-time decline, thereby easing the financial market liquidity pressure.

Combined with real estate, commodities and the stock market trend, we believe that the probability of the first case is higher than the second case.

32 Cities Have Selling Restrictions

iFeng: 全国32个城市楼市“限售” 调控效果比房地产税厉害?
According to the Centaline Property Research Center statistics show that the 32 "restricted sales" cities are: Chengdu, Xiamen, Fuzhou, Qingdao, Hangzhou, Guangzhou, Zhuhai, Huizhou, Yangzhou, Changzhou, Changle, Minhou, Xushui, Qidong, Baigou, Sanya, Qionghai, Jiaxing, Chengde, Baoding, Beijing (Baoding, Beijing, etc. are part of the restrictions), Haikou, Dongguan, Xi'an, Jinan, Zhengzhou, Gaobeidian, Wuhu, Kaifeng, Nanjing, Wuxi, Changsha.

ChiNext Analog


Third and Fourth-Tier Urbanization a Vision, Not Reality

Urbanization follows Zipf's law, such that large cities do not grow slower than smaller cities.
iFeng: 姜超:三四线城市化或仅是一个美好的愿景
Can the population gather? From the experience of urbanization in the United States and Japan, the population continues to gather in large urban areas. The United States since the 1950s, 50,000 - 25 million people in the metropolitan area population is basically stable; and more than 1 million population of the metropolitan area population proportion from 26% to 56%. The proportion of the population in Japan's population concentrated increased from 43% in 1960 to 67% in 2010, and the population continued to gather in the three metropolitan areas. After 1973, the population shifted from "three poles" to "one pole" to Tokyo. The population of the city is subject to Zipf's law, that is, the population of the Nth-largest city in the country is the first urban population of 1 / N, which means that the scale effect completely compensates for the marginal cost increase, and the growth rate of the big cities is not much faster than that of small cities SLOW.

i09: A mysterious law that predicts the size of the world's biggest cities

iFeng: 樊纲:中国目前应主要发展大城市 而非小城镇
China (Shenzhen) Comprehensive Development Research Institute, said Fan Gang 20, urbanization is the migration of people, we have to study the laws of human behavior, China in the current stage the main development should be large cities, and not small towns.

...Fan Gang said that in our current stage of development, should be the main development of large cities, but not a small town-based. The land gave a small town, big city man-made limit, the last is today's results. Big cities, small cities polarized, big city prices, prices soared, small cities (houses) can not sell, because people do not go to small cities.

...For some small cities in Western countries, the existence of a large number of facts, Fan Gang said that small cities and towns in Western countries are often small cities around the city, belonging to the metropolitan surrounding large urban agglomeration, urban small cities , with rail transport, an hour, a Half-hour to work within the region, belonging to the urban agglomeration, urban areas of the part; these small towns did not die, because the European countries, the process of industrialization is very slow, 100 years, 150 years of several generations of talent to complete the industrialization. The young man has not gone, the retired man is back. Retirement is the first person to go back with high income, the second is to go back with social security, the third is with a lifetime of modern city life experience back, he went to transform the old house, some modern things back That small town, that small town has developed, they retired without having to go to the city crowded bus, so the development of small towns.

Different from the Western countries, China and Japan, South Korea and other late countries in just a few decades time for rapid industrialization, in one or two generations of time is the main population concentration, and less population flow. At this stage the rate of urbanization and greater urbanization tends to be higher. This is not what we do wrong, but the development stage is different, the development of different characteristics. The experience of the development of small towns in Western countries shows that small towns are not without opportunities for development, but not in the early stages of urbanization .

Fan Gang said that in this context, we think about the fast industrialized countries, in the present circumstances, no one back to the case, probably a lot of small cities now work is to protect the environment, protect the environment, protect the culture, protect the good Old house, the future can develop, but need a process.

Baoding: Can't Sell Land for 10 Years

Developers will be unable to sell land won at auction for a decade under new rules in Baoding. The maximum price for land is 11 million yuan / mu. Maximum home price 13,000 yuan/ sqm.

iFeng: 全国最严!保定买房拿到房产证后10年内不得买卖

ECNS: Restrictions to curb housing speculation in more cities
A 10-year ban on housing transactions in Baoding City, North China's Hebei Province, made the national headlines on Monday, following a series of moves nationwide to cool the property market.

Regarded by insiders as the toughest restriction on house purchases in China, the regulation requires buyers to hold properties for at least 10 years, the longest restricted period on property trade so far, after they receive a real estate certificate.


Beijing Converted Apts: Transactions Down 99pc, 6 Trillion Yuan Frozen

It seems like there are no transactions in Beijing's housing market, and developers keep quiet out of fear reads the headline.

Developers are used to playing on the edge of government restrictions, but the restrictions on converted apartments and credit tightening have
iFeng: 冰封的北京商住:新政后几乎零成交 开发商噤若寒蝉
With the residential function to digest the commercial inventory, which is the developers over the years are very familiar with the "edge of the ball-style" play. However, the sudden commercial and retail restrictions on loans to let everyone caught off guard.

According to the March 26 Beijing Municipal Construction Committee issued by the commercial project control policy requirements: commercial project minimum division unit shall not be less than 500 square meters, shall not be allowed to change the use of residence and so on. Development enterprises under construction (including in the sale) business projects, not sold to individuals. Where a second-hand commercial project has been sold for sale to an individual, the buyer is required to pay the full amount in addition to satisfying the residential purchase request.

Recently, the "China Business" reporter visited Beijing's largest "coverted" community in Zhonghong Xiangsu found that this once vibrant young community with nearly ten thousand sets of commercial and residential homes, has almost overnight turned into a depression. Today, the intermediary stores have closed, many restaurants, supermarkets, cafes, etc. also closed.

Centaline real estate chief analyst Zhang Dawei told reporters: "In the past few months, Beijing business class property monthly contract are more than 3000 sets, a little more than a month after "3.26" buying restrictions, the market turnover fell by 99% , almost close to zero turnover, more than 6 trillion yuan of funds in Beijing is completely frozen.

"420,000 yuan deposit I have received, waiting to register the property!" Ms. Wang said that the vigorous and resolute she never imagined in this metaphor on the face of her more vigorous and resolute commercial and commercial purchase policy.

"Would like to sell the house that set of business, just to the school district to save a down payment." In two years, Ms. Wang's son will go to primary school. Although Beijing to fully limit the commercial and commercial rumors have heard, Ms. Wang is still very confident of their speed of action.

This is located in Chaoyang District Beiyuan for sale of housing soon to attract a few buyers to come to the government - in 2013, Ms. Wang to 1.6 million price loan to purchase, in order not to be possible future limit Credit policy, she also "vision" to use their own mother's name.

The final price of the transaction was finalized at $ 2.6 million. A buyer soon signed a contract with her and paid a deposit of 420,000 yuan. It is unexpected, is the history of the most stringent business protection policy introduced, so that both Ms. Wang and buyers stupid. Buyers lost the purchase qualification with the Ministry of Housing and Urban ordered to stop the network signed, this set of hottest commercial housing and smashed back to Ms. Wang's own hands.

"What is the purchase, is simply banned ah!" Ruins returned after the deposit of Ms. Wang secretly analysis of their own house has become a hot potato, shot hope is slim. "Even if the release of the network again, it is estimated that the price should drop about three percent."

"3.26" limit the purchase of loans to the Beijing commercial and commercial market hit immediate. According to the chain of the Institute of the conservative estimates, such as Ms. Wang this dilemma "in the way" the number of groups up to 10,000 or so. May 9, chain home group, said the number of commercial stores closed has reached 44.

In Beijing pixels, have been the owner of the price of millions of houses unsuccessful news spread out. There are some plans to rent in Beijing, seeking friends, because there is no intermediary to help, coupled with the district now "illegal" housing in most formal channels have been unable to show, had to secretly in the subway and the district posted a small Advertising, or resort to social networking sites and other marginal channels to publish rental information.

Open Douban "Beijing rental" group, enter "Xiangsu" (像素) and other keywords can be seen, since March 26 more than a month since the time, the number of rentals and looking for rentals posts number in the hundreds. Which is not difficult to see some of the transfer of the battlefield of the intermediary figure.
Developers are also having trouble selling properties, and the article says there are about 600,000 properties built over the past 10 years which are affected by Beijing's various restrictions, among them 450,000 converted apartments.

Buyers are also becoming more cautious.

iFeng: 北京“3·17新政”两月考:“买房者已不敢出手”
"China Times: chinatimes" reporter visited the Chaoyang District, Beijing Shuangjing, Dawang Road, Baiziwan and other regions also found that since the "3.17 New Deal" since the Beijing housing transactions there has been an unprecedented 7 weeks continuous decline, in April some stores saw sales of almost zero.

"Now, the seller can talk about the price, down a 100,000, 80,000 is not a problem." An intermediary sales staff told reporters. "3.17 New Deal" disrupted the buyers, the intermediary of the established plan, making mediation reshuffle, buying and selling stalemate. Chain family official online display, from March 22 to May 15, is located in the Huilongguan a sale of housing prices after several down, the total price from 5.0 million to 4.6 million, but has not yet traded.

...Thunder fist down, Beijing's commercial housing into the frozen period. In the commercial and residential projects - Taihe Central Plaza sales hall, in addition to duty on the front desk and security, empty. "At present, this area did not live any people, very lonely." Responsible reception staff admitted that this situation lasted for two months. Reporters then visited the focus on the Beijing Wuhuan outside the shops, the scene is also deserted.

In addition, the financial regulation is to curb the real estate market life door.

Beijing Banking Regulatory Bureau, the latest data show that the size of mortgage loans and the number of mortgage approval both significantly reduced. Such as the second week of April to the fourth week, the jurisdiction of the commercial banks to issue personal housing loans totaled 15.328 billion yuan, the average weekly ring down 20%; individual housing loan approval number were 4456, 3944, 3188, Down nearly two percent. Since the "51" after the holiday, a number of banks in Beijing to cancel the first suite interest rate concessions, two suites are the benchmark interest rate floating 20%, more than 25 years of housing loans also ceased approval. "The Beijing real estate feast is no more." Gu Haibo sighs.


Deflation: Interbank Market Lending Contracts

Caixin: Regulator Wins First Round in Clampdown on Interbank Fundraising
In the second week of May, the net amount of funds that banks raised from selling negotiable certificates of deposit (NCDs) was a negative 107.3 billion yuan ($15.6 billion), meaning they paid back more than they borrowed, according to Wind Information, a financial data provider.

That’s the biggest weekly shortfall in net issuance since China introduced interbank NCDs at the end of 2013, and the third straight week of redemptions exceeding new issues, the data show. The amount of outstanding NCDs fell to 7.7 trillion yuan as of May 18 from 7.9 trillion yuan at the end of last month, set for the first monthly drop since November, according to Wind.
Unless there's credit growth elsewhere in the economy offsetting this contraction, the economy will slow later this year.

Value of South China Sea Increases After Combustible Ice Extracted

Phys.org: China, Japan extract combustible ice from seafloor
Combustible ice is a frozen mixture of water and concentrated natural gas. Technically known as methane hydrate, it can be lit on fire in its frozen state and is believed to comprise one of the world's most abundant fossil fuels.

The official Chinese news agency Xinhua reported that the fuel was successfully mined by a drilling rig operating in the South China Sea on Thursday. Chinese Minister of Land and Resources Jiang Daming declared the event a breakthrough moment heralding a potential "global energy revolution."

MoH: Developers Must Begin Advance Sales Withing 10 Days of Approval

iFeng: 住建部:房企取得预售许可证后十日内应全部公开销售


Deflation: Chinese Shadow Banking Contracted in April

Guotai Junan estimates non-standard bank lending contracted 800 billion yuan in April as deleveraging policies finally had an effect.

Although banks in China can be politically coerced into lending (and to take bailouts in America), it is still the case that banks are the front line of credit creation, and hence money supply. If shadow banking contracts, the money supply contracts. Asset prices and economic growth will soon be on a downward trajectory if there's no credit or money supply growth to offset it.
iFeng: 银行开始缩表了!市场影响比央行缩表更可怕
With the detailed financial data released in April, Guotai Junan Bank team found that the real start to shrink the table is the bank. Credit Suisse Managing Director Tao Dong believes that banks are more scary than the central bank.

The Politburo meeting on 25 April will guard against financial risks to an unprecedented level, and the political will behind it is beyond doubt. Followed by a line of three will continue to introduce policies to promote financial deleveraging, the effect began to appear.

According to Guotai Junan bank team estimates, in April self-non-standard or non-bank contraction of about 800 billion yuan, the signal shows that financial leverage to achieve a certain effect, the bank began to shrink non-bank, non-standard business.

...Credit Suisse Managing Director Tao Dong that commercial banks to substantially shrink their own balance sheet will bring two effects:

1. credit contraction. A banking-led credit table, especially in the off-balance sheet business. As the credit expansion of the Chinese economy in the past few years basically completed by the expansion of the table, the sudden off-balance sheet of the impact of the number can be seen even more ferocious. Credit out of the economy and the real estate industry poses the risk, may be more than the cost of capital increases.

2. the cost of credit debt soaring and fund-raising capacity decline. Over the past two years, the overall level of leverage in the Chinese economy is still rising, but the fund-raising platform from the financial products to credit debt makes the cost of capital dropped significantly, raising funds is more standardized. Credit market changes in the market, may make a serious reliance on borrowing new debt and some of the old debt default risk increased significantly. At the same time, savings growth slowed down, banks compete for deposit war imminent, normalization of the monetary environment is by the money market "fake interest rate", the real economy to the real economy to raise interest rates.

Tao Dong said that the recent Chinese economy is facing a sudden shortage of liquidity, mainly related to the bank's off-balance sheet business contraction, the intensity may be higher than the performance of the data, the bond market performance reflects the credit environment changes. In order to ease the pressure, the central bank to restart the open market operations, but believe that the normalization of the monetary environment will continue, financial strong supervision will continue.

Tao Dong said that the normalization of the monetary environment, to prevent financial risks, strengthen supervision, eliminate financial corruption, long-term look is a good thing, but to prevent systemic risk necessary. But the departments have introduced measures, but in the manufacture of a superposition of resonance effect, may lead to the credit environment overkill. To prevent risks but become the source of the creation of new risks, and backfire. This is a need for vigilance

SDRs Are Coming

SDRs might extend the global credit cycle for another generation, at least that is the plan.

ZH: World Money: Five Hidden Signals From The IMF

Credit Bubble: Chinese Companies Splurge on Buyouts

This is textbook credit bubble: too much money and not enough investments. Chinese companies with no experience in technology, such as chemical and poultry producers, are buying up online games, apps and media properties.

Read the whole thing.

Bloomberg: Why Did a Chinese Peroxide Company Pay $1 Billion for a Talking Cat?

What Is the One Belt, One Road Really About? Making China Great Again

China is selling 一带一路 to its own people with nationalism.

One Belt One Road
A lot of people can’t quite get what One Belt One Road means. In fact it’s quite easy if you make a simple metaphor: say infrastructure to a country is like a person who goes buy a house. For the vast majority of country, they needed it, but they don’t have the money on hand. Well, China here is like a developer, a construction company and a bank all put together. China has money it doesn’t know what to do with, it has empty houses, and the construction companies have no orders either. So we have both demand and supply sides here with nothing to do. What can we do?

Easy, we make a mortgage. China lends money to all these countries, and then these countries use this very money to ask Chinese companies to build them infrastructure, paying back the money to China in installments in the next decades.

By doing this China can use it’s foreign currency reserves in a smart way. We can avoid buying US treasury bonds like we’re stupid; those give almost no yield. By lending out the money for interest, the yield is much higher. With this plan China can also put to use its industrial overcapacity, we get orders which reactivate our manufacturing base. And all these countries which would use China’s money and rely on China to build infrastructure; their economies will grow eventually, they’ll use money to pay us back, and they will also buy Chinese products.

So everybody wins, that’s what One Belt One Road is all about. [This sentences rhymes in the original]

Also through this infrastructure we can achieve two roads to Europe, one by land and one by sea. If there is any war with the US, the US won’t be able to encircle us. At the same time this would accelerate the speed of transport from China to Europe, lowering transport costs and increasing China’s competitiveness.

All these countries would use Chinese products as the standard of their infrastructure. This means that in the future they would need to use Chinese products to service the infrastructure. This would exclude other countries’ products, giving our manufacturers an advantage when competing with foreign manufacturers.

Of course inside all this there will be some loans which go bad. It’s like a bank, there’s always someone who can’t pay back their mortgage or their car loan. But banks don’t care about that, why? Because they make enough profit to compensate for it. And with China’s One Belt One Road, China would profit twice. One through the interest on the given loans, way higher than the yield of US debt. And then again when these countries buy Chinese products, giving money to Chinese private businesses. In business terms this is a very lucrative process, if we can manage well the level of bad debt, we are sure to make a net profit.

Also if China gets to develop these countries’ infrastructure, naturally these countries will become more friendly towards China. All these countries will be our friends. And as everybody knows, it is always good to have many friends. This applies to people and to states.

During this process, you may notice that China outright gives aid to some countries, without expecting payback. Some people don’t understand this, how can we give stuff away for free? It’s very easy. When you get some business from someone, you gotta give them some advantage. When shopping in a store, many shops give regular discounts, they’d give you coupons if you buy a lot, or even free products. Countries do the same. You’re making money out of someone, if you don’t give them something in exchange, well the business won’t go anywhere. All these aid packages are in fact discount coupons of a sort. Because besides us there’s also Japan or Germany giving loans, helping others build infrastructure. We have competition.

This kind of plan was in fact invented by the Americans. When the US wanted to open up foreign markets, they didn’t do like other countries and use military force to conquer colonies and their markets. What the US did was use what they called “open-door policy”, they used loans, the Marshall plan, etc. They gave loans to other countries, and these countries then used the money to buy American products. By doing so the US occupied these countries’ markets without shedding blood, which helped America become wealthy, and the US dollar become the world’s reserve currency. Thus the US became the world’s factory and ultimately the boss of the world. China is actually learning from America’s path to greatness, growing through peace, and not force.

So, you see, One Belt One Road is a very farseeing policy, it is precisely the path for China’s rising. If you have any friends who still don’t get it, send this piece their way. Let everyone get it. The Great Renewal of the Chinese Nation is just around the corner!
It's back to 1945 for China and America, but they have swapped places.

Shanghai Targets Converted Commercial Properties

Caixin: Shanghai Orders Clean Sweep of Converted Commercial Properties

Chinese New Home Price Rose Again In April, But Restrictions Working

New home prices climbed 0.7 percent in April, matching March's increase. A smaller number of cities saw rising prices.
Restrictions are working though. I watch 12 cities, the four first-tier cities and eight "hot" cities. These 12 combined for an average price increase of 0.08 percent. I don't include Sanya in the list, and it saw the largest drop, 1.2 percent on the month. Many third-tier cities saw gains of 1 percent or more. The highest was 2.2 percent in Bengbu, Anhui.

Existing home prices also climbed 0.7 percent. In those 12 cities, the average increase was 0.4 percent. The highest increase was in Changsha, up 4.3 percent.


Pop Goes the Ponzi: Rumors Foresea Life Insurance In Trouble

A leaked document circulating on the Chinese Internet shows one of China's most aggressive sellers of universal life insurance is in trouble. Foresea Life was selling policies like hotcakes in order to fund parent Baoneng's takeover attempt of Vanke. The chairman of Baoneng was banned from the insurance industry for 10 years, and now the insurance division might be facing a Ponzi-collapse if it cannot sell enough new policies to meet the cash demand from a ballooning amount of surrendered policies. Last year, policies surrendered totaled 9 billion, an increase of 5.2 times. This year, the 2017 estimated surrender value (estimated by Foresea) is 60 billion, an increase of 6.7 times.

Some background, from September 2016, Barron's: China Cracks Down On High-Yield Life Insurance Policies
Hong Kong-listed Chinese insurers soared after the China Insurance Regulatory Commission put the brakes on high-return life insurance policies, essentially short-term wealth management products.

Universal life insurance is one such policy, commonly offering 5-6% annual return. Players like Evergrande Life even offer 8%.

And such policies have been funding unlisted insurers to buy mainland China's A-shares. Qianhai Life Insurance of Baoneng Group has been issuing these "life insurance" policies to fund its purchase of China Vanke's (200002.China) shares.

September 2016, SCMP: Unlisted insurers to be hit hard by clampdown on flexible, but ‘risky’, universal life products
Anbang’s premiums from investment products reached 186.9 billion yuan, a 271 per cent year rise on the previous year. Evergrande Life Insurance’s investment premiums swelled 705 per cent to 23 billion yuan while that for Qianhai Life surged 228 per cent to 50.1 billion yuan, according to calculation by SWS Research.

If insurers use cash collected from universal life products to buy shares in listed companies, they have to issue the products continuously to maintain cash levels, because many buyers surrender them within three years, Li from CMS said.
February 2017, FT: China bans fourth-richest man from insurance sector for 10 years
China’s fourth-richest man has been banned from the country’s insurance industry for 10 years, in the most aggressive move yet by regulators to tame borrowing and hostile corporate takeovers by insurers.

Yao Zhenhua, chairman of financial conglomerate Baoneng Group, last year launched a high-profile raid on China Vanke, the country’s largest residential developer. He acquired a stake worth 25 per cent, prompting Vanke’s chairman to label Baoneng “barbarians”. 

Much of the funding for Baoneng’s Vanke stake and other investments came from policies sold by its life insurance unit, Foresea Life Insurance, which Mr Yao also chairs.
December 2016, Reuters: China suspends Foresea Life from selling "universal life" insurance

Today, Reuters: China insurer Foresea Life says operations normal, cashflow stable
Local Chinese media and Britain's Financial Times, citing a letter sent from Foresea Life to China's insurance regulator, said the insurer may be unable to meet payouts if it was unable to sell new products.

The letter from Foresea Life, dated April 28, requested the China Insurance Regulatory Commission (CIRC) to resume new product approvals to "avoid inciting mass incidents by clients and localise and systemic risks", the Financial Times said.

Foresea Life had been aggressively wresting market share from bigger, listed peers by offering investors guaranteed-return, higher yielding products.
Today, FT: Chinese insurer warns of defaults as ban on new products bites
One of China’s largest insurers has warned of mass defaults and social unrest unless the regulator lifts a ban on its issuance of new products, the latest sign of stress in the industry caused by a crackdown on financial risk.

In a letter to China’s insurance regulator seen by the Financial Times, Foresea Life Insurance warns that the company expects Rmb60bn ($8.7bn) in redemptions this year and might be unable to meet payouts unless it is able to sell new products.

In December, the China Insurance Regulatory Commission banned Foresea for three months from applying to sell new products. In February, the agency banned Foresea chairman Yao Zhenhua, China’s fourth-richest man, from the industry for 10 years.

In the letter dated April 28, Foresea asks the CIRC to resume new product approvals “in order to avoid inciting mass incidents by clients and localised and systemic risks, producing greater damage to the industry”. The term “mass incidents” is commonly used in China to describe demonstrations, protests and riots.

iFeng: 前海人寿被传陷“600亿退保”危情 回应称经营正常
Recently, screenshots of documents relating to Qianhai cash flow and surrender pressure spread on the Internet, including the "Shenzhen Insurance Regulatory Bureau recommended paying attention to Qianhai cash flow risk", "on the request to support the normal operation of Qianhai and related matters Of the report" and so on.

The above mentioned documents, Qianhai, said, "In 2017 our company is expected to have 60 billion yuan in surrendered policies," and asked the CIRC within a certain amount of sales within the scope of the resumption of universal business sales and new product declaration. In addition, the document also pointed out that the Qianhai risk of cash flow, the first quarter of this year, the company's cash inflows substantially reduced. However, the authenticity of the above documents, the reporter did not from the CIRC and Qianhai to be confirmed.
According to the iFeng article, 78 percent of Foresea's (Qianhai in pinyin) premiums came from sales of universal life policies back in 2015. It saw 60 billion in investment inflows thanks to those policies. Business has since slowed, although some don't see a big risk.
After the suspension of the Universal Insurance business, according to the recently released data, the former life insurance in the first quarter of 2017, the original insurance premium income of 13.48 billion yuan, compared with 11.89 billion yuan in 2016 increased, while the new investment To 46.78 million yuan, compared with 33.46 billion yuan last year.

According to the solvency report, at the end of the first quarter of 2017, the net cash flow of Qianhai Life was -12.4 billion yuan, the consolidated current ratio was 198% in one year and the liquidity coverage rate was 257%. At the end of the first quarter of 2016, the net cash flow was 8 billion yuan.

People close to Qianhai said that the 2016 annual report shows that as of the end of the year, Qianhai had cash and cash equivalents balance of 43.66 billion yuan, plus the first quarter of 2017 scale premium income of 13.5 billion yuan, Qianhai to achieve annual cash net inflow is not stressful.
Assuming the document is real, we now know why regulators and the central bank suddenly eased their stance on deleveraging last week. The problem is that, as Mises said so many years ago:
There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.
In the end, the yuan will pay the price.

Mickey Kaus Sees American Social Tension Rising

Kausfiles: The Most Important Chart
It’s not just that wages for many have been stagnant. It’s that their increase or decrease has taken on a vicious meritocratic bias. Well-educated Americans are still doing well. Uneducated Americans are actually doing worse — they’re dropping out of the bottom of the pack.

It’s hard to see how traditional American-style social equality — everyone’s equal, not only in the eyes of God or before the law but in the eyes of each other — can survive many more decades of this chart. It’s one thing if the rich get richer — I’d argue there isn’t a hard, Marxist connection between income tables and a sense of social superiority. (Would you let any of these guys but in front of you in line?) It’s another if a whole group of Americans — increasingly identifiable by dress, appearance and language — keeps getting tossed into the economic trashcan. *** I’ve had more than one conversation out here in West Los Angeles in which the topic of heartland working-class decline comes up and the explicit response from one of my friends is, “Fuck ’em.” (The only-sometimes-explicit rest of the response is “… if they’re too stupid to move or go to school.”)

...True, each educational class might develop its own associational life, the way ethnic groups traditionally developed their own groups (Knights of Columbus, etc.). But it might take a long time. It’s also the stuff of neo-feudal dystopias. (When will the Betas and Zetas revolt?)

Brewing Battle Over Greek Debt Relief

FT: Is Greece just about to default?
Further, to Tsipras’ (and others’) surprise, Greece now runs a big primary surplus — over 3 percent of GDP in 2016, up from balance in 2015, and still running strong into 2017, even if some of it reflects temporary factors. Sure enough, that scorching fiscal withdrawal is accompanied by output declines, yet again. But in that context, Tsipras doesn’t need new finance for the budget as is if deposit flight is contained or if ELA is uncapped. Only if deposits flee and ELA is capped will Greece spiral. But thereby the Euro pandora’s box of ECB legitimacy will bust wide open. If Tsipras is ever going to stand and fight on debt reduction — i.e., default — now is the time.

Merkel, likewise, faced with this prospect, also has good reason to pick a fight on Greek debt reduction now.

Glad as she may be that Mme Le Pen has been dispatched, at least for now, Merkel’s immediate task, faced with “Saint Emmanuel”, is to reassure her voters that she’s not going to go soft, not for him, nor the Brits, nor the Italians, and so certainly not for Tsipras. Given the resurgent SPD since Schultz, her key concern ahead of Fall elections is risk of loss of votes to her right. So a flat-out fight with the IMF and Tsipras over debt reduction, with an insistence on the German version of ECB “orthodoxy” on ELA, all under the rubric of “European rules”, has big political attractions.
Even the most pro-EU members have domestic political concerns that cause them to behave in their national interest. Overall social mood is negative in Greece, tensions are rising in Europe.

The last time Greec issued bonds into the private debt markets (2014) it marked a peak for the Greek stock market, and would soon be followed by a political battle over austerity.

A Map of Europe's Secessionist Movements

If social mood declines greatly over the coming decades, a major breakup of nation states is not out of the cards.

ZH: Mapping Europe's Secessionist Movements

Turkey Stirs Trouble With Greece and EU

ZH: EU Warns Turkey After 141 Greek Airspace Violations In Single Day
Turkish aircraft and helicopters illegally entered Greece’s airspace 141 times on May 15, the Hellenic National Defence General Staff reported.

...Will now Turkey stop Greece’s airspace violations? On the contrary. Greeks expect ‘intensive activity’ due to the Turkish naval exercise Seawolf.

On May 16, a pair of Turkish F-16 and of F-4E as well as one CN-235 violated the Greek airspace three times.

Back in August 2015 I wrote Geopolitical Forecasting Through Technical Analysis: Is Turkey About to Destabilize the Middle East?

Social mood in Greece is high now and the country is about to sell bonds into the private market. Social mood was also high in April 2014, the first time it sold private bonds since the debt crisis started in 2010. Look at what happened next. The current offering is a contrarian indicator.

More broadly, Greek social mood is very negative. Nationalist sentiment is suppressed for now, but it could erupt at any moment. Military tensions with Turkey could be a spark. It would also give pretext to any nationalist governments in Europe who want to push Turkey out of Europe.


Will President Trump Be Impeached? America Edges Towards Social Unrest

Back in 2013 I wrote: Will Obama Be Impeached? Watch The Stock Market

I posted four charts.

A bit from that piece:
Social mood will determine whether the public wants lawbreakers hunted down and punished, or whether they'd rather see Congress get back to business. Iran-Contra was serious, it caused Reagan's approval rating to fall, but ultimately people were in a positive mood. President Clinton lied under oath, but the social mood was even more ebullient in 1998. Republicans were completely out of step with the social mood and ended up harming themselves with impeachment. In contrast, Nixon's scandal broke during the 1970s bear market and social mood deteriorated as the scandal unfolded.
Watch the stock market. If there's a major bear market, all bets are off. Also watch who has the power.

Daily Mail: Ousted FBI chief James Comey claimed in write-up of dinner with Trump that President asked him to 'LET GO' investigation into National Security Adviser Mike Flynn because 'he's a good guy'
Comey's memo also described a Trump request to prosecute and jail reporters who report on classified information leaked to them

ZH: Murdered DNC Staffer Seth Rich Shared 44,053 Democrat Emails With WikiLeaks

The 1970s (riots, impeachment, soaring crime) are an optimistic scenario if social mood declines. The extremes in wealth disparity, foreign population and declining life expectancy tells me this is much closer to the early 1920s (wave of communist and anarchist terror) , if not the late 1850s. Peter Turchin lays out many of the social and economic factors that are consistent with prior periods of civil war and social unrest.

Socionomics tells us what is possible given the prevailing mood, but what actually takes place depends on the facts on the ground. America is much closer to major upheaval than is realized. It is a powder keg, and extremely negative social mood will be the spark.

Bond Connect With Hong Kong

Bloomberg: China Announces Hong Kong Bond Connect After Stock Links
The People’s Bank of China and Hong Kong Monetary Authority said Tuesday that the bond connect system would only be northbound at the start, giving foreigners a channel to buy onshore securities. There will be no daily quota, and the regulators didn’t provide a date for when trading would begin. Authorities in Hong Kong and the mainland will sign a memorandum of understanding to coordinate supervision, the statement said.
Only inflows to start.

iFeng: 央行:同意开展香港与内地债券通 启动时间将另行公告

China Blinks, Confirmed

Last week, Chinese interpreted a meeting between financial regulators and the PBoC as positive for the markets. The statement from the meeting pledged greater cooperation between central bank and regulators. Analysts saw this as meaning the PBoC would inject liquidity to offset deleveraging efforts.

See: China Blinks? Analysts See Easier Money and Regulatory Easing
PBoC to Ease Liquidity After Meeting With Financial Regulators

From Friday's SCMP: China banking regulator softens tone amid financial crackdown
In an extraordinary briefing Friday afternoon, Xiao Yuanqi, director of the prudential regulation bureau under the China Banking Regulatory Commission, said that banks are now undertaking “self-examination” into whether their activities have amounted to “arbitrages” that the regulator vowed to crackdown. They will be given sufficient time to eliminate any practices found to be in violation of the rules eventually, he told them.

“We will open the front doors while shutting down the back doors. We’ll proactively encourage lawful bank businesses and leave the front door wide open,” said Xiao.

Responding to concerns that the CBRC is “competing with” other regulators to tighten restrictions as much as possible, Xiao said it is not true. He said the current “self-examination” aims to let banks and other financial institutions figure out the size of relevant businesses by themselves. The regulator will then check the authenticity of the numbers, and then eliminate any practices that breaches rules.

“We’ll leave a 4-6 month grace period before banks rectify their irregular practices eventually. We’ll also tolerate old investment schemes before [the seven directives] and let them mature and vanish,” Xiao said.

And now the latest from ZeroHedge: China Capitulates: Injects $25 Billion Into Liquidity-Starved Banks To "Appease Investors"
Predictably, China throwing in the towel on deleveraging immediately raised animal spirits: the Shanghai stock market rose 0.7% on Tuesday, having earlier fallen by nearly 1%. The yield on China’s benchmark 10-year government bond, meanwhile, fell back to 3.62% from 3.64%.

Ultimately, what the PBOC did is just what every other developed central bank when faced with declining markets: it capitulated.

“The timing of PBOC’s move does point to an intention to appease investors,” said Ding Shuang, an economist at Standard Chartered Bank.

As Goldman noted over the weekend, the first sign of Beijing’s desire to soften its tone emerged last Friday, when the PBOC said in its latest monetary-policy report that regulators should carefully handle the timing and pace of introducing their policies and solve financial risks in an orderly manner. The central bank also pledged to provide necessary liquidity to ensure “reasonable” credit growth. It waited just 2 days to do just that.

Also Friday, China’s banking regulator said in a briefing it was trying to “avoid creating new risks in the process of resolving existing risks” and that it would give banks time to adapt, applying tougher standards only on new investment products while allowing existing ones to expire intact.

Then on Sunday, an editorial from the official Xinhua News Agency urged financial regulators to refrain from turning the recent campaign of risk prevention into a fresh risk itself. The same day, Chinese Premier Li Keqiang stressed at a cabinet meeting the importance of “striking a balance” between maintaining financial stability, “gradual deleveraging” and stabilizing economic growth.

“There were indeed worries that if the market volatility induced by the regulatory crackdown worsened, it could lead to systemic risk and hurt the real economy further,” said Liu Dongliang, senior analyst at China Merchants Bank.
Assuming this does mark a shift in policy, bears can push back the timing of the apocalypse and once again raise their long-term USDCNY target.


Real Estate Investment Strong, SOE FAI Offsets Decline in Private FAI

Source: NBS

Listed Banks Are Shadow Bank Bad Boys

Caixin: Speculative Ventures Threaten China’s Financial System, Tsinghua Report Says
Chinese joint-stock commercial lenders’ aggressive expansion in off-balance-sheet activities is creating a serious risk to the financial system that requires regulatory attention, a new report by the Tsinghua University National Institute of Financial Research says.

The overall level of risk in the Chinese financial system actually fell in the first quarter of the year, when the so-called real economy — a sector that produces actual goods and services — picked up. But this was not the case among joint-stock commercial lenders China Minsheng Bank Co. Ltd., China Everbright Bank Co. Ltd. and Industrial Bank Co. Ltd., said the report, issued Saturday.
Caixin’s attempts to reach the three lenders for comment were unsuccessful.

Such lenders are increasingly engaged in businesses such as “shadow banking” — lending that is often speculative and little-regulated that occurs beyond official banking channels. Such businesses also include “entrusted investments,” or funds that banks lend to external asset managers to invest in bonds, stocks and commodities. Regulators say this creates multiple layers of investments with high level of leveraging, therefore making financial markets vulnerable if a liquidity shock were to occur.


Bottom Fishers Swarm in A Share Market

Last week, the PBOC was seen as easing monetary policy following a meeting with financial regulators. Although the central bank hasn't reversed policy, it's believed it will act to mitigate the fallout from the regulatory crackdown on the interbank market and shadow banking. Now bottom fishers are swarming in the A-shares market. Investors are looking at heavy insider buying, as well as the impact from the "One Belt, One Road" after port stocks took off on Friday.

iFeng: 有人看到了A股底部迹象 跟着大股东买买买?

Unprecedented: 55 Cities, 160 Housing Restrictions in 2017

iFeng: 史无前例!55城160次调控!楼市降温 房价真要降了?
Since this year, "3.17" since the implementation of the property market regulation and control policy, Beijing new housing market cooling significantly. According to the data released by the relevant intermediaries, in April 2017, the city's new commercial housing in Beijing signed a total of 2767 sets, down 48.9% from April 2016. At the same time, existing home transactions there has been a significant decline in the number of existing residential transactions in 16794 sets of units, fell 35.12% month-to-month.

Grand Supercycle Peak: White Left Becomes Insult on Chinese Internet

I was surprised on my last visit to China by acquaintances who discussed the migrants into Europe. He was perplexed as to why it was happening, and I made a comment about how pepole say some areas of the major cities are devoid of natives. He had recently been to London and confirmed it. He was also clearly a bit dejected to have traveled to the geographic location London, but not found himself in cultural London. At dinner, he asked me how anyone could possibly vote for Clinton? I told him Trump would win, but he didn't believe it.

As this article from Open Democracy explains, there are a lot more people like him in China.

Open Democracy: The curious rise of the ‘white left’ as a Chinese internet insult (Chinese source: 为什么西方受过高等教育的精英分子会成为部分中国人眼中幼稚的「白左」?)
The term first became influential amidst the European refugee crisis, and Angela Merkel was the first western politician to be labelled as a baizuo for her open-door refugee policy. Hungary, on the other hand, was praised by Chinese netizens for its hard line on refugees, if not for its authoritarian leader. Around the same time another derogatory name that was often used alongside baizuo was shengmu – literally the ‘holy mother’ – which according to its users refers to those who are ‘overemotional’, ‘hypocritical’ and ‘have too much empathy’.

... A thread on “why well-educated elites in the west are seen as naïve “white left” in China” on Zhihu, a question-and-answer website said to have a high percentage of active users who are professionals and intellectuals, might serve as a starting point.

The question has received more than 400 answers from Zhihu users, which include some of the most representative perceptions of the 'white left'. Although the emphasis varies, baizuo is used generally to describe those who “only care about topics such as immigration, minorities, LGBT and the environment” and “have no sense of real problems in the real world”; they are hypocritical humanitarians who advocate for peace and equality only to “satisfy their own feeling of moral superiority”; they are “obsessed with political correctness” to the extent that they “tolerate backwards Islamic values for the sake of multiculturalism”; they believe in the welfare state that “benefits only the idle and the free riders”; they are the “ignorant and arrogant westerners” who “pity the rest of the world and think they are saviours”.
What is really interesting is these netizens aren't buying a government line because their thinking is more in line with Neoreaction:
Global Times conducted their own online survey in response to Amnesty’s claim, and the results were quite the opposite: 90.3% said ‘no’ to the question ‘would you accept refugees in your own household?’ and 79.6% said ‘no’ to the question ‘would you accept refugees in your city, or would you like to be neighbours with refugees?’. Ironically, Amnesty’s portrayal of China as a welcoming country for displaced people was even read by some netizens as part of a foreign conspiracy, intended to pressure the Chinese government to accept more refugees. A senior researcher at the Chinese Academy of Social Sciences commented that this survey was “weird” and seemed to “incite citizens against the government”.
It's possible there is some influence from Russia, as it was the first to target foreign NGOs. China has also tightened control over NGOs in recent years. However, the government is not stoking right-wing ideology online.

Back in 2013 I wrote: Rise of the New American Right Leaking Into Mainstream; What is Neoreaction?. Around that time, the term "Dark Enlightenment" also started appearing as a description of ideas that reject some of the base foundations of the Enlightenment such as the Blank Slate. If the West has or is crossing through a Grand Supercycle peak, the start of it traces back to the Enlightenment and the Industrial Revolution. If a major reversal in social mood is in store, it is possible the core concepts of the Enlightenment will also be tested.
The more interesting question is what's behind the emergence of these ideas in China? Is it totally organic, a reaction to the failure of modern Western ideology? Or did China wake up and realize it can't fight cultural Marxism with Marxism?

Or is it China's determined focus on development?
From a domestic perspective, the proliferation of anti-baizuo sentiment is clearly in line with the dominance of a kind of brutal, demoralized pragmatism in post-socialist China. Many of the attacks on the welfare state and the idea that states have obligations towards international refugees appeal to the same social Darwinist logic of ‘survival of the fittest’. It is assumed that individuals should take responsibility for their own misery, whether it is war or poverty, and should not be helped by others. The rationale goes hand in hand with the view that inequality is inevitable in a market-economy-cum-Hobbesian-society. Although economic disparity in China has been worsening in recent years, sociologist Yu Xie found that most Chinese people regard it as an inevitable consequence of economic growth, and that inequality is unlikely to give rise to political or social unrest.
However, the Chinese also see the "White Left" as destructive:
Seen from the perspective of international relations, the anti-baizuo discourse can be understood as part of what William A. Callahan calls ‘negative soft power’, that is, constructing the Chinese self through ‘the deliberate creation and then exclusion’ of Others as ‘barbarians’ or otherwise inferior. Criticisms of the ‘white left’ against the background of the European refugee crisis fit especially well with the ‘rising China’ versus ‘Europe in decline’ narrative. According to Baidu Trends, one of the most related keywords to baizuo was huimie: “to destroy”. Articles with titles such as ‘the white left are destroying Europe’ were widely circulated.
From what I've experienced, Chinese see China surpassing the West positively, as China becoming greater. They do not see the destruction of the West as good. It is more akin to how Americans viewed the rise of communism during the Cold War.

Globally, major political changes are coming worldwide as negative social mood unfolds. If this is a small-scale decline in mood similar to the 1960s and 1970s, the changes will be brief and eventually reverse in the coming decades. I believe the current changes are at least on the scale of the 1920s, or the 1850s in the United States (see Turchin's Ages of Discord). The risk of war and social upheaval is great. If instead this change in mood is occurring at the greatest scale, basic thinking about concepts such as equality will completely change in the coming decades and centuries.


Beijing Agent Sells 1 House in 2 Months

Real estate controls are having an effect:
"Outside the door," located in Beijing, South Second Ring Road, a real estate intermediary store before the intermediary Xiao Sun with these four words to describe the current market. Two months ago, Xiao Sun every day from 9 am to 10 pm, non-stop with the customer showings, signing, running procedures, one day receive nearly 50 calls, charge the electric bike battery twice. "This round of control incredible, these two months I only sold 1 house, now most of the time I'm sitting in the store." Xiao Sun said.
HomeLink said April customer traffic fell 40 percent from March.

iFeng: 北京楼市强劲调控 中介:两个月只卖出一套房

China Blinks? Analysts See Easier Money and Regulatory Easing

iFeng: 央行银监会释放维稳信号 股市或迎新转机(附机构分析)
The market ushers in a new turn for the better!

First, the central bank to open the faucet, May 12 release of 459 billion yuan MLF operation.

Second, the central bank made it clear that "shrink table" and must mean to tighten the money, the actual effect may be to relax the money.

The People's Bank first quarter balance sheet has been published with China's monetary policy implementation report, China's central bank "tighten" certainly means to tighten monetary policy, the actual effect may be to relax the monetary policy, specifically the column balance sheet debt clearly re-converted to "expansion". The central bank's statement "three guarantees" to ensure stable and healthy economic development, to ensure that the supply side structural reform has been deepened to ensure that no systemic financial risks.

Third, the China Banking Regulatory Commission today's made it clear that because of the risk of disposal caused by new risks, and said that self-inspection and rectification work for a period of 4 to 6 months of the buffer period for the bank to achieve compliance with the standard.

What is the turning point?

Not only today's central bank and the CBRC's latest statement, in fact, stretched for a long time to see, after the Labor Day, the regulatory level has been blowing, blowing the policy of warm air.

...Jiuzhou Securities chief Deng Haiqing: regulatory peak may be past

For the financial market, the stock market or return to long-term healthy cattle, long-term bond market depends on the central bank funds interest rates, the current stock market bond market opportunities are higher than the risk of falling. Since April, regulatory factors led to the general decline in financial markets, stock markets, bond markets, commodities were significantly decreased. From the current central bank and the attitude of the CBRC, regulators for the financial market attention began to significantly improve the recurrence of financial market risk of the basic elimination of the stock market is expected to return to long-term healthy bull market, the bond market rose more than the risk of rising risk.

Italy's Turn to Try Populism

A good round-up on the 5-star Movement in Italy. The party is currently at the top of the polls with an election coming sometime in the next 12 months.

WSJ: A Populist Storm Stirs in Italy
Fueled by discontent with slow growth, high unemployment and disillusionment with mainstream politicians, 5-Star has won local elections in Rome, Turin and elsewhere, partly on the strength of its leaders’ call for a referendum on Italy’s use of the European single currency.

Pollsters say about 30% of Italian voters support the movement founded by comedian Beppe Grillo, a level of popularity that has stood firm despite a series of high-profile stumbles, especially by its mayor in Rome. The self-described association of free citizens has replaced the center-left Democratic Party at the top of most polls ahead of national elections to be held by May 2018.
Europe can only dodge bullets for so long, and it only takes one victory to upend the apple cart. Once one nation acts in its self-interest, the pro-EU politicians who go along to get along will fall like dominoes. Nationalist sentiment is already high even in pro-euro and pro-EU countries.

Marketwatch: Draghi, Dutch lawmakers clash over ECB's stimulus

Mr. Draghi's rare visit to The Hague comes at a sensitive time for the ECB, which is considering when to start winding down its EUR60 billion-a-month bond-purchase program, known as quantitative easing. The program is currently due to run at least through December.

Tempers occasionally flared during a two-hour hearing in the Dutch parliament, as politicians probed Mr. Draghi on the ECB's record of transparency, and attacked policies they said subsidized southern European countries and harmed Dutch pensioners.

"You still believe this [QE program] is fully within [the ECB's] framework and you have not been doing any government financing, even though you [will have] bought EUR2.5 trillion of debt by the end of the year?" said Pieter Omtzigt, a member of the center-right Christian Democratic Appeal.

Mr. Draghi strongly defended the ECB's decisions, which he said had helped support households throughout the region, including in the Netherlands. He also brushed off calls for a swift exit from QE.

"It is too early to declare success," Mr. Draghi said. "Maintaining the current very substantial degree of monetary [stimulus] is still needed for underlying inflation pressures to build up."

...Some Dutch lawmakers weren't convinced. The ECB's stimulus might have made Mr. Draghi a hero in southern Europe, said one MP, but not in Holland.

"It's not my job to be a hero, just to pursue my mandate," Mr. Draghi responded. The ECB, he said, has done no more than other major central banks in the U.S., U.K. and Japan, which also launched major stimulus programs in recent years.

..."You look remarkably calm for someone who issues EUR2.5 trillion out of thin air, especially when your chief economist says there is no Plan B," commented Lammert van Raan, a member of the left-wing Party for the Animals.
States such as California and Texas have high hurdles on the road to independence. EU countries were sovereign nations less than a generation ago. The highest hurdle is a national election. The European project faces a bullet at almost every election, and if social mood deteriorates, the odds of nationalists winning goes up.


PBoC Researcher Goes Mellon

SCMP: Many financial institutions should go bust, China central bank researcher says
“Not a single Chinese financial institution has gone bankrupt ... are China’s financial institutions really so good that not even a single one has gone bust?” Xu asked in a speech at Peking University. “The real problem is that some authorities and local governments don’t want to open the jar.”

...“When we tried to tackle a few risky places, everyone involved was scared” and began to ask questions such as “is my economy not good” or “is my regulation too lax”, Xu said. “Since small risks are not allowed to be addressed, moral hazard is created.”

First and Second-Tier Real Estate Restrictions Keep Coming

iFeng: 一二线城市成交回落 5月份楼市调控仍不止步
According to the statistics, since May, Beijing, Shanghai, Chongqing, Shenzhen, Jiangxi, Wuhan, Zhengzhou, Jinan, Xi'an, Chengdu, Haikou, Sanya, Lanzhou, Wuxi, Langfang and Wuhu have introduced relevant real estate control policies. Contrls related to credit, purchase, land transfer, existing housing transactions supervision, housing transfer increased the number of years and other means of control.
The article goes on to discuss the new rules in each city.

Ethnic Tensions Rise in Indonesia

Back in December, Indonesians claimed China Attacked Indonesia With Biological Weapon: Chili Bacteria. Now the focuses turns to wealth.
Reuters: Exclusive: Indonesian Islamist leader says ethnic Chinese wealth is next target
The leader of a powerful Indonesian Islamist organization that led the push to jail Jakarta's Christian governor has laid out plans for a new, racially charged campaign targeting economic inequality and foreign investment.

In a rare interview, Bachtiar Nasir said the wealth of Indonesia's ethnic Chinese minority was a problem and advocated an affirmative action program for native Indonesians, comments that could stoke tensions already running high in the world's largest Muslim-majority nation.

"It seems they do not become more generous, more fair," the cleric said, referring to Chinese Indonesians, in the interview in an Islamic center in South Jakarta. "That's the biggest problem."

Ethnic Chinese make up less than 5 percent of Indonesia's population, but they control many of its large conglomerates and much of its wealth.

..."Our next job is economic sovereignty, economic inequality," said Nasir, an influential figure who chairs the National Movement to Safeguard the Fatwas of the Indonesian Ulemas Council (GNPF-MUI). "The state should ensure that it does not sell Indonesia to foreigners, especially China."

...The ethnic wealth gap has long fed resentment among poorer "pribumi", Indonesia's mostly ethnic-Malay indigenous people. During riots that led to the fall of Suharto in 1998, ethnic-Chinese and Chinese-owned businesses were targeted, and about 1,000 people were killed in the violence.

There has been no blood-letting on that scale since then, but tensions have remained. President Joko Widodo was the subject of a smear campaign on the campaign trail in 2014 that falsely claimed he was a Chinese descendant and a Christian.
These stories shouldn't be overlooked. Social mood is relatively positive now, it is a bear-market rally in social mood. Not only in Indonesia, but much of the world. The odds of a policy or pogrom following these remarks is high. This is not idle conversation. Given the rise of China and its push into the South China Sea, there are also much greater odds of this anti-Chinese sentiment translating into international tensions.
Greg Fealy, an expert on Indonesian Islamic groups from the Australian National University, said GNPF-MUI is developing a national agenda following the Jakarta governor's conviction.

"They are trying to harness that movement to link the Islamist agenda with inequality. It is, in effect, targeting Chinese non-Muslims," he said. "This is all part of a pitched battle in the run-up to 2019."
Where will social mood be in 2019?

ChiNext-Nasdaq Analog

M2 Slows, But Credit Growth Continues

M2 fell in April, yoy growth slowed to 10.5 percent, 3-month annualized growth was 5.3 percent. Although TSF was lower than recent months, it was up 77 percent from April 2016.

Reuters: China's April loans growth highlights debt challenge
China's banks unexpectedly extended more credit in April than in the previous month, though household loans fell in a sign authorities are walking a tight rope as they try to tamp down debt risks without throttling the economy.

Second-Tier Land Sales Cool, Prices at Lows

iFeng: 楼市降温:二线城市土地交易冷清 底价出让成普遍现象
Second-tier urban land cooling

May 11, Qingdao City Land Resources and Housing Authority online auction Chengyang District East Guo Zhuang community 2 transformation of land and high-tech zones unified transfer of five land. In the end, seven to the floor price transactions, of which the profit of the wing of the joint venture 315 million won the Chengyang District East Guo Zhuang community transformation of two commercial and residential land; high-tech zone 5 land was Haier real estate joint Haier special appliances to about 8.46 Billion won.

May 10, Longhu real estate to 2.56 billion yuan of total price, competing in Tianjin Binhai New Area, a commercial and residential land, with a total area of ​​149,200 square meters, the premium rate of less than 1%. Tianjin, the industry said that the original floor price is expected between 18000-19000 yuan / square meter, the final transaction results "beyond our expectations." For the expected and the results of the gap, the source said, "3.31 New Deal" after the introduction of the overall market situation tends to be flat, "the past policy after a period of time, the market is often still relatively busy, but the policy The effect to show faster. "

Also in the May 10, Nanchang land market ushered in a "marathon" auction, as the red valley of the central area of ​​the last piece of land is not sold, this plot attracted from the Shimao, green, Country Garden, R & F, South China City, Blu-ray and other enterprises compete.

But even such a popular plots, the entire auction process can be used to "calm" to describe the first two hours of the price of nearly a hundred rounds, the basic rate of increase in the 10,000 / mu to 50,000 / mu between the floor price From the beginning of the 5242.11 yuan / square meter slowly rose to 6197.37 yuan / square meter, the premium rate of only 18.22%, with the industry before the expected "intense" formed a two days of ice. Eventually after 5 hours of tug of war, R & F to 1.177 billion yuan won the premium rate of 62%, floor price of 8522 yuan / square meter. Although the premium rate of 62% in the recent land market has been relatively high, but in such a stalemate under the fierce battle, this premium rate compared with last year's land market was significantly cooling.
A good time to build inventory:
On the other hand, with the April Ministry of Land and Housing and Urban Construction Department issued a land supply linked to the cycle policy, from the property market regulation supply side force, a number of hot urban residential land supply plan significantly improved, good second quarter of real estate Development investment. This is more abundant funds on hand, you want to further expand the size of the housing prices, it will be a good time to grab land, stock up.


PBoC to Ease Liquidity After Meeting With Financial Regulators

A meeting between the PBoC and financial regulators is getting a lot of attention. The meeting is seen as signaling an easing of deleveraging policy after tight financial conditions hammered the stock, bond and commodity markets.

Reporters are poring over a PBoC statement following a meeting with three regulatory agencies. One sentence getting a lot of attention says: strengthen regulatory policy communication and coordination, advance the agenda.

Text analysis from a reporter:

1. The PBoC is not in charge because the statement said the meeting is "one bank three regulators." If the PBoC was in charge, it would have convened a meeting with three regulators.

2. PBoC open market operations will be appropriately increased, deleveraging policy may be eased

We should pay attention to today's very important three messages, and to combine to see.

1, the central bank for a few days after the zero delivery or net return, the recent return to reverse repurchase, and release the MLF operation tomorrow.

2, the regulatory authorities have issued a letter to the bank to understand the interbank financial market interbank lending, loans, notes and other interest rates.

3, Beijing, a number of banks raised deposit interest rates floating rate, increase in 2-year time deposit rate are relatively large, short-term deposit rates are reduced.

Since April, the oversight push has three stages. 1. CBRC oversight exceeded expectations, stocks and bonds killed 2. the regulatory attitude and the media attitude was loose, the market thinks the oversight "won't be too strict," the stock and bond market rebound; 3. regulators and media trends again more stringent, the market is expected to deteriorate significantly, stocks, bonds, commodities all killed.

Phase 3 "line of three" competitive levers, especially the CBRC investigation of interbank deposits, has begun to affect the bank's balance sheet and income statement. Banks because of lack of money, began to attract depositors term deposits, focusing on 3 months to 2 years.

Obviously the CBRC has already noticed, so the investigation of various interest rates. At the same time, the central bank began to release a positive signal to the market, the money market will not be as tight as before.

Stock market today also quickly respond, turn over the red. [Red is up in China.] With the beginning of the "One Belt One Road" forum, the regulators are talking about politics.

Comprehensive information can be seen that financial deleveraging has entered the fourth stage, there are two characteristics:

1, "One bank three regulators" competitive deleveraging has changed, and really began to cooperate.

2, the current round of deleveraging will always maintain a "moderate" pace, the economy will not have a hard landing.

An important turning point is the first quarter Politburo meeting, and now began to gradually implement.
iFeng: 一行三会这个会议隐藏了多少信号?

Related from SCMP: China’s financial regulators appear determined to tighten rules further, boost oversight
China’s financial regulators are signalling that they will continue to tighten rules and slash leverage, regardless of the short-term pain their moves bring, keeping with President Xi Jinping’s order to prioritise financial security.

The Financial News, a publication under the People’s Bank of China (PBOC), said in a commentary on Monday that market participants should refrain from exaggerating small-market volatility, lest their actions disrupt regulators’ determination to enhance supervision amid a “mild deleveraging” of the marketplace.

“There’s no need to worry about the current monetary policy and regulatory policies,” the commentary said. “Stability remains the key tone.”

Investors, however, heavily sold off their holdings in China’s stock, bond and commodities futures markets in recent weeks, on the increased regulatory efforts and their increasingly hawkish tone.

Related from Reuters: China c.bank queries some banks on MLF demand, to inject funds on Fri - sources

Related from Balding at Bloomberg: Is China Really Deleveraging?
For now, China's government seems willing to accept all this as the price of reducing financial risk. And that's commendable. But as the pain gets worse -- and spreads to state-owned companies, consumers and banks -- the pressure will only build to once again let credit balloon. Economics is the study of tradeoffs. Beijing will soon have to decide whether this one is worth it.