2017-04-23

Will Anti-Money Laundering Rules Finally Break Housing Market?

New housing rules require "know your customer" regulations be fully implemented and all money flowing through official bank channels. This piece argues buying a house will expose home buyers to a detailed investigation of their finances, risking exposure of tax evasion or money laundering, ending the illicit demand that helped fuel home flipping.
iFeng: 楼市这项政策将带来巨变 很多人却没有看懂!
In the future, the property market regulation can also require each homebuyer to provide the first payment source, when the time can check your money from wages or bonuses, or parents to provide assistance, or from the down payment or private lending. You suddenly deposited into their account of large amounts of cash, when the time must account for the source, or even check you have no tax.

When the bank is serious, through the way through the supervision of "know the customer", you are basically placed under the microscope. By then, buying a house is a very risky thing. Well, the Inland Revenue Department will know that you are tax evasion, the central bank know you money laundering, the Commission for Discipline Inspection know you bribe, the bank know you use the first mortgage.

Buy a house before you need to first reflect on three days to see if their money is clean or not, is there a loophole. At that time, if you hate who, to persuade him to buy a house, to the eyes!

To that time, if your funds have the slightest flaws, do you dare to buy it? As for the real estate, it is even more clearly seen.

When the government really want to control the price the real estate speculators have no way to escape!

2017-04-22

Excess Inventory Resolved by 2018

iFeng: 高善文:大量中小城市楼市去库存将2018年基本完成
China's small and medium-sized cities real estate inventory reduction will be completed in 2018, this transition marks the basic normalization of economic operation, and will have a significant impact on the large class of asset markets.

...In 2016 due to the impact of stimulus policies and demand overdraft, real estate inventory consumption is undoubtedly very fast, and unsustainable. But if the inventory reduction maintains the pace of 2015, then by the first half of 2018, the third- and fourth-tier level of "unsatisfactory" inventory will drop to near zero.

...A topic worthy of discussion is that many people believe that since 2016 the focus of the city's real estate market is re-bubble. If the price from the point of view, the situation is undoubtedly the case. However, from the start of the new changes to see the problem, these cities so far there is no rapid accumulation of inventory, which is very worthy of vigilance.

Summary In the late 1980s, after the United States in 2005, and China since 2010, a key feature of the real estate bubble was the rapid expansion of real estate investment and the subsequent accumulation of large inventories. In fact, it is precisely because of the rapid accumulation of inventory and difficult to deal with, in the housing bubble burst, only the formation of a serious bank bad debts, excess capacity and price adjustment.

From this point of view, since the beginning of 2016 in some second-tier cities, housing prices rose rapidly at the same time, the rapid expansion of supply and inventory accumulation is not obvious so far, rising house prices mainly reflects a serious imbalance between supply and demand.

With the start of demand regulation, this imbalance is expected to ease in the short term, but the long-term correction of this imbalance will undoubtedly require a more robust response from the supply level, or a fundamental reversal of the trend of population movements.

S&P 500 Best Case 4pc Ann Return Through 2021

John Hussman puts out this chart of stock valuation (as a percentage of gross value added) and the subsequent 12-year return for stocks. Currently, it forecasts a 12-year return of near 0 percent. If I extrapolate off the 2009 low, I get the S&P 500 at 2750 in 2021, an annualized gain of 4 percent for the next four years. That is the best case scenario. On his chart, the red line would defy history and float sideways and higher until it meets the 2009 peak figure, avoiding a correction or bear market in the interim.

Hussman: The Value of Dry Powder

Yi Gang Says RMB Internationalization Making Steady Progress

人民币走出去有何困难?央行副行长用四个字回答
As the media more, the guests can not answer all the questions one by one. But referred to as the country's long-term strategy of the RMB internationalization process, the original plan to leave the venue of the easy to turn on the Phoenix Finance reporter said, "steady progress", and increased tone twice reiterated the key words. Around the participants heard also kept echoing, "steady progress" these four words suddenly let the atmosphere relaxed and active.

The internationalization of the RMB "steady progress"
It is understood that the promotion of the internationalization of the renminbi as a national strategy, and is a long-term behavior, so "push" is imperative; how to understand "steady" Advancing the process of facing some short-term need to balance the interests, such as maintaining the stability of exports. Therefore, the key of the four words, the focus is to promote, how to promote it? Not radical but steady. But also to show the attitude of the Chinese exchange rate policy is responsible for the country is also responsible for the world, but also to seek and the dollar a coordination and balance.

The biggest resistance in the internationalization of RMB
In addition, the process of internationalization of the RMB is indeed facing some challenges and risks: the dollar is currently strong, because the US economy into a rising cycle, the strong dollar position in the next period of time will be maintained. And promote the process of internationalization of the RMB, the biggest resistance is the strength of the dollar and the dollar hegemony. As the dollar as the world's most powerful currency, then the yuan will certainly promote the hegemony of the dollar challenge. From a different perspective, the Fed will hinder the internationalization of the RMB process.

2017-04-21

Frexit or Status Quo? France Heads to the Polls

Below is the CAC 40, the iShares MSCI France (EWQ), and EWQ divided by SPDR Gold Shares (GLD). Things were worse for France at the last election and voters changed course, choosing Hollande over Sarkozy. If the euro is a better measure of the mood at the moment, then perhaps anything really is possible on Sunday. As for the odds, Le Pen looks expensive at 32 cents (PredictIt). Brexit broke the mold of voters getting cold feet at the last moment. No Western European continental country has broken with the established political order yet.

I watched one of the debates, but otherwise haven't paid close attention to the race. Macron strikes me as the French version of Matteo Renzi, the only attraction he has is his youth. A status-quo agenda in a new suit. Markets are betting he wins. If round two is Le Pen/Melenchon or Fillon/Melenchon, the euro could be in trouble. The risk to financial markets is much larger than from Brexit because the UK was not in the Eurozone.

Lou Jiwei: Household Debt Near 50pc

iFeng: 楼继伟:中国家庭杠杆率已经升至接近50%
Social Security Fund Council Chairman Lou Jiwei April 21 at the annual meeting of the Finance said that China's family leverage has risen to close to 50%, the deleveraging process should not be too fast, some local government debt has been default The Chinese economy will continue to grow, and the Chinese economy's Lewis inflection point has not yet arrived. With the change of the population, the Chinese economy will follow the L-shaped growth trajectory in the long run, and the Chinese economy will follow the L-shaped growth trajectory. The

Chinese government debt ratio to consider non-standard PPP projects and government guidance funds.

When the Fed starts to reduce its balance sheet, the global financial system will face a real stress test.

Chinese Farmers Cut Chicken Growth Time in Half

Baidu: 鸡肉价格大跌背后:白羽鸡生长周期缩短近半 (by way of The Sinocism China Newsletter)
This year, broiler prices continued to fall, the leading profit margins listed companies, many chickens produceres have fallen into a loss.

In fact, over the past decade or so, the relative prices of broilers have been in the doldrums compared to other meat products. And this is behind the role of antibiotics and other reasons, the growth cycle of broilers has been reduced by nearly half; broiler production has long been highly industrialized.
Also, attention KFC and McDonald's, you are headed for another public relations disaster:
Against the use of antibiotics in the world continued to heat up. According to Reuters, KFC plans to limit the supply of antibiotic broilers and plans to completely ban human antibiotics by the end of 2018. As early as August 2016, McDonald's announced that from 2017 onwards, the US market McDonald's will only purchase non-human antibiotics using chicken products.

But Kentucky Fried Chicken and McDonald's policy only in the United States, does not include China. McDonald's previously responded that the use of antibiotics in the course of animal treatment is a must. McDonald's requires Chinese suppliers to use antibiotics in strict compliance with national laws and regulations.
Far be it from me to tell them how to run their business (and I don't know the cost differential, maybe it is high), but Chinese are more health conscious and still expect better from foreign brands. Fast food can't always make a claim to better health, but selling China's "first antibiotic free chickens" at restaurants across China would be great marketing.

2017-04-20

Small and Medium Bank Bankruptcies Possible

I had to pull up the cached version of this article because it no longer comes up on iFeng's site. The headline reads: Dongbei Securities: Banking Industry in Crisis, These Banks Could Go Bankrupt. The full version is below in case the link stops working.
iFeng: 东北宏观:银行业危险了 这些银行将会破产
There is also a the same story at JRJ.com, currently working: 东北宏观:银行业危险了 这些银行将会破产

The report is an interview with Liu Chengran:
Shanghai Legal Information Financial Services Limited partner, vice president of Financial Supervision Research Institute. He has worked in the People's Bank of China, the banking supervision system, has up to 15 years of experience in supervision, focusing on banking regulatory statistics and legal compliance research, participated in various types of bank good standards and regulatory statistical inspection more than 30 times.
Q1: What additional regulatory documents should we pay attention to during the year?

Liu: may introduce a series of regulatory documents, we believe that the core of the management of credit management methods, off-balance sheet business management regulations, financial management approach (guidance has been released first, this approach is already waiting for the introduction of new financial management in the same The new regulations on the floor to come out), the rest is the central bank to lead the management of the guidance, regulate the financial industry Document No. 127 will be revised version of the text. Promote the class of documents, one is the Trust Company Ordinance, one is the commercial bank bankruptcy regulations should pay attention.
Q2: Will banks go bankrupt?

Liu: In the past we think that the probability of bankruptcy is small, but the deposit insurance after three years of efforts, allowing small banks to bankruptcy (the largest risk is agricultural banks), the possible outbreak of regional financial risks, do not rule out this phenomenon. The next three to five years the probability of bankruptcy of commercial banks is very large, in fact, there are already micro-bankruptcy, such as the use of absorption merger.
Discussing why WMP have such high yields, but shouldn't, Liu says it is a risk and maturity mismatch:
If there is no active management of the bank capacity, it will not have a high yield, so theoretically financial management should not have a high yield. But why is there now? Because the docking non-standard, which became a financial deposit, become just against, because the bank to eat poor, do not want to give excess returns, it is not the same as the public offering of funds as the nature of the commission. But the docking of non-standard will be mismatched, including the mismatch of the period, the risk of mismatch, and the bank on the "off-balance sheet" did not mention the risk of provision, that is, the ability to take risks.
Q4: 30 trillion in WMP will go where? Just do not grow or shrink? Will it be old and new? What kind of model will the future WMP use?

Liu: WMPs will shrink. Old and new cut is there, but will give the rectification period, not always indefinitely old and new cut off, but it will not suddenly back, otherwise the capital gap is difficult to make up, will slowly back to the table, such as matured do not renew, and then slowly back, so be sure to shrink.

The future of bank finance is likely to fund, such as the formation of financial subsidiaries in the form of strict information disclosure, to net worth, the buyer at their own risk.
Q6: Does the central bank and the CBRC agree? Before the 19th NPC Why do not you want to do so before dragging it? Is there a target for deleveraging?

Liu: now do not check will lead to 19th after the more unstable, because it can not drag down. There is no quantitative indicators, now is the risk of exposure, lack of capital to supplement the capital. The central bank's perspective is to ensure that every quarter end there is not a big liquidity risk, the central bank will not consider bond risk too much. Now is to do stress tests, the banking system can return to the loan.
And the final question:
Q7: Which banks are relatively more dangerous and more safe?

Liu: state-owned big line is relatively more secure, because the operation has been relatively stable, the business is relatively more standardized, and large but not down. In addition, the big banks have begun to clean up and rectify, especially the underlying assets of the screening. Small and medium-sized banks, especially the risk of agricultural firms, do not rule out the phenomenon of individual bankruptcy.


Finally: New Homes Sales Fall 20pc or More in 50 Cities

In the first half of April, new home sales are tumbling in as many as 50 cities according to recent data:
In April the country part of the city property market regulation effect is obvious. Yesterday, the latest report shows that April 1 - 15, 50 typical cities of new commercial housing turnover of 12.86 million square meters, down 4% mtm, down 22% yoy. An industry insider expects the second half of April will continue to decline, the monthly sales volume of 50 cities or will fall nearly 10% mtm.
Declines are happening in all tiers:
April 1 - 15, first-,second-, third-tier 50 typical cities of new commercial housing transaction area growth rate of -12%, -2% and -4% mtm respectively. Three types of cities have appeared in varying degrees of the chain fell, one of the first tier cities fell more, and the Guangzhou market began to have a great relationship between the cooling. While the second-tier cities and third-tier cities there is a clear phenomenon of market differentiation, some market transactions in the rise, some began to decline.
Price follows volume. Also, as I have mentioned, there was panic buying in late March, which will make the mtm drop appear larger in the second half of April
Yan Yue Jin that the second half of March (March 16 - March 31) sales definitely saw some panic, the volume was greater than the first half.
iFeng: 4月上半场50典型城市新房成交同比下滑超2成

Liquidity Squeeze for Stocks?

Bloomberg: China Sage Tips 'Destruction' of Leverage Trades as Stocks Slide
Tightening in the money markets as China seeks to reduce leverage saw the bond market sell off at the end of last year. Now it’s equities’ turn. After barely moving for most of March as traders chased gains in Hong Kong, mainland-traded shares have slumped this week as a regulatory crackdown spooks investors. The ChiNext small-cap index, seen as a barometer for Chinese stock-market sentiment, has fallen to near a 19-month low.

“For now, it pays to stay cautious -- I don’t think the bearish trend will stop here,” Hong said. “We’re going to see the destruction of trades that rely on very high leverage.”

Beijing Real Estate Tightens Again

In order to close loopholes, the Beijing government is further restricting existing home sales transactions.
Second, the real estate development enterprises in the sale of housing, real estate brokerage institutions in the provision of second - hand housing transactions brokerage services, the parties should be asked to buy housing transactions in the form of bank transfer to pay, and must use the seller and the buyer 's bank account, Sale funds, stock exchange transaction funds to monitor the special account for funds to pay ; if a refund occurs, should be the original payment method, the funds returned to the seller and the buyer's bank account.

...Third, the real estate development enterprises, real estate brokerage agencies in the sale of housing, providing brokerage services, have to bear the obligation to identify suspicious transactions and responsibilities. The suspicious transaction shall be reported to the administrative department of anti - money laundering or the public security organ.
iFeng: 北京住建委:二手房购房款应以银行转账方式支付

Real estate agent fees on existing home sales are also falling in Beijing as the market cools and competition for business picks up:
Since the "3.17" since the New Deal, Beijing second - hand housing market transactions quickly frozen, intermediary fees began to loose. Recently, the public Ms. Lee told the Beijing Chinese Commercial News reporter, she was prepared to love my house to buy the house, the agency fee only 1%, the reason is that I love my family and chain customers compete for customers, given a surprisingly low commission. The industry believes that 2.7% of the current market default interface fee standards, but with rising house prices, this standard is not suitable for the current status of the industry. Therefore, the intermediary fee should be adjusted on the voice has been continuous, which intermediary fees a price of the highest voice, but in accordance with the total price of housing sub-file charges are relatively reasonable.
iFeng: 北京二手房中介费松动 由默认2.7%跳水至1%

How Globalization Ends in the West

The developed world cannot absorb the number of people and the amount of capital that wants to enter. If they do not have restrictions on the movement of people and capital, their own citizens are priced out as their nation turns into a resort for wealthy foreigners. Population controls are already starting, but immigration into the West may become near impossible within a generation and many foreigners currently living in the West may even be deported if they fail to assimilate.

More surprising is how the West is adopting policies seen in many smaller countries and investment/tourism hot spots, such as rules against foreigners owning property. The West has about 12 percent of global population today and that share is falling as Africa's population is expected to quadruple this century, from 1 to 4 billion. Meanwhile, 2.5 billion Indians and Chinese will eventually be able to compete with Europeans and Americans for their homes and schools.

Buying restrictions in cities such as Vancouver and Toronto is caused by 1X buying power. As China becomes a middle income country and India's development accelerates, this will grow to 10X or more. Maybe in the short-term pressure will alleviate because China's housing bubble will burst, either via home prices or a currency collapse. A similar issue with Japan existed in the 1980s, but the Japanese housing bubble did burst and Japan's population peaked at a fraction of the West's. Japan's impact also came when it reached economic parity with the West. Even if China suffers a massive financial crisis, China and India will eventually exert economic power that is at least 10 and possibly 20 times more powerful than Japan in the 1980s.

ZeroHedge: Ontario Finally Cracks Down On Toronto Housing Bubble: Launches 15% Foreign Buyer Tax
Almost a year after Vancouver, ground zero of Canada's housing bubble inflated with Chinese "hot money", implemented a foreign buyer tax, and just weeks after Toronto's housing bubble officially went nuts as prices soared 33% Y/Y, prompting economists such as David Rosenberg to demand a government intervention, Ontario's Liberal government has finally cracked down on foreign buyers and according to CBC will join Vancouver in slapping a 15% tax on home purchases by non-resident foreigners, while expanding the province's existing rent control system to cover all tenants.
Up next will be cultural controls. France is probably a good example of the types of policy environment that will develop across the West in the coming decades.

2017-04-19

More on the 3 Billion Yuan Fake WMP

Following up on yesterday's 3 Billion Yuan Fake WMP at Beijing Branch of Minsheng Bank

Global Times: China Minsheng Bank says it will assist in fraud probe
Material provided by the investors showed the products were "issued by China Minsheng Bank," and carried the branch bank's official deposit stamp. However, the bank previously told one investor that it was a personal act of Zhang.

The bank should shoulder legal accountability for these investors despite doubts about the authenticity of the stamp, as investors do not have the obligation to examine the stamp, Wang Fu, a lawyer with Beijing Zhenbang Law Firm, told the Global Times, adding that the case reflects negligence in management.

Wang said it is common for employees of Chinese banks to illegally cooperate with other private financial institutions, in order to sell WMPs to the bank's customers.
Shanghai Daily: Minsheng exec in fake bank bills probe
Minsheng Banking Corp finds itself involved in a 3 billion yuan (US$436 million) fraud case as a branch chief of the lender in Beijing allegedly issued false bank acceptance bills and later secure funds from individual investors to cover up the misdeed.

...Zhang allegedly helped a corporate client disguise commercial acceptance bills as bank acceptance bills by using a false seal of the bank. The bills were issued by the client to a number of companies, which later discovered the bills were fake, Caixin said.

In order to cover up the fact that the fake bills were not able to be cashed by the bank, Zhang later sold 3 billion yuan of unauthorized wealth-management products to the bank’s private customers to get funds for the client to repay the bills.

China Eases Capital Controls

The easing of capital controls is said to follow a boost in confidence, but more likely the currency controls were eased because they were hurting confidence. Whether they work or not, capital controls are a sign of weakness, not strength.

Reuters: China relaxes some cross-border capital curbs as yuan steadies: sources
With less incentive for capital flight and the economy on steadier footing, China's foreign exchange reserves have clawed back above the closely watched $3 trillion level.

Premier Li Keqiang said on Tuesday that market confidence in the yuan has significantly improved, Xinhua news agency reported.

As of last week, the People's Bank of China (PBOC) is no longer demanding that banks match outflows with equal inflows, the sources said.

..."This particular move won't help on real M&A deals...It's like the brakes aren't totally locked up any more, but the foot is still on the brake pedal pretty hard," said Burch.
iFeng: 媒体:央行适当放松跨境资金管理 收付限制不严格执行
A foreign-line trader believes that regulation may also be due to the implementation of the challenges or business complaints, because the foreign exchange situation is still quite tight, capital outflow control is still very strict.
SCMP: China eases yuan outflow controls in sign of recovered confidence
The People’s Bank of China in early January required commercial banks to stop processing cross-border yuan payments unless the banks could show at the end of every month that the amount of outbound yuan matched the sum that came in, but that restriction was scrapped from last Wednesday, said mainland banking sources who were briefed on the policy change.

After the policy relaxation, banks can now freely process outbound yuan payment and remittance requests from their corporate and individual clients, a move that is expected to help boost liquidity in offshore yuan markets, especially Hong Kong.

2017-04-18

Fixed Asset Investment Rises in March

The year-on-year March increase in fixed asset investment was 9.5 percent. Private FAI climbed 8.6 percent.

NBS: 2017年1-3月份全国固定资产投资(不含农户)增长9.2%
NBS: 2017年1-3月份民间固定资产投资增长7.7%

Real Estate Investment Rises 9.4pc in March


This chart from the NBS report says everything. Real estate sector optimism is at its highest in a year.

NBS: 2017年1-3月份全国房地产开发投资和销售情况

Chinese Home Price Rise Accelerates in March

NBS reports home prices increased 0.7 percent in the month of March, an acceleration from prior months. The first-tier and 12 hot cities I have followed in the past have slowed and only accounted for 14 percent of the increase. Last year the two sometimes accounted for well over 50 percent of the national increase.

Existing prices rose even faster, at a 0.8 percent pace. Some wide divergences were seen as restrictions hit new housing much harder than existing housing. In Beijing, new home prices rose 0.4 percent, existing homes up 2.2 percent. Xiamen new homes 1.8 percent, existing up 4.4 percent.


NBS: 2017年3月份70个大中城市住宅销售价格变动情况

3 Billion Yuan Fake WMP at Beijing Branch of Minsheng Bank

As long as credit is expanding, fraudulent lending activities can be papered over. Once the credit cycle peaks and reverses, high-risk, highly-leveraged, and fraudulent activities are revealed. The latest is in Beijing, where a 3 billion yuan fake WMP was supposedly sold at the Hangtian Qiao branch of Minsheng bank. Investors came to collect their funds after the WMP matured, but the bank refused to pay. A few hours later, the bank was filled with investors looking for their money and the branch shut for the day. Police are investigating and investors have formed an investors' rights group. It is believed the bank (or rather employees at the bank misdirecting bank capital) may have tapped private banking customers to cover a funding shortage created by their activities. The bank official(s) may have forged bank seals to make unapproved loans.

The investors are all VIP customers and most are members of the Jingzuan Golf Club. This club may be created by the bank or has a very close relationship because a year ago they hosted a golf tournament with this group. See this story from Leshi sports April 2016: 2016民生银行航天桥支行鲸钻高尔夫俱乐部开杆赛

Regarding the fake WMP:
In response to the above risk events, Minsheng Bank has set up a working group to assist the public security departments to investigate and strive to find out the facts as soon as possible, to maximize the protection of funds, to properly resolve the demands of all parties and bear the relevant responsibilities. In addition, Minsheng Bank said the daily operation of the Hangtian Qiao branch is normal.
Caixin speculates management of the branch may have used the 3 billion yuan to cover an off-balance sheet shortfall as part of aggressive lending schemes. This would make it similar to fraud cases that exploded in late 2016.

Bloomberg: China’s Newest Problem With Fakes Threatens Bond Market Pain
Forged seals, fake letters, and counterfeit documents. They’re all part of China’s recent spate of fraud coming to light in the country’s $3 trillion corporate debt market amid a rout that has analysts predicting a record number of defaults in 2017.

As it becomes harder for Chinese companies to issue new notes to repay maturing debt, expect more scandals to come -- and to worsen the bond market’s already-precipitous downturn.

“We expect to see more of this type of behavior given the increasingly problematic environment for refinancing in the domestic bond market," said Charles Macgregor, head of emerging markets at Lucror Analytics in Singapore. "Unfortunately, these frauds may be difficult to detect, as documentation and seals may appear authentic given collusion between various parties.”

...Within two weeks in December, two fraud cases emerged that shook the bond market by threatening to undermine confidence in the ability to collect on the enormous amount of credit that’s built up in the nation. China Guangfa Bank Co. said documents and seals in its name had been forged for use on a letter to guarantee bond payments. Separately, Sealand Securities Co. said former employees conducted as much as 16.5 billion yuan ($2.4 billion) of bond trading with a forged official seal, or chop.

The alleged forged stamps at Sealand, which it has said are being investigated by the police, were on so-called entrusted holdings, a widely used tool to boost leverage in China’s debt market. Under such structures, investors legally skirt rules by entrusting their note holdings to a third party and agreeing to buy them back later. That frees up funds on their books that they can use to purchase more bonds.
Caixin describes this as an internal bank control "black hole." Sealand Securities fraud case invovled 20 financial institutions at the end of 2016.
The case involves a number of rediscount banks, one at the end of hundreds of private banking customers, although the case, but exposed a major bank internal control black hole.

...At the end of 2016, Guocheng Securities and more than 20 financial institutions, the Agricultural Bank Henan Branch and Ping An Trust, Jiangyin Bank and Hengfeng Bank, Guangdong Development Bank and Fortune, Zhejiang property insurance, etc., are "fake seals" Disputes, triggering market shocks.
Police in the Minsheng case have one branch executive in custody:
Financial reporter from a number of close to the Minsheng Bank and regulators confirmed that the suspect, Minsheng Bank Hangtian Qiao branch Zhang Ying has been the Beijing Haidian District Public Security Economic Investigation Department control, his home and office were searched by police; Hangtian Qiao branch vice president Xiao Ye "lost", has not been brought to justice. It is not clear whether Minsheng Bank has dealt with higher-level people internally.
How many more fraud cases exist in China's 30 trillion yuan WMP market? With the CBRC targeting fraudulent activities and the PBoC working to restrain credit growth, we may soon find out.

iFeng: 民生银行爆30亿理财大案 私银用户上门讨说法(多图)
Caixin: 独家∣民生银行30亿理财“飞单”案发 竟涉票据“萝卜章”

The Anglosphere Tightens Visa Rules

BBC: Australia to introduce stricter rules on working visas
The 457 visa programme is used mainly to hire foreign workers in the restaurant, IT and medical industries - the majority came from India, the UK and China.

But PM Malcolm Turnbull said it will be abolished to prioritise the recruitment of Australian nationals.

Critics of 457 said Australian workers lost out to foreign counterparts.

In its place, two new temporary visas will carry additional requirements and draw from a smaller list of eligible professions.

"The new system will be manifestly, rigorously, resolutely conducted in the national interest," Mr Turnbull said on Tuesday.
Reuters: Trump to seek changes in visa program to encourage hiring Americans
The order he will sign on Tuesday will call for "the strict enforcement of all laws governing entry into the United States of labor from abroad for the stated purpose of creating higher wages and higher employment rates for workers in the United States," one of the senior officials said.

It will call on the departments of Labor, Justice, Homeland Security and State to take action to crack down on what the official called "fraud and abuse" in the U.S. immigration system to protect American workers.

The order will call on those four federal departments to propose reforms to ensure H-1B visas are awarded to the most skilled or highest paid applicant.

H-1B visas are intended for foreign nationals in "specialty" occupations that generally require higher education, which according to U.S. Citizenship and Immigration Services (USCIS) includes, but is not limited to, scientists, engineers or computer programmers. The government uses a lottery to award 65,000 visas every year and randomly distributes another 20,000 to graduate student workers.
And in the UK, the push for independence gains speed with a snap election.

Guardian: Theresa May calls for UK general election on 8 June
In a surprise statement outside Downing Street on Tuesday morning, the prime minister claimed that opposition parties were jeopardising her government’s preparations for Brexit.

“We need a general election and we need one now,” she said. “I have only recently and reluctantly come to this conclusion but now I have concluded it is the only way to guarantee certainty for the years ahead.”

May claimed the decision she would put to voters in the election, the announcement of which was a tightly guarded secret known only by her closest aides, would be all about “leadership”.

The prime minister may have been swayed by recent polls that placed the Conservatives 21 points ahead of Labour despite a policy blitz by Jeremy Corbyn’s party. She will hope to boost a slim working majority of 17 in order to help pass both domestic and Brexit-linked legislation.

Western Support For Turkey Weakens

Back in August 2015, I first started looking at Turkey as a potential geopolitical hotspot in Geopolitical Forecasting Through Technical Analysis: Is Turkey About to Destabilize the Middle East?

In the next year, there was a failed military coup (or a false flag designed to consolidate power?). Donald Trump won the 2016 Presidential Election in the United States, threatening to revamp the NATO alliance and improve relations with Russia. These changes appear less likely three months into his presidency, but as long as they remain a possibility, Turkey is among the nations likely to suffer the most.

Turkey hasn't helped itself either. In 2017, relations with the West further deteriorated after Turkish President Erdogan's ministers were denied permission to campaign in Europe. He had previously used migrant flows as a stick against Europe, and this escalated when he threatened widespread Islamic Jihad against Europeans:
“If Europe continues this way, no European in any part of the world can walk safely on the streets,” Mr Erdogan told journalists in Ankara.
This weekend, he won wider powers in a referendum vote that was criticized by the Western establishment even before claims of voting irregularities:
What's in the new constitution?
The president will have a five-year tenure, for a maximum of two terms
The president will be able to directly appoint top public officials, including ministers and one or several vice-presidents
The job of prime minister will be scrapped
The president will have power to intervene in the judiciary, which Mr Erdogan has accused of being influenced by Fethullah Gulen, the Pennsylvania-based preacher he blames for the failed coup in July
The president will decide whether or not impose a state of emergency

Mr Erdogan says the changes are needed to address Turkey's security challenges after last July's attempted coup, and to avoid the fragile coalition governments of the past.
The new system, he argues, will resemble those in France and the US and will bring calm in a time of turmoil marked by a Kurdish insurgency, Islamist militancy and conflict in neighbouring Syria, which has led to a huge refugee influx.

Critics of the changes fear the move will make the president's position too powerful, arguing that it amounts to one-man rule, without the checks and balances of other presidential systems such as those in France and the US.
The Russians see an opening: Is America's Alliance with Turkey Doomed?
The sixty-year period between the Crimean War of 1853–56 and the July Crisis of 1914 resembles the era that opened with the admission of Turkey into NATO in 1952 and appears to be ending today. As the Anglo-Ottoman case warns, alliances formed in response to an external threat between powers that view each other as cultural “others” may deteriorate after the threat diminishes. Suffering from such alliance fatigue, erstwhile partners become clashing rivals.

...American dislike of Erdogan’s behavior is reminiscent of the British abhorrence of Abdülhamid II, who defended the rights of Muslims as their spiritual leader. These developments have relegated Turkey from a praiseworthy defender of Western civilization and democracy to an “other” representing Islam and autocracy. Conversely, according to Turkish public perception, the United States has become a wolf in sheep’s clothing: a superpower silently plotting to partition Turkey.

...The lesson for the United States is clear: unless Turkey feels desperate, it will not ally with non-Western powers, including Russia. Some Turkish politicians are today feeling desperate and have favored rapprochement with Russia, Iran and China. Erdo?an, in 2013, publicly expressed interest in transitioning from a Dialogue Partner of the Shanghai Cooperation Organization to a full member. But even if Turkey changes sides, it will not last long unless its traditional allies abandon it permanently, which would be extremely unlikely.

The U.S.-Turkey alliance, originally forged because of a common external threat, has become exceedingly fragile since the fall of the Soviet Union. Both states criticize each other rather than sweep aside their differences. More troublingly, they harbor mutual mistrust, which colors their perceptions of each other. While it is difficult to predict the future of the U.S.-Turkey alliance, it has clearly suffered from severe alliance fatigue and needs extensive restoration. Resuscitating the relationship will demand investment and concessions from both parties.
There is a lot of history in the long piece. The main reason for the break with the West is the post-Cold War shift to a clash of civilizations. Turkey is becoming more Islamic and Erdogan will accelerate the end of Turkish secularism. At the same time, rising European leaders are shifting their view on Islamic immigration and relations with Turkey. It isn't hard to imagine a chain of events that could eventually lead to mass repatriation of Turks from Germany. It isn't very probable, but a path that did not exist before is now visible. Meanwhile, the latest power grab also has the Western establishment souring on Erdogan: TURKEY’S VOTE MAKES ERDOĞAN EFFECTIVELY A DICTATOR

The chart on Turkey remains the same, a massive head-and-shoulders pattern. While everyone is focused on politics, few are talking about Erdogan's horrible economic policies. Although political volatility is rising, if TUR collapses, it will most likely be the result of a debt and currency crisis. That will then provide the fuel for a potential breakdown in relations with the West.

Banking Regulator Targets Interbank Market

郭树清掀“监管风暴” 银行同业人士:坐等“那一刀”
"Last week, the bank felt particularly turbulent, the CBRC documents came one after another." A large city firms with the Department of the same side of the assets of investment pool Chen pool (a pseudonym) on the first financial reporter lamented. A brokerage researcher also complained - the speed of his writing can not catch the speed of the documents.

In particular, the "Notice on the Prevention and Control of Banking Risk" (No. 6) and the Notice on the Special Arrangement of Supervision, Arbitrage and Concession Arbitrage in the Banking Industry (No. 46) Express means the same industry. The former clearly pointed out that "the supervision of interbank deposit orders faster growth, interbank deposit accounted for a higher proportion of interbank debt banks, reasonable control of interbank deposit and other industry financing scale"; the latter is listed at least five kinds of phenomena, part of the same industry "Regulatory arbitrage" and "peanut arbitrage" two hats.

"The line is waiting for regulators for the same industry deposit issued a formal regulatory directive, after the rumors of interbank deposits may be included in the same industry debt assessment." Chen Chi told reporters. The proportion of interbank liabilities in the total liabilities of the bank shall not exceed 33%, and the interbank deposit does not constitute the same industry liability and is not subject to supervision. At the same time, the interbank deposit period is often shorter, and the bank's long-term investment in the end of the formation of a period of mismatch. Coupled with some of the same industry funds through the purchase of interbank wealth into the bond market, last year's debt market turmoil exacerbated the systemic financial risks.

"At present, many banks are still issuing a large number of interbank deposits, used to make a large pool of funds, but the future supervision of the trend, the circulation rate will likely down, after all, the subject of the same industry financial circulation has been shrinkage this year." But Chen pool and Many practitioners still believe that the problem caused by the heavy volume in the same industry is the phenomenon rather than the nature, there are signs of "demonization".
Xinhua: CBRC takes measures to weigh on modes of interbank liabilities
“The liability department has convened several meetings specific to this circular and what we are concerned about is liquidity management. After all, regulators have included wealth management and investment with negotiable certificates of deposit (NCD) into idle arbitrage. It is foreseeable that issuance scale of NCDs will surely decline. The regulator wants to slash the scale of off-balance-sheet wealth management products (WMPs) but don’t bear liabilities through NCD. In my opinion, whether the regulator should cut reserve requirement ratio (RRR) in next step?” A head from asset and liabilities management department of a bank told a journalist of Securities Times.

Nasdaq: China tells banks to come clean on misdemeanours
China's banking regulator has told lenders to conduct checks on improper trading, incentives, innovation and charges, according to a document seen by Reuters. The move is the latest in a flurry of orders from the regulator after Guo Shuqing took the helm of the China Banking Regulatory Commission (CBRC) in February.

2017-04-17

Record Steel Output in March

Reuters: China March steel output climbs to highest on record
The growing production as Chinese mills bid to profit from prices that soared in 2016 and into this year are undermining the government's years-long push to cut capacity to make the steel industry more efficient and tackle smog.

Beijing's crackdown has mainly targeted low-grade products like rebar, used mostly for construction.

Rising inventory levels and recent falls in the prices, though, suggest output has been growing faster than China's actual demand.

The most-active steel rebar futures prices were down 1.15 percent at 2,918 yuan ($423.90) per tonne at 0243 GMT, on track for a 7.8 percent drop in April, their worst monthly performance since May last year.

2017-04-16

Chinese Housing Speculators Finally Thwarted?

Chinese cities are implementing strict selling restrictions that ban transactions for 2 to 5 years, with other cities following up. This latest wave of restrictions has industry watchers expecting the froth will finally come out of the market. Assuming speculators can't engage in "lease-to-buy" or sell 5 year "options to buy" to renters, or find some other way to recoup capital under existing regulations.
Xiamen: new housing to obtain a certificate of property after 2 years to be listed on the transaction

Chengdu: high-end apartments purchased by the housing within 5 years shall not be listed on the transfer

Fuzhou: the new real estate license to obtain less than 2 years, shall not be listed transactions, shall not apply for the transfer of notarization procedures

Qingdao: Housing obtained real estate license after 2 years before the listing of transactions

Guangzhou: new purchase of housing to obtain real estate license over 2 years before the transfer

Changle (Fujian): obtain real estate license under two years, not listed transactions

Changzhou: new purchase over 2 years before the listing of transactions

Huizhou: new purchase of commercial housing over 3 years before the transfer

Zhuhai: new purchase within 3 years to prohibit the transfer of transactions

Dongguan: upgrade purchase, over 2 years before trading

Yangzhou: property rights under two years without trading

Hangzhou: enterprises to buy regional housing to be 3 years before the listing of transactions

Hainan province: new buyers to obtain real estate license two years after the transfer
Cities around the "hot cities" are also tightening buying restrictions:
Sale can greatly curb the real estate speculation, which is regarded as "cut off the property market liquidity," the ruthless strokes. And now, the property market also showed a "city circle + recognition room credit + limited sales" of the new features of regulation:

To "city circle", the city group in the form of a comprehensive closure of real estate

For example: in Beijing, Tianjin, the Pearl River Delta, the Yangtze River Delta and other regions, there are in addition to the central city regulation and upgrading, the surrounding more than ten cities (counties, districts) are also released, upgrade the situation of purchase. This is equivalent to the hot city around the city to build a road wall, close fried real estate.
The loan data from March suggests the buying and selling restrictions are driving prices higher, although we'll find out soon enough when data is released this week. At some point, legitimate buyers will start expecting prices to come down and the air will quickly be let out of the market, as it has in the past. At this point, there's only hope:
In the real estate market, there is no bubble burst. The recent control policies emerge in an endless stream, so that the market realized that the government "regulation of ammunition" in the "ammunition" is also sufficient, and the determination of the current round of control is also great, which can play a real shock to the real estate speculators. After a spring with no peace in the housing market, everyone is looking forward to a quiet summer.

iFeng: “王炸”祭出炒房客被逼入绝境 房价要降了?

Bad Debts Piling Up in Mining Sector, Retail

According to bank annual reports for 2016, bad debts stabilized. The Chinese central bank's gusher of liquidity in 2016 sparked a global commodities rally, certainly it was able to stabilize debts. Some sectors continued to deteriorate though. One is retail, which is suffering the same online competition as brick-and-mortar in the USA.
Data show that the major banks of non-performing loans are still concentrated in the wholesale and retail trade, manufacturing and other industries with the overall economic situation more closely related , but the two industries last year, non-performing loans increased significantly more than 2015 in the wholesale and retail trade. Manufacturing nonperforming loans accounted for the proportion of all corporate loans also generally lower than the beginning of last year.
The sector seeing the worst deterioration, doubly worse given the commodities rally in 2016, was mining:
It is noteworthy that the mining industry to increase the risk of loan exposure. In addition to the lack of industry distribution data of the Bank, the remaining 10 bank mining industry, the overall increase in non-performing loans over 50%, Minsheng, Pingan, Shanghai Pudong Development, bad debts increased more than 200%.

Changes in the industry's nonperforming loan data also affect the mutual credit strategy with banks. Data show that, in addition to the lack of data, the remaining 10 banks wholesale and retail trade, manufacturing and mining loans balance dropped at the start of the year, of which only Minsheng and Pingan continue to increase manufacturing sector loans.
iFeng: 不良贷款新动向:采矿业风险加速暴露 长三角地区回暖

2017-04-14

Has Peter Schiff Turned Even More Bearish?

Background: Socionomics Alert: Social Mood and Facial Hair

Panic Buying: Home Lending 78pc of Loans in March

Money supply is growing at a slower pace than in 2016, falling to 10.6 percent yoy growth in March. The montly increase in M2 was 1.06 percent, down from 1.52 percent in March 2016.

The 3-month annualized rate of growth is 13.3 percent, down from 16.2 percent in March 2016.
Although fiat money supply growth slowed, credit growth was robust and centered on the housing market. This is likely fear driven buying, fear that Beijing's stricter housing rules will spread across the country.
Reuters: China's shadow banking rebounds in March, household loans surge despite curbs
Loans to households surged to 797.7 billion yuan in March, according to Reuters calculations using PBOC data, accounting for 78 percent of all new loans in the month.

That was much higher than either January or February and even the 50 percent of new loans in 2016.
Caixin: Are ‘Secured Homeowner Loans’ Fueling Real Estate Frenzy?
One of China’s largest lenders plans to continue issuing so-called “secured homeowner loans” to consumers who use their homes as collateral, despite a debate over whether the practice is fueling a property market frenzy.
China CITIC Bank Deputy Governor Fang Heying said the ongoing commitment to these niche loans complements the bank’s push for more consumer and personal business credit activity.

“We will allocate more assets toward issuing personal credit products in 2017,” Fang told a reporter on the sidelines of a China Banking Regulatory Commission (CBRC) meeting Thursday. “We will continue issuing homeowner secured loans, a credit product that has garnered a good reputation and brand popularity.”
Households are propping up credit growth.

Reuters: China March new yuan loans 1.02 trln yuan, less than expected
A surge in household lending in March also added to worries about whether authorities will be able to get the frenzied property market under control, even as cities roll out increasingly stringent curbs on home buying.

The central bank has raised interest rates on money market instruments and special short- and mid-term loans several times in recent months, most recently in mid-March, to contain debt risks and discourage speculation, though it is treading cautiously to avoid hurting economic growth.

Outstanding bank loans grew at the slowest pace since July 2002 in March at 12.4 percent, while M2 money supply growth hit a more than 6-month low, reflecting the moderately tighter policy stance by the People's Bank of China (PBOC).

M2 growth and modest appreciation in the yuan reduced the reserve coverage of M2 to below 13 percent. There is now 53 yuan of M2 for every $1 of forex reserves.

2017-04-13

Bullish on India

Hindustan Times: 2012 vs 2016: NASA images show how India looks like from space at night

Socionomics Alert: Social Mood and Facial Hair

Notice the dip in the 1930s....a big dip in 1973...and the decline heading into 2008...

Source: University Graduate Facial Hair Styles 1898-2008 [OC]
Raw data (Google docs)

I looked at the Google Trends for beard. There doesn't seem to be a lot of signal in the past, but notice the search volume recently spiked in December 2015. The stock market made its last intermediate-term bottom in January 2016. It seems to spike around December each of the past three years. Also, while the U.S. searches for beard peaked in 2015, the worldwide search made a new high in December 2016.

2017-04-12

Credit Growth Is Real Estate Growth

Credit growth is already slowing and the government is cracking down hard on the real estate industry. Who will borrow in 2017?

Caixin: China’s Big Four Banks Binge on Mortgages

11 Cities Implement Sales Restrictions

The 11 cities are Beijing, Xiamen, Hangzhou, Fuzhou, Qingdao, Guangzhou, Qidong, Zhuhai, Changzhou, Huizhou, and the latest, Yangzhou.

The new rules require a holding period before selling a newly purchased home. Many home flippers use high interest short-term loans and flipping becomes unprofitable as holding periods reach a year or more. Rules are different for each type of property. Beijing has one of the strictest rules on companies that buy residential housing, requiring a three-year holding period.

iFeng: 楼市“限售”扩至11城 北京暂未跟进个人住房限售

Reuters: Chinese cities restrict home sales by buyers to fight speculation

Chinese Cities Tighten Buying Restrictions

Chengdu, Chengde, Dongguan, Zhuhai and Yangzhou. Most of the regulations are similar to existing regulations elsewhere. Chengde restricts non-residents to one home, and requires a 50 percent downpayment for it. Zhuhai requires 5 years of tax or social insurance payments to quality for home buying.

Caijing: 成都限购政策再升级!取得产权证满3年才能转让
Caijing: 河北承德新政:非本地限购1套首付5成 增加土地供应
Caijing: 东莞外地人买房至少需1年社保 房产证满2年才能交易
Caijing: 珠海楼市调控升级:非本市居民购房需5年个税或社保
Caijing: 扬州楼市升级调控:产权证未满2年 不得上市交易

2017-04-11

CPI Still in Deflation, PPI Decelerates

The CPI spent its second consecutive month in deflation. As was the case last year, if you strip out the Spring Festival price bump, consumer prices are in deflation.
More important for the global economy is the PPI. Chinese producer price inflation is set to end next month if the current trend holds. Price data from the first 10 days of the month shows the trend holding.

NBS: 2017年3月份居民消费价格同比上涨0.9%
NBS: 2017年3月份工业生产者出厂价格同比上涨7.6%

Bye-Bye Dollars

Here's some news that confirms Jeffery Snider's take on eurodollars and their dearth in global markets.

The Baltic Course: Deutsche Bank stops providing dollar clearing service in Estonia
Germany's leading bank, Deutsche Bank, has decided to suspend correspondent banking services to Estonian banks and is cutting off access to dollar-clearing facilities for them, while previously it had announced it would do the same with Latvian banks, writes LETA/BNS.

170407_deutsche_bank.jpg
"Deutsche Bank's policy regarding Estonia and Latvia does not differ," a member of Versobank, Margus Normak, told on Monday evening. According to Normak, even if one big provider disappears, Versobank will continue offering dollar payments through other correspondent banks.

After Deutsche Bank decided not to offer the service anymore, making dollar payments has become more uncomfortable because there is now no very large contra agent that is able to deliver payments everywhere, Normak said. "Price changes will come later," he added.

...Making U.S. dollar payments in Estonia and Latvia may become extremely difficult if Deutsche Bank should stop handling dollar settlements here, Aivar Paul, head of prevention of money laundering at LHV Pank, said then. "It will definitely not happen at the same price, it will definitely not happen as quickly, and I'm not ruling out that it will not be possible to conduct all transactions then," he added.

Alhambra: How We Got Here: Ignoring Even The Mathematics of Ideology When It Becomes Uncomfortable

The Source of the 2016 Global Economic Recovery and Commodities Rally

Look at the start of 2016.

ZH: How China Is Keeping Its Financial System From Collapsing, In One Chart

The yuan benefited from a weaker U.S. dollar, but that may be end in April. On the other side of the ledger, there's a lot more yuan that wants to escape. Solve for USDCNY.

The 4 Automakers Who Will Rule China

At least according to Guotai Junan analysts.

SCMP: Four brands to dominate in China’s automotive oligopoly
“The market share of four domestic car makers will surge from the current 45 per cent to 60 per cent or above, with both prices and volume rising together,” they said.
The four companies are Great Wall Motor Co. based in Henan province, Volvo’s owner Geely Automobile Holdings, SAIC Motor Corp in Shanghai, and Honda’s Chinese partner Guangzhou Automobile Group, according to their forecast.

China Still Turning the Screws on Real Estate

Reuters: China banking regulator issues risk control guidelines
China's banking regulator said on Monday it has issued guidelines on risk control for lenders, as authorities ramp up efforts to contain risks from a rapid build-up in debt. The move is the latest in a slew of measures taken by China's regulators to reduce leverage and risk in the country's banks.

...China's banking regulator said on Monday it has issued guidelines on risk control for lenders, as authorities ramp up efforts to contain risks from a rapid build-up in debt. The move is the latest in a slew of measures taken by China's regulators to reduce leverage and risk in the country's banks.
iFeng: 银监会:防范房地产风险 分类实施房地产信贷调控
"Guidance" clearly pointed out that the banking financial institutions to firmly grasp the housing housing properties, classification control, due to the city policy, the implementation of differentiated housing credit policy. It is strictly forbidden to inflow into the real estate market, crack down on "down payment" and other acts, and effectively curb the hot city real estate bubble.

Meanwhile in Beijing, 15 real estate agencies and websites are facing a crackdown on their websites for using banned language such as "school district home." Companies include major agencies such as Lianjia, as well as real estate websites from Sohu, Tencent and Netease among other familiar names.
By 24 o'clock tomorrow, if the site there are "appreciation potential unlimited", "commercial and residential", "school district room" and other words, will be thorough investigation. This morning, the city live in the Committee, the Municipal Trade and Industry Bureau, City Network Office jointly interviewed the chain of home network, I love my home network, security and other 15 listings issued information website, the site issued false information, illegal agents real estate Brokerage business and other illegal acts to regulate, requiring the site to be removed before 24 o'clock in the morning there is a clear source of illegal information.
iFeng: 北京三部门约谈15家房产信息网站 违规信息全撤下

2017-04-10

Rising Capital Outflow Backlog

SCMP: China urges foreign firms to make ‘joint efforts’ to control flow of cash out the country
China’s foreign exchange regulator has asked for cooperation from multinationals, including Sony, BMW, Daimler, Shell, Pfizer, IBM and Visa, to manage and control the flow of capital out the country.

The request was made public in a report on the State Administration of Foreign Exchange’s website after the regulator’s chief addressed a delegation of foreign businesses in China at a symposium in Beijing on Wednesday.

“A stable and good foreign exchange market is in line with the common interests of regulators and market players and it requires joint efforts from all sides,” Pan Gongsheng was quoted as saying.
Bearish.

2017-04-09

Neutral Monetary Policy and Shandong Debt Implosions

I covered the exploding Shandong debt situation here two week ago: Shandong Bad Debt Daisy Chains Exploding, Loanshark City Falls on Hard Times. One feature was the credit guarantees blowing up as one default takes down multiple divisions of a company, setting off daisy-chains of mutual credit guarantees across an entire local economy. Supposedly this crisis passed with a debt payment on Friday, but more are coming so long as the central bank doesn't pump credit into the economy.

Now the SCMP is on the case: Debt distress in Shandong province illustrates risks of interlocked credit guarantees
At the centre of the financing circle was Qixing Group, whose management had now effectively been taken over by Xiwang Group under the direct instruction of the local government in Zouping county, Xinhua reported.

On Wednesday, Qixing was reported to have defaulted on a bank repayment worth up to seven billion yuan (US$1 billion), causing a plunge in the shares of Xiwang Foodstuffs, the Shenzhen-listed arm of Xiwang Group.

Investors were selling their shares in Xiwang Foodstuffs in a panic because its parent is the biggest guarantee provider for Qixing. In the event that Qixing were to fail, Xiwang would potentially be on the hook for 2.9 billion yuan in outstanding debt.

...In addition to Xiwang Foodstuffs, Xiwang Group also controls Xiwang Steel and Xiwang Property Holdings, both listed in Hong Kong.

Another important issue was the size of the cross-guarantee web, Chung said.

Local media group Shandong Business News reported that more than 10 billion yuan worth of loans were extended to Qixing and several other local companies, which provided guarantees for each other.

...Meanwhile, investors are dumping the bonds issued by China Hongqiao Group and Weiqiao Textile, two other listed companies based in Zouping.

It is not known if these two firms are involved in the credit chain. Short-selling institution Emerson Analytics earlier issued a report claiming Hongqiao inflated its profit, sparking a sell-off in the stock.

2017-04-07

Chinese FX Reserves Inch Higher in March


Marketwatch: China's forex reserves rise for 2nd straight month
The reserves ended March at $3.009 trillion, up $3.96 billion from a month earlier and following a gain of $6.92 billion in February, the People's Bank of China reported Friday. Economists polled by The Wall Street Journal had expected a $10 billion rise in March.

The recovery suggests that after 16 months of selling foreign exchange to prop up the yuan, the central bank largely halted its intervention in March, said Julian Evans-Pritchard of Capital Economics--though it could feel pressure to resume if the dollar strengthens again, setting off yuan bearishness and spurring capital outflows.
This bounces was also seen in 2016. I am still of the opinion that the yuan is in the eye of a hurricane because I expect further U.S. dollar appreciation. The yuan has tracked with the euro for two years after the August 2015 devaluation.

2017-04-06

Chinese Govt Wants More Land Supply

The Chinese government wants localities to regulate the housing market via land supply. In cities with low inventory, they want more, and vice versa. Of the 70 cities in the NBS home price survey, 45 may increase supply.

The core of this policy is to inventory the digestion cycle grade, short cycle to expand the land for a long period of time to stop for the land. "From the supply and demand to start, this is the right medicine. The next step to see the local government execution, see the Ministry of Construction accountability." There are real estate sector so evaluation.

According to the latest statistics of the Institute, at least 45 cities in the country's 70 key cities in the inventory digestion cycle in 12 months (including 12 months), these cities need at least "increase the land supply", including Nanjing, etc. 6 cities "not only to significantly increase the supply of land, but also to speed up the rhythm of the land."
iFeng: 两部委发话!至少45个城市要增加土地供应

Property Speculators Start Flipping Cemetery Plots

With the government cracking down on property speculation, some house flippers are turning to tomb flipping, causing cities to begin tightening cemetery plot regulations.

Caixin: China Real Estate Restrictions Reach the Afterlife
The government in Suzhou has told local funeral parlors to turn away out-of-towners wanting to buy plots in the public cemeteries, according to a report in the official Suzhou Daily. A local official told the paper the step was necessary to ensure that local residents could spend their afterlife in Suzhou.

The restriction on out-of-town buyers — apparently a first in China — comes as dozens of cities in China in recent weeks have rolled out measures requiring bigger down payments on second-home purchases in a bid to curb soaring prices.

...Even with the ban, Suzhou won’t find cemetery plots cheap. Already, burial space in Suzhou costs more than double the average price of a similar amount of space in a second-hand house, about 50,000 yuan ($7.255) versus 23,000 yuan, according to fang.com, which provides property market data.
iFeng reports that cemetary plots have increase 1000 percent in the past 5 years.

比房价还凶:5年涨10倍 炒房者杀入墓地市场
"The past 5 years, Suzhou cemetery prices rose at least 10 times. In 2016, the average price in Suzhou cemeteries was about 30,000 yuan per square meter, the highest up to more than 100,000." A local cemetery intermediary said. At the same time, they are facing resource constraints. "The price has been pushed up by speculators, more than half of the customers I've contacted are from Shanghai and Zhejiang, which exacerbated the difficulty of getting a tomb in Suzhou."

Not only in Suzhou, in the country a number of large and medium cities, cemetery prices all the way up. Reporters survey found that the price of many cemeteries: an area of ​​about 1 square meters in Shanghai, the average price is 60,000 yuan, up to 300,000 yuan; in Tianjin, the minimum 10,000 yuan, up to 200,000 yuan; in Guangzhou, mostly 10,000 yuan to 120,000 yuan.

"In Beijing, Changping cemetery price is generally 30,000 yuan per square meter, the average price of six rings is 60,000 yuan, better ones more than 100,000." A Beijing cemetery intermediary said cemetery prices are like home prices, thecloser to the city center, the higher the price.

Fushi Park is China's largest funeral service provider, in Shanghai, Henan, Shandong, Liaoning, Anhui and other provinces have cemetery cemetery. Results show that in 2016 Fung Shou Park sold a total of 12,486 graves, the sale of a wide range of graves, the most expensive custom art tomb, the average price reached 338,000 yuan, the average price of finished art is also more than 100,000 yuan.

Hot city cemetery prices, prompting many people to buy the tombs. Hebei Sanhe Lingshan pagoda cemetery more than 50 kilometers from Beijing, the cemetery official said that the cemetery since 2013 began to sell, the current family of the deceased in Beijing accounted for 70 percent of the purchase. The average price of the tomb in the 50,000 yuan, according to the location of the tomb, the highest priced tombstone is 80,000 yuan, compared with Beijing has a price advantage.

Guangdong Province, Qingyuan City, Yi Yuan Cemetery less than two hours by car from the city of Guangzhou, cemetery has been sold nearly ten thousand cemetery plots, Guangzhou residents accounted for 70 percent of purchases. Cemetery plot price is only 20,000 to 20,000 yuan, much lower than the average price of more than 100,000 yuan in Guangzhou cemeteries.
In addition to regular demand, speculators and cemetery operators are driving up prices:
In addition to limited land resources and other reasons, some human factors is pushing the cemetery prices behind the "black hand".

- Tombs. "Cemetery operators have a variety of methods to raise the tomb price, the most common is the use of approval policy strict situation, through the 'cover plate reluctant to sell' and other means to create a tight cemetery situation, take the opportunity to raise the cemetery price," a Shanghai resident engaged in funeral industry said.

Some of the tombs of low-cost enterprises operating a large number of burial sites, but the development of slow, while selling side to sell. To a large operating cemetery, for example, the total planning area of ​​700 acres of cemetery, but seven or eight years only developed a third. And the average price of its tomb from 28,400 yuan in 2012 rose to 60,300 yuan in 2016, or more than 200 percent.

- Excessive. According to the Ministry of Civil Affairs issued on the implementation of the funeral management regulations in the interpretation of several specific issues, buried ashes of the single, double coffin burial covers an area of ​​not more than 1 square meters. However, the reporter found that in some places exceeded the grave is not uncommon, the price is often very high.

Putian in Fujian Putian Baoshan tomb, the reporter saw most of the tomb area is about two or three square meters, of which a row of graves and even twenty or thirty square meters. Chang'an District, Xi'an Fengqi Shannan District has recently been exposed to a total of 175 super-standard tombs, illegal sales of 151, of which an area of ​​about 25 square meters of the standard Tomb of the price of more than 900,000 yuan.

- Tomb Flipping. Industry insiders, although some places have clearly purchased the cemetery to real name system, but due to lax supervision, some enterprises and individuals to drill the policy of the loopholes fried tombs.

Reporters in Taobao, go to the network search found that some sellers transfer cemetery, the price ranges from 10,000 yuan to several hundred-thousand yuan. Go to the market a seller called "Qing Xiling near the existing three cemeteries need to transfer, certificate complete, can transfer." Reporters dial the phone, the seller said a few years ago to buy three cemetery, investment used, "when the price of each cemetery in 9,000 yuan, and now a sold 60,000 yuan."

Reporters survey found that some operating cemetery to get the low cost, selling high prices, resulting in profiteering. To Fushou Park, for example, in 2016 to achieve operating income of 1.268 billion yuan, 448 million yuan of profits, of which the cemetery service gross margin as high as 81%. Sanhe Lingshan pagoda cemetery parent company Fu Cheng shares (600965) 2016's earnings show that the funeral industry gross profit of up to 84.84%.

2017-04-04

More on Xiongan New Area

SCMP: What happens to a Chinese backwater when it becomes centre of president’s futuristic dream city?
For residents of the sleepy county of Xiong in smoggy Hebei province, Saturday’s announcement by China’s state news agency that it would become the centre of a new special economic zone, handpicked by President Xi Jinping, was a bolt out of the blue.

Xiongxian rocketed overnight from a forgotten backwater spot on China’s economic map to the darling of mainland investors after Xinhua said the Xiongan New Area, covering three rural counties – Xiong, Rongcheng and Anxin – would be as important for China in the future as Shenzhen in the 1980s and Shanghai Pudong in the 1990s.

....Luxury vehicles with Beijing or Tianjin number plates filled the dusty streets of Xiongxian, causing traffic jams at main intersections and parking beside small noodle shops and donkey burger stalls.

At a restaurant selling a bowl of noodles for eight yuan, the boss said business had boomed after the government’s announcement. “Many of my new customers came from Beijing, trying to speculate in property here,” he said.

Straits Times: Xiongan is China's new special economic zone
The removal of non-capital functions from Beijing is part of a greater strategy to integrate the development of Beijing, Tianjin and Hebei for a better economic structure, cleaner environment and improved public services.

With that strategy, the authorities intend to transform the region into a new growth pole as China's economy slows.

The decision to set up the Xiongan New Area is a key stroke in solving urban woes and creating new growth, said a commentary carried by the website of the People's Daily, the flagship newspaper of the Chinese Communist Party.

The move will also explore a new model of optimised development in densely populated areas and restructure the urban layout in the Beijing-Tianjin-Hebei region, according to the circular.

The Xiongan New Area is 100 sq km in area now but will eventually be expanded to 2,000 sq km.

Fake News Leads to Scandal

Two articles from the same paper, on the same day. Guess which one was the headline story?

LA Times: Hit-and-run accidents fell after California gave those here illegally driver’s licenses, study finds
LA Times: The number of pedestrians, cyclists and drivers killed in L.A. traffic rose sharply in 2016

You have to dig into the stories and the study to find out they're basing the claim on statistical analysis. More people would have died if the drivers licenses weren't issued. Although even that claim doesn't quite hold up:

Andrew Gelman: No evidence that providing driver’s licenses to unauthorized immigrants in California decreases traffic safety
So, I’m with them when they say that the data show no evidence of negative consequence from the law allowing driver’s licenses for unauthorized immigrants. But I’d need more evidence to be convinced of their causal claims, in particular on the hit and runs. That seems like more of a reach.
Is the LA Times fake news? It's propaganda, it shows you what it wants you to see. We can only find out the truth by digging into the stories and looking at the evidence ourselves. Completely false stories are sometimes pushed if they fit the Narrative. Real news is sometimes deep-sixed if it doesn't. Regular news is filtered to create a narrative.

Most people live in a world that is not reality, but is manufactured by the editors and producers of media content. The assault on "Fake News" after the November election is merely the media's belated realization that the Internet allows anyone to craft a narrative and create alternative stories. There is no fake news or it is all fake news, because all are fabricating a narrative.

This fracturing creating by the Internet is timed perfectly with negative social mood, which causes the public to desire separation. The public is divided and increasingly looking for a fight. The mainstream media is also subject to public mood. Instead of reforming and recommitting themselves to objective journalism, they have redoubled their efforts in becoming a niche media outlet serving a shrinking slice of the public. It ends up chasing stories that blow up in their faces.

Currently, there's zero evidence of any collusion between Trump and Russia, yet the mainstream media runs it non-stop because it wants to harm Trump. When actual wrongdoing is uncovered, that this whole enterprise may the work of high level Obama administration officials who used the nation's intelligence apparatus to spy on political opponents, the media sits on the story and hopes it goes away. As it did with the Lewinsky story two decades ago.

Now, the greatest political scandal in modern history is starting to be exposed. If the latest evidence is true, it is likely the Obama Administration was also using the IRS and other agencies to punish political opponents,as was alleged previously. Ironically, this would likely have never been uncovered if the media wasn't running its Russia stories non-stop, forcing the Trump Administration and GOP Congress off of their legislative agenda and on to finding out where all the leaked information was coming from.

Daily Caller: Former US Attorney: Susan Rice Ordered Spy Agencies To Produce ‘Detailed Spreadsheets’ Involving Trump
“What was produced by the intelligence community at the request of Ms. Rice were detailed spreadsheets of intercepted phone calls with unmasked Trump associates in perfectly legal conversations with individuals,” diGenova told The Daily Caller News Foundation Investigative Group Monday.

“The overheard conversations involved no illegal activity by anybody of the Trump associates, or anyone they were speaking with,” diGenova said. “In short, the only apparent illegal activity was the unmasking of the people in the calls.”

Other official sources with direct knowledge and who requested anonymity confirmed to TheDCNF diGenova’s description of surveillance reports Rice ordered one year before the 2016 presidential election.
The country is in the mood for a fight. It is in the mood for a major political scandal of "impeachment" level proportions. It is going to get its scandal, but not the one it expected.