2017-01-31

Young People Still Flock to First-Tier Cities

This article in the top of the finance section at iFeng discusses why some second-tier cities have seen prices rise, but third- and fourth-tier cities are ignored by young workers. The verdict: third- and fourth-tier cities are boring.

iFeng: 为什么北上广的人赶不走 三四线城市却多空房?
First, large cities have a multi-city life. Compared to the big cities, small city life is very simple, even a look to the end of the way of life, which people have a feeling of suffocation, once the young people accustomed to a large city of diversified lifestyles, he It is difficult to adapt to the tedious life of small cities. Theoretically, only a population of more than five million to support from a performance of Western music as the main concert hall. Perhaps in the big city so that everyone accustomed to the bar, nightclubs, concert halls, museums, exhibition halls in the small city is almost hard to find luxury goods, lifestyle unbearable barren.

To give the most simple example, when the financial crisis in 2008, when many young people working in the eastern coastal areas choose to return home, but after a while but have come back, the reason is actually very simple to come back. Boys will say that in the small city of my cell phone with 4G signals are not, the girls will say, I even do a hair will not find a hair shop. Indeed, is such a way of life so that we understand more, perhaps not because the small city is not good, but already have a habit of life, not used to monotonous.

Second, large cities have more possibilities. As a result of population concentration and concentration, many industries and opportunities arise, some people have and Hange said, in his home city, basically can choose the way of life is civil servants, teachers, individual business, may be searched The city can not find any decent business or passionate work. However, a person's development needs are more opportunities and possibilities, in the small cities in front of the barren opportunities, many people will choose to leave.

Third, big cities have a more enlightened culture. China is a human society, this is a normal thing, we are big to the country, Han brother to study, the law school wall hanging on the Qing Dynasty Penalty a plaque, which says, "Tian Li country human", visible in the country Level will still be human as a very important thing. That small to say, whether it is family or business, are everywhere in the world. However, small cities due to lack of change, tend to pay more attention to human, more contempt rules. In the big cities may be as long as you act in accordance with the rules, basically can be easily done, but if in a small city, most likely not to find someone you will be difficult.

2017-01-27

PBoC Blockchain Coming

Caixin: PBOC Set to Be First to Issue Digital Bills
The People’s Bank of China (PBOC) completed a successful trial run of a digital bank acceptance exchange, moving closer to becoming the first central bank in the world to research and test its own digital currency.

According to sources from the PBOC, the central bank on Dec. 15 completed the trial in transactions and settlements of bank acceptance bills using a digital currency it developed, supported by blockchain technology – a secure digital ledger that records online transactions.

...When the system is ready, the central bank’s pilot digital bank acceptance exchange platform will be connected with the existing Shanghai Commercial Paper Exchange to form a national platform for bank bill transactions, said a person close to the central bank.
The utopian vision of the blockchain is rapid, low cost transactions outside of the banking system, ending the modern monetary nightmare of bank-created credit money. The dystopian vision is a revived push for centralized control of the Chinese economy. A big reason why central planning fails is the lack of information, but if the government has access to all economic transactions in real-time, someone will get the bright idea to try it again. Additionally, the blockchain could replace the trouble caused by the black market, with the troubled caused by a black government that has total control and knowledge of all your economic activity.

Pop Goes the Housing Bubbles Fueled by Overseas Chinese

Bloomberg: China’s Army of Global Homebuyers Is Suddenly Short on Cash
In London, Chinese citizens who clamored to purchase flats at the city’s tallest apartment tower three months ago are now struggling to transfer their down payments. In Silicon Valley, Keller Williams Realty says inquiries from China have slumped since the start of the year. And in Sydney, developers are facing “big problems” as Chinese buyers pull back, according to consultancy firm Basis Point.

“Everything changed’’ as it became more difficult to send money offshore, said Coco Tan, a broker associate at Keller Williams in Cupertino, California.

2017-01-26

Jack Ma: Next 3 to 5 Years More Difficult Than We Imagine

Update: SCMP has English coverage here Hard times ahead for China’s economy, says Alibaba tycoon
iFeng: 马云:未来三到五年 经济形势会超乎想象的艰难
First, Trump is very smart, the next six months are extremely critical

I think we can not underestimate Trump, he was elected president of the United States is not a coincidence, I think is a necessity. Today's world situation, the US economic situation, the birth of such a president, to believe that such a big country in the United States, we should believe that the American people, I believe they elected such a president, to give Trump a little time, there will be transformation. We have a very good exchange this time, explored the Sino-US relations, discussed the development of enterprises, after all, we are all businessmen in business. In short, we talked a lot about economic issues, the views of Sino-US trade, and how to develop the economy.

I am optimistic about the overall Sino-US trade relations, but there will be contradictions, there may be future trade conflicts between China and the United States, if not dealt with properly, may lead to a larger trade war. But if the trade conflict, both sides are not good, bad for China, the United States is not good, the global economy is not a good thing. But I want to tell you, Trump is still relatively open, listening to some of my views and views. I think the world is looking forward to Trump, his speech style, style of work, but with the past, we imagine the politicians do not like it, he saw a lot of problems in the United States today, but he hopes to use different ways to solve these problems. However, he is a businessman, his action is still very strong, the result is very strong. But we feel his routine is not the same as every other leader in the world.

I think the next six months is extremely critical.
He talks about Davos next, before moving on to China's economy:
Third, the transformation and upgrading must be slowed down

In addition, we look at how China's economy today? I have said many times, the Chinese economy over the next three to five years or less, I am not optimistic, and I think the economic situation will be more difficult than we imagined. This is normal, three decades of rapid development can not be sustained. I used to talk about an example, the growth of people, before the age of 20, there may be a long, each year 8% and 9% growth, but after the age of 20, each year is not more than ten centimeters long May, and long must be the head, the quality, not the number is long. China's economic growth at this time there is a moderate slowdown, about 7%, but my view is still too fast. Such a large volume, there is a 4%, 5% growth is also quite scary. So to maintain the quality of the growth of China's economy is a sign of health. Do not think 6% slow down, and today the world today, no country in such a large second-largest economy to maintain more than 6% growth, I think it is quite remarkable.

...Now we must transform and upgrade the country, the transformation and upgrading is equivalent to turning the corner when the speed of the turn must be slow, I think transformation and upgrading must be slowed down.
Fourth, business needs to do business rather than investment promotion, anti-corruption creates a good business environment

We are now fighting corruption, we appear to be short-term pain. China's economy in the past two to three decades of rapid development, basically to the county party secretary, to the party secretary, to the municipal party committee secretary at this level to comprehensively promote. But now it seems that many places, due to the extensive economic development of the past three decades, many anti-corruption, the government-driven economic slowdown, the short term appears to be pain, but the long term, for all of us Zhejiang , For all Chinese enterprises to establish a good business environment. In fact, we particularly hate bribery, with relationships, with a variety of money, resulting in social injustice, I believe that today's price, in ten years later we have the opportunity to engage in the country's economy. I ran more countries, I listen to more things, more people contact, I feel more and more deep, China is Fortunately, at this time a strong anti-corruption. Many countries actually very terrible, we Taobao sellers to other countries, one hundred mobile phones into the time, only 87, there are 13 customs removed, and very terrible, those corrupt, all the way In the past, I did not mention the names of these countries, whose names were all very big, but the corruption was more serious than anyone imagined. Corruption in these countries would certainly cost the country's long-term economy a great deal.
Fifth, when the storms rise up, the strength of the captain is extremely critical

The good news is that everyone is the same, no one is good, the United States is not good, Europe is not good, the world is not good, the economy is not good in three to five years, to tell you a bad news, China is not good, this time, the most important thing is the spirit of entrepreneurs. I feel that when the economic situation is not good, is to consider the key moment of good entrepreneurial spirit.

SAFE Targets Outflows, Will Examine FX Management and Cross Border Payments

Reuters: China unveils fresh steps to curb capital outflows, spur inflows
The State Administration of Foreign Exchange (SAFE) said it will strengthen monitoring of cross-border capital flows as it looks to promote "healthy development" of the foreign exchange market.

China will "establish a sound macro-prudential management framework under the capital flow management system, requiring banks and enterprises to comply with existing foreign exchange regulations", the regulator said in a statement on its website.

"Real and legitimate cross-border payments and remittances will not be affected," it added.
All cross-border payments are legitimate in the eyes of the parties involved.

This bit is noteworthy:
Firms who want to remit foreign exchange profits equivalent or above $50,000 out of China must submit resolutions from board of directors on profit distribution, alongside tax documents and audited financial statements, according to the new rules.

The SAFE said it will standardise management of trade-related foreign exchange business and said exporters should collect their foreign exchange payments in a timely way.

Under the new rules, domestic firms must use proceeds from their exports to repay foreign exchange loans, rather than buying foreign exchange from banks.
That's a red flag. Chinese exporters can hoard dollars by leaving them offshore, as was revealed back in 2011 and 2012 when the currency first dipped offshore: Chinese hoard dollars
China's largest privately run shoemaker, Aokang, exports 40 million pairs of shoes to the United States and Europe each year. Previously, the firm would swap U.S. dollars for yuan on the same day they were received, but now, "[We] keep as much as possible, we even wish we could keep all of it."

In the wake of the PBOC's interest rate cuts, demand for U.S. dollars has increased as the interest rate spread between the two currencies narrows.

The CEO of Aokang used to ignore the renminbi exchange rate because it was in an appreciating trend versus the U.S. dollar, but now he views it online everyday. Other executives check the exchange rate changes daily.

Hoarding of U.S. dollars is helped by an April 16 change in financial regulation, when SAFE repealed the regulation that compelled businesses and individuals to exchange their U.S. dollar remittances for renminbi.

...A Dongguan shoe exporter has the same strategy as Aokang. Before, they would immediately exchange USD, EUR and JPY for CNY, but now they consider their business needs and the exchange rate before changing money. They slowly increased their retention rate of U.S. dollars from nothing to a current 40%.
How stable is the Chinese yuan if the government doesn't want exporters sitting on their USD holdings? Also, declaring what is "legitimate" and squeezing exporters will have an unintended side effect of creating new dollar demand. The dollars sitting offshore are temporary currency speculation. Once the yuan becomes cheap enough, or depreciation is though to be ending, these dollar hoarders will pile back into onshore yuan. Instead, some businesses will now find legitimate needs, maybe commercial real estate, and park those dollars in a more permanent form.

Some of the other goals point to opening the market though. From the iFeng coverage: 外管局:今年银行考核增加外汇管理和跨境收付款差额
Wang Chunying pointed out that the first to enrich the trading tools, improve the open, delivery and other trading mechanisms to expand the functions of derivative products management enterprise exchange rate risk, increase the type of foreign exchange options products, the introduction of foreign exchange futures.

He also pointed out that should increase the transaction body, to support domestic individuals to participate in the domestic foreign exchange market. And expand the two-way open to expand the participation of foreign institutions in the domestic market, to support domestic banks to participate in overseas markets, and promote the formation of the RMB exchange rate at home and abroad.

2017-01-24

Chinese Developers Share Risk, Costs of Land Sales

Chinese developers are sharing the load on land sales, in an effort to spread costs, risks, and keep prices from rising.

Caijing: 全国土地市场深度降温 房企联合拿地分摊风险
A development business people told the "Economic Information Daily" reporter, most companies do not want to appear this kind of joint competition in the way. However, the current situation, on the one hand the land market is less than demand, if the business will compete between their bidding will lead to fierce competition, easy to raise land prices, increase land costs; , Fierce competition to push up land prices is likely to lead to plots hit the government limit the highest price and standard; In addition, the joint development can also share the risk. To participate in the consortium to take, to reduce the game between enterprises, from multi-input to win.

First Hike in 6 Years: PBoC Follows U.S. Interest Rates Higher

Malay Mail: China central bank hikes interest rates on MLFs, bond prices fall
hina’s central bank today raised the interest rate on a key liquidity tool, the medium-term lending facility (MLF), as it rolled over maturing loans, triggering a fall in prices of benchmark bond futures.

The People’s Bank of China (PBOC) pushed up the interest rate for one-year MLFs by 10 basis points, taking it to 3.1 per cent, it said in a statement. It also increased the rate on the six-month tenor by 10 basis points to 2.95 per cent.

- See more at: http://www.themalaymailonline.com/money/article/china-central-bank-hikes-interest-rates-on-mlfs-bond-prices-fall#sthash.9QQG8tdX.dpuf
iFeng has CITIC's take on it: 中信:政策利率近六年以来首次上调 四大原因揭秘

The note says the last increase was in July 2011, also amid a peaking/slowing real estate market. Real estate rage arrived in October.

It says the 1-year MLF is becoming a benchmark rate for policy following loan and deposit rate liberalization.

The four main reasons for the hike are:

1. the economic recovery provides room to hike
2. market rates are rising and the PBoC is playing catch-up (did you think central banks set the interest rate?)
3. deleveraging and control the real estate bubble
4. Federal Reserve hiking, challenge of widening spreads

For the bond market, the policy interest rate for the first time in nearly six years, coupled with taking into account the deleveraging is still on the road, the Fed is also expected to gradually raise interest rates, bond market inevitably into the technical bear market.

China Will Devalue the Yuan

My view isn't that China should devalue the yuan, but that a depreciating yuan is inevitable because China doesn't want a depression. If China is willing to accept a contraction in GDP growth, rising unemployment and widespread bankruptcies, then of course the best option is to have a recession and deflation. Punish those who took on too much debt, too much risk and bad decisions (jail/execute them if they are your political rivals?), rather than socializing losses across the economy. Let companies go bankrupt and clean up the mess, clean the balance sheets and restart the business cycle.

Instead, China refuses to allow any clean up and piles more inflation on top of more inflation. The devaluation of the yuan already took place and is still ongoing, from 2008 to 2017. There was a brief interlude when they thought to slow credit growth a smidgen and it led to fear of a real estate collapse. What followed was a stock market bubble and then another real estate bubble.

Chinese outflows are driven by the overvaluation of the Chinese yuan and Chinese assets. As long as the yuan and Chinese assets (namely housing) are overvalued, there will be outflows. The target value for Chinese reserves is zero if the yuan-denominated assets remain overvalued.

China can let asset prices collapse, causing a collapse in debt and money supply, balancing out the economy. Or China can let inflation rip inside of China, north of 10 percent per annum for a few years, such that wages catch up with home prices (an example of two prices out of whack because of credit inflation). Or China can find a way to reform and grow the private economy, something it has failed to do for nearly 20 years.

Or China can push the US to reform the global monetary system. My view is based on the global economy and U.S. dollar cycle. China is not an island unto itself. It is struggling with U.S. dollar deflation today. Layering on socionomic analysis, the chart of the U.S. dollar says there will be more dollar appreciation (deflation?) and President Trump's economic agenda could create it overseas via trade, tax and energy policy. If DXY gets to 120, EURUSD will be 85 cents and USDCNY will be 8 without any yuan-specific depreciation.

Reuters: Chinese banks told to issue dollar-denominated debt-sources
China's central bank is said to have encouraged banks to issue more offshore US dollar bonds at a time of steep declines in the country's foreign reserves, raising supply prospects for the sector.

The People's Bank of China (PBoC) encouraged banks at a meeting late last month to issue more US dollar bonds, according to two market sources. The guidance was verbal and no specific measures were mentioned, they said.

"PBoC's stance was quite supportive (on the issuance of US dollar bonds)," said one of the sources. "In heeding the call, banks will probably issue more US dollar bonds at a faster pace this year."
China needs more U.S. dollar credit to meet dollar demand, but the U.S. isn't providing it. The eurodollar market is in contraction as Jeffrey Snider of Alhambra has explained. Trump's economic agenda will further shrink the flow of dollars to China.

2017-01-23

China Tightens Internet Controls

AP: China cracks down on tools used to get around web filters
China is beefing up a campaign to root out services that circumvent the government's internet censorship with a 14-month-long "clean-up" of the internet industry.

The Ministry of Industry and Information Technology said in a directive that it forbids the operation of virtual private networks (VPNs) or leased lines that allow users and businesses to access blocked overseas websites without government permission.
It sounds like it is aimed at domestic companies offering services on the sly to Chinese customers. Unclear if this will be a sustained policy, or another instance of a temporary crackdown followed by a return to normal.

Into the Jaws of the Bear: More RE Restrictions, More Dollar Borrowing

Even though the Chinese real estate market peaked and is beginning to turn lower, Chinese cities are still piling on the buying and credit restrictions. Shenzhen, Jinan and Chongqing are the latest. In other news, Chinese borrowers are increasing their issuance of U.S. dollar bonds because of Chinese credit controls, including state borrowers.

China Daily: House sales fall, more tightening in pipeline
Following tougher house-buying rules to contain speculation, property sales in China's large cities dropped at the beginning of 2017. Analysts said house prices nationwide could drop slightly this year as more tightening measures were in the pipeline.
Here's the latest from iFeng: 多地楼市调控升级:热点区域成交大幅降温
Shenzhen is limiting the price of homes applying for a pre-sale license:
Shenzhen Municipal Planning and Land Commission recently in the "pre-sale price of commercial housing and business apartments operating rules," clearly stated that the proposed pre-sale project is the first time to apply for pre-sale, the apartment reported the average price shall not be significantly higher than the surrounding similar Units in the sales price of the sale of the project, the surrounding non-similar items in the sale of reference, you can refer to similar second-hand housing prices around.
Chongqing is strictly enforcing similar controls:
Chongqing City Land and Housing Bureau recently issued "on the strengthening of the main city commercial housing project pre-sale program management notice," demanding strict implementation of the pre-sale price declaration, the declaration of price review and price changes for the record requirements.
Jinan implement more general buying restrictions, such as limiting people from buying another home if they already own two.

Also: Capital curbs push Chinese firms to risky, costly dollar bonds
China's efforts to support its currency and cool its hot property market are encouraging more Chinese companies, including many state firms, to take on extra cost and risk by raising foreign-currency bonds in Hong Kong and other offshore locations.

Despite the yuan's nearly 7 percent slump against the dollar in 2016, Chinese companies including state-owned Bank of China (601988.SS) raised a record $111 billion in offshore dollar bonds, according to data from Dealogic, up from $88 billion in 2015.

...The list includes issuers who need dollars to pay for overseas acquisitions and deals but are unable to use their yuan after China tightened its grip on capital outflows last year to support the currency.

"It's getting increasingly difficult to move money out," said Shen Weizheng, fund manager at Ivy Capital, which invests in stocks and bonds in Hong Kong. "So for Chinese companies eager to invest overseas, the dollar bond market becomes an easier funding avenue."
The last two times the U.S. dollar peaked, it caused a collapse in emerging market asset prices and commodity prices, followed by a downturn in the U.S. In the early 1980s, Latin American debt and oil prices collapsed. Then there as the 1987 stock market crash, a real estate downturn and the Savings & Loan Crisis. In the 1990s, the Asian Crisis, oil prices down to $8 a barrel, followed by the bursting of the dotcom bubble and a real estate downturn in the United States. Using leverage to build a short-USD, long assets position amid a U.S. dollar rally is likely to end badly.

Bloomberg: Good Times Seen Coming to End for China’s Real Estate Bonds
Caijing coverage: 125亿美元债年内到期 中资房企紧急补充弹药
Steps to cool China’s property market are stoking speculation the good times are about to end for developer bonds offshore.

The hangover would be big. Yield-starved fund managers around the world have piled into the $65 billion market for dollar-denominated notes sold by Chinese builders.

The Caijing article reports rising yields:
However, according to a Hong Kong investment bankers observed that the rate of Chinese-funded housing enterprises issued US dollar debt is rising from the end of 2016 about 6%, climbing to the current 7%, some even more than 10%.

...in 2017, Chinese developers real dollar debt (including high rating and high yield) will be issued in the total amount of 18 billion US dollars, accounting for 25% of the entire Chinese-funded non-financial enterprises.

Behind the high-frequency bonds is a large number of the upcoming US dollar debt. A number of overseas issuer data statistics show that this year there will be 12.5 billion US dollars from the Housing Housing debt maturity. However, housing prices are also facing a dilemma: the Fed's rate hike will make the US dollar interest rates have a higher trend, housing prices are also tightening domestic financing.

2017-01-21

Chinese Govt Prepares Groundwork for New Stock Market Bubble

Here we go again. Real estate is slowing and the government is unleashing several policies designed to secretly "stabilize" the stock market. Monday's dip in the market, taking ChiNext to a new post-peak intraday low, spurred the policy burst according to market participants.

China did this before, froim 2014-2015. Real estate slowed in 2014 and the stock market peaked in June 2015. The overall conditions in the economy are similar in 2017: slowing growth, slowing credit growth, slowing real estate and even a weakening yuan. A big difference is the ChiNext bottomed in late 2012 and was already up more than 100 percent when the government started cheerleading. This time around, the government first has to stop the bear market.
But this is not finished, spree followed. SFC yesterday afternoon press conference said, the IPO audit scope is more stringent , the suppression of listed companies over financing, mergers and acquisitions to strengthen supervision , to crack down on "Fudge" type M & A speculation, the effective protection of investors, especially small investors' legitimate rights and interests , industry sources said, in the event of "black Monday", the Commission apparently began secretly stabilizing the stock market.
"Black Monday" refers to the 3.6 percent Monday drop in the ChiNext, which took out the post-peak intraday low.

The policies are as follows:

1. Traders believe the central bank unleashed savage power this week in order to rescue the market, flooding the market with temporary liquidity.
Yesterday afternoon, the market came the news, in order to save the market, the central mother resorted to force the middle of nowhere, in addition to more than two hundred million yuan this year's flooding, but also use the "temporary liquidity facilities' operations to provide liquidity support to the market . Analysts said yesterday's rebound may be related to this news.
The ChiNext bounced 2 percent on Friday.

2. A tightening of IPO standards
The industry believes that in this conference, the SFC on the recent market hot too fast on the IPO, audit fairness, refinancing arbitrage and holdings of major shareholders questioned, have given a clear response to the refinancing and reduction reasonable guide and regulate the behavior of attitude, which is dark stable stock market, whether it is China a-shares or capital market reforms will bring real good. First, IPO audit more stringent, strict entry into the capital market

Zhang Xiaojun pointed out that the recent CSRC issued a notice on 2017, revised and improved issuance audit performance avoidance system. The revised system, strict and refinement involving relatives Challenge System, IPO audit scope is more stringent , including spouses, children and so on. Refinancing application enterprises, relatives of more than 5% of the audit staff, but also to avoid.
Under current rules, relatives with 5 percent of company stock can serve on the government audit staff?

3. Protect minority shareholder rights
Zhang Xiaojun said that the refinancing of listed companies, the reduction of major shareholders, merger and reorganization system, related to the capital market service entity economic function, but also related to the listed company's shareholding structure and corporate governance, but also to investors, especially small and medium investors The protection of legitimate rights and interests. SFC will conscientiously implement the Party Central Committee and State Council decisions and arrangements, adhere to the general tone of the work while maintaining stability, improve relevant systems; further promote supervision according to law, strict supervision, the overall supervision, to maintain the market "Three" order, effective protection of investors, especially small investors' legitimate rights and interests .

Since 2016, the SFC will strengthen the supervision of listed companies refinancing, strictly examine and strictly regulate the fund-raising investment, a number of listed companies quit hard to withdraw the refinancing application, reduce the amount of refinancing.

Next, the Commission will take measures to restrict the financing of listed companies frequently or single financing amount is too large, listed companies to raise funds and improve the use of on-site inspection system, and urge the sponsor of the trial in the refinancing project for review .

4. Crackdown on dodgy M&A activity, as part of an effort to revive investor confidence.
Zhang Xiaojun said at the press conference, the current M & A order of listed companies is not yet standardized, there are speculative speculation ills, and "Fudge", "follow the trend" and blind cross-border restructuring of the problem.

The next step will strengthen the supervision of mergers and acquisitions, to crack down on "Fudge" type M & A speculation, continued to improve the relevant institutional rules to guide funds to invest more in favor of the integration of industrial upgrading direction, better play the positive role of mergers and acquisitions.

5. PBoC slashes RRR, allowing for 600 billion yuan of credit expansion
According to the new financial news, the directional down, the workers and peasants in the five lines will be divided into batches, the period is 28 days, not the choice to return to normal. The market is expected to release more than 600 billion yuan of funds to cope with the temporary liquidity problems during the Spring Festival.

16:00 more than the central bank announced that the cash delivered centralized security requirements before the Spring Festival, to promote liquidity in the banking system and currency market operated smoothly through the "temporary liquidity facilities' operations to deliver cash in a high proportion of several large commercial banks provide temporary liquidity support, operating period 28 days, the cost of capital with the same period of open market operations rate is substantially the same . This operation can be more effective through the market mechanism to achieve the transmission of liquidity.

Gold solid income that this is the first time in the history of the use of directional timing RRR, according to estimates, about 600 billion of funds can be released . Four factors of the statutory deposit reserve each factor on the impact of liquidity is not small, especially this year early this year makes these factors at the same time superimposed on several factors at the same time , Leading to a large liquidity gap in banks. Overall, the current monetary authorities put the amount of money is still abundant, but the period is short, there is no net invested MLF and other longer-term funds, such funds expires in February increased pressure .
iFeng: 够实在!央行、证监会节前送出五重大礼包

That's not all. Traders expect futures margins will be cut 25 to 50 percent:
According to the new wealth, after several rounds of rumors, before deregulation policy of stock index futures, or Spring Festival will be officially landed . From the margin to the transaction fee to the number of positions will be adjusted. People familiar with the matter said that since January 25, 2017 (Wednesday) the settlement date, the CSI 300 and SSE 50 stock index futures contracts non-hedging positions in the trading margin from the current contract value of 40% to 20% CSI 500 stock index futures contracts of non-hedging positions in the trading margin standards, the current value of 40% of the contract adjusted to 30%.
East Money: 股指期货松绑传闻再起 中金所重申确切消息以交易所为准

Update: This was also a policy shift last week.Shenzhen exchange reviews rules to push innovation
The Shenzhen Stock Exchange said it would study plans to change the rules on its ChiNext market for small companies, as the startup venue heads for its lowest level since 2015.

The bourse said the move is to better service innovation and entrepreneurship, according to a statement posted on its website on Monday. It didn't provide further details. Among other key tasks for the year, the exchange said it will push ahead with a trial for options on exchange-traded funds, and try to boost risk controls and supervision of the smaller market.

The stock market cannot generate enough credit growth to boost the economy, but a stock market bubble would distract from a slowdown in overall credit and the broader economy——as it did until the bubble burst in June 2015. This time around it will take more money to lift prices off their lows though, and the government starts off fighting the market instead of riding the bull. It's easy to "manipulate" the market when it's already moving in your favor. As the government learned post-peak in 2015, when the market moves against you, even extreme measures will fail in the face of social mood.

Interest Rate and Dollar Correlations

People's Daily Says Bears Have Failed

iFeng: 中国2016年经济增速或为全球最高 成绩单让唱空者落空
The International Monetary Fund's latest World Economic Outlook report predicts that China's growth will be 6.7% in 2016 and 6.6% in India. In this regard, in 2016 6.7% of China's economic growth is expected to become the world's highest speed.

Such a report card is also a strong response the China bears. The end of 2015 and early 2016, many people are not optimistic about the operation of the Chinese economy, and some institutions, experts predict the Chinese economy may be "collapse way" decline, hard landing is inevitable.

"It turns out that these predictions of the Chinese economy once again fail." This reminded the people concerned about the Chinese economy to determine China's economic situation requires a comprehensive analysis, not to generalize.To see the challenges facing China's economy, but also depends on To China's economic growth, structural optimization and the overall trend, but also to see the Chinese government and people's determination and ability to respond to challenges, so that we can get more accurate judgments. "Development Research Center of the State Council Macroeconomic Research Fellow Zhang Liqun Said in an interview with this reporter.

The louder he talked of his honor, the faster we counted our spoons. -Ralph Waldo Emerson

2017-01-20

China Restricts Access to Real Estate Data

ZH: As Its Housing Bubble Pops, Chinese Real Estate Firms Halt Monthly Pricing Data
Fast forward to Friday, when at least two major Chinese private providers of home price data stopped publishing the figures, just as the housing market is stating to cool off at a dramatic pace across all Tier cities. According to Reuters, the China Index Academy, a unit of U.S.-listed Fang Holdings, has stopped distributing monthly housing price index data for 100 cities that it usually issued at the start of the month. The academy said it had suspended distribution indefinitely, without giving a reason for the suspension.

"I don't know who exactly is making the order, and it's not mandatory," said a source with knowledge of the matter, who declined to be identified as the topic is a sensitive one.

Home price data from private providers tends to show sharper increases than official data from the National Bureau of Statistics (NBS), which publishes monthly and annual percentage changes in 70 major cities. It also overextends on the downside, which according to official data, has now begun, and may explain the self-imposed censorship.
The data actually stopped being published in October. September was the last month China Index Academy published it's monthly 100-city survey, which I covered at the start of each month.

Buying Restriction Surge: New Home Prices Rocket 2.8pc in September

Restricted access began this autumn, when government restrictions didn't work and prices rocketed. A more serious crackdown began, and then the government survey (NBS 70-city) started showing mid-month data to prove restrictions were having an effect.

Reuters: Two China real estate consultancies halt monthly home price data

Now the buying restrictions are taking effect with the monthly home price growth slowing nationally, and turning negative in the first-tier.

Chinese Media Calls Top in First-Tier Housing Market

China Home Prices Slow, What Happens to Credit?
Credit makes the modern economy go. Credit growth is money supply growth in modern financial systems and without it, the economy will slow. Leave aside what is the right or wrong policy (whether the growth is sustainable or not): China wants stability in its economy, therefore it must have credit growth. If the housing market slows and mortgage lending slows, a new source of credit growth must be found. In July, loans to households increased 1.5 percent. In December, they still increased 1.5 percent. If household lending slows in 2017, as one would expect given the government's success with buying and credit restrictions, where will new loan demand come from?

China Running Out of Dollars: PBoC Cuts RRR Again

Nothing has changed. The slow motion global dollar deflation is still underway. The odds of a large, one-time devaluation of the renminbi is increasing, not falling. The size of the eventual adjustment is growing as well.

Alhambra: China RRR: Surprise But No Surprise
In July 2015, just before everything broke, PBOC funding of the Big 4 State-Owned Banks was less than RMB 100 billion. As of the latest figures for December 2016, it was RMB 1.17 trillion.

...The RMB is flowing outward from the central bank, but money markets are increasingly starved of funds.

With the New Year holiday approaching, the PBOC stunned the mainstream by reducing the RRR for five of China’s largest banks today, and doing so by a full percentage point. The unconfirmed reports that I saw suggested this was only a temporary measure, in addition to another 28-day funding conduit that was just added for “major commercials”, but it doesn’t make any sense given the trillions in RMB already flowing unless you take account of that “something” else.
Straits Times: China cuts reserve ratios for 5 big banks temporarily amid cash squeeze
China has allowed its five biggest banks to temporarily lower the amount of cash that they must hold as reserves, to ease seasonal liquidity tightness amid huge cash demand heading into the long Lunar New Year holiday, three sources with direct knowledge of the matter said.

The People's Bank of China (PBOC) has cut the reserve requirement ratio (RRR) for the banks by one percentage point, taking the ratio down to 16 per cent.

It will restore their RRR to the normal level at an appropriate time after the holiday, according to sources.

"This is a temporary adjustment, and is mainly in response to the cash withdrawal, tax payment and reserve payment. (The RRR) will go back to the normal rate after the Lunar New Year holiday," one source said.
The PBoC made a similar move in 2015. WSJ: China Cuts Reserve Requirement Ratio

Ren Zeping: Housing Adjustment into 1H2018

Ren Zeping: structural opportunities in the stock market, housing prices continue to adjust

Founder Securities chief economist and co-director of the Institute Ren Zeping

2017 stock market will turn from performance buffalo cattle, there is no index-level opportunities, but the structural opportunities are more, will revolve around the reform and performance of the two main lines. House prices will be adjusted to the end of 2017 or 2018. RMB overvaluation will continue to be revised.

Dear 21st Century Business Herald Readers:

Looking ahead to 2017, I expect GDP to grow by around 6.5% and CPI to grow by around 2%. The economy will bottom twice in the second quarter, but the callback rate is not deep. Inflation peaked in the first quarter, but the year in a mild inflationary environment.

...Housing market, the current round of price adjustment may continue until the end of 2017 to 2018 in the first half, the key to look at long-term mechanism. As the current regulation is mainly through the purchase and purchase of credit control needs, if the land supply can not keep up and long-term mechanism is not ideal, the end of 2017 to the first half of 2018 housing prices facing a new round of upward pressure. If the long-term mechanism can be established, there are still turning.
Caijing: 任泽平:房价调整持续到2018年上半年 关键看长效机制

Still No Sign of Private Service Sector in FAI

SOEs Still Pulling FAI Higher in December

Fixed Asset Investment, Private FAI Steady in December

Real Estate Investment Jumps to 11.1pc Growth in December

Real estate investment growth finished on a high note in December, at the fastest monthly pace of 2016. It grew 6.9 percent for the full year.

2017-01-18

Chinese Media Calls Top in First-Tier Housing Market

iFeng: 证实了:特大城市亮出杀手锏!房价拐点来了
New Year, the property market has become the focus of public attention. Part of the real estate control policy continues to tighten, many hot city commercial housing chain volume dropped significantly. The industry said that the policy tightened with the previous Central Economic Work Conference proposed the establishment of long-term mechanism for the property market, the return of housing properties, to promote the healthy development of real estate echoes. The overall housing prices in 2017 is expected to be more stable or slightly down.

We're Gonna Need A Bigger Debt

iFeng: 今年赤字率预计仍保持3% 地方债规模适度扩大
Into 2017, in accordance with the central economic work conference tone, fiscal policy will shift to a more active and effective. Reporter learned that this year's fiscal deficit rate is expected to remain at around 3%, but the overall scale of local debt will be modest expansion.

Local debt replacement moderate expansion

According to the arrangements of the Ministry of Finance, in 2016 the scale of new local debt is 1.18 trillion yuan, which is nearly doubled compared to 2015. Among them, the general debt of 780 billion yuan, 400 billion yuan of special bonds. Replacement debt, the Ministry of Finance Wang Ke Bing, deputy director of the budget last year, has publicly stated that the year may be 5 trillion yuan of debt replacement.
I assume modest expansion of debt will be less than the nearly 100 percent increase in 2016?

Li Keqiang Calls for Tax Cuts 3 Times in 2 Weeks

Maybe year 5 will produce results?

iFeng: 李克强半月三次谈减轻企业税负 这次透露了根本原因
"Why do we need to intensify efforts to small and micro enterprises tax cuts? Why should continue to promote the commercial system reform? These are to encourage entrepreneurship!" In the January 18 State Council executive meeting, Li Keqiang answered why he has been Concerned about tax cuts.

...January 13, Li Keqiang chaired a forum to listen to experts and scholars and business people on the "Government Work Report (Draft)" comments and suggestions. Li Keqiang said that this year to adhere to the government tighten the day to continue to compress general expenses for corporate tax cuts to make room for less this year to reduce fees and other non-tax burden on the market to have personal experience, the State Council to develop check.

DXY Analog, RMB Breather

Where is the U.S. Dollar Index according to the analog?

The analog points to a correction in the dollar, one that should bottom about 3 percent lower around April. Right about the time Congress will be finalizing the budget and tax reforms.

A dollar correction will give the PBoC breathing room for a few months as well.

China Home Prices Slow, What Happens to Credit?

After a blitz of buying and credit restrictions, the governments at all levels achieved their goal of reversing real estate prices.

Home prices increased 0.25 percent nationally in December. The Top 5, the first-tier plus Xiamen, recorded an average price gain of 0.0 percent. Guangzhou was the only gainer, with a rise of 0.7 percent. The hot second-tier cities I have tracked in prior months (Haikou, Wuhan, Fuzhou, Hefei, Hangzhou, Nanjing, Tianjin) reported a net decline. Third-tier cities drove the gains, although the top two gainers are second-tier cities: Sanya (+1.2 percent) and Chongqing (+1.1 percent). Now we know why Chongqing launched its real estate regulation blitz: Chongqing Home Sales Collapse Amid Restriction Blitz.

Existing home prices gained 0.30 percent nationally. They were up slightly in the first-tier, and up big in some second-tier cities such as 1.6 percent in Nanjing.

With credit slowing and real estate growth slowing, the ball is now in the economy's court. Companies will have to step up their lending, or the central government will have to force feed credit through the SOEs once again if the government wants stability. Credit is the lifeblood of the economy and Chinese bankers spent much of the past year trying to make as many "safe" loans as possible, mainly mortgages and government lending, to the point where residential borrowing was more than 100 percent of new credit at banks in July: Depression: Residential Mortgages Account for 102pc of Lending Growth, Rate Cut Coming
I recently had a chat with the president of a grassroots bank, they saw the collapse of a large number of small and medium enterprises, manufacturing enterprises reluctant to borrow, demand is very weak, very worried about the outbreak of bad loans, now the only source of relief is government projects, the platform loans, he said that because in his 30 years of lending experience, the government loans never go bad, at worst they are extended, so we are all seeking to lend to government projects, and this is the reason the lending platforms have too much money, also a reason for the jump in M1.
For a time in 2016, mortgage lending was propping up credit growth:
Credit makes the modern economy go. Credit growth is money supply growth in modern financial systems and without it, the economy will slow. Leave aside what is the right or wrong policy (whether the growth is sustainable or not): China wants stability in its economy, therefore it must have credit growth. If the housing market slows and mortgage lending slows, a new source of credit growth must be found. In July, loans to households increased 1.5 percent. In December, they still increased 1.5 percent. If household lending slows in 2017, as one would expect given the government's success with buying and credit restrictions, where will new loan demand come from?

PBoC: 存款类金融机构人民币信贷收支表, Summary of Sources And Uses of Credit Funds of Financial Institutions(in RMB)
NBS: 2016年12月份70个大中城市住宅销售价格变动情况

2017-01-17

When It Becomes Serious, You Have to Lie

Global Times: Liaoning government admits it falsified economic data
Chen Qiufa, governor of Northeast China's Liaoning Province, admitted that some local fiscal and economic figures between 2011 and 2014 were falsified and fraudulent, the People's Daily reported on Tuesday.

During the 8th meeting of the 12th People's Congress of Liaoning, Chen said that the province began to increase data accuracy in 2015, when financial revenue contracted 33.4 percent year-on-year. Last year, Liaoning's revenue rose 3.4 percent to 219.9 billion yuan ($32 billion), according to the report.
Liaoning's recession has been the subject of several posts.

Finding 50 Cents

Marginal Revolution: Authoritarians Distract Rather than Debate
It’s long been known that the Chinese government hires people to support the government with fabricated posts on social media. In China these people are known as the “50c party”, so called because the posters were rumored to be paid 50 cents (5 jiao or about $.08) to write the posts. The precise nature and extent of the 50c party has heretofore been unknown. But in an amazing new paper, Gary King, Jennifer Pan and Margaret Robert (KPR) uncover a lot of new information using statistical sleuthing and some unusual and controversial real world sleuthing.

...First, the posters are government workers paid on salary not, as the 50c phrase suggests, piece-rate workers. Second, and more importantly, it has long been assumed that propaganda posts would support the government with praise or criticize critics of the government. Not so. In fact, propaganda posts actively steer away from controversial issues. Instead, the effort appears to be to distract (especially to distract the people from organizing collective action; thus distraction campaigns peak around times and places where collective action like marches and protests might become focal).
Lots more info at the link, including how they determined which social media accounts were Wumaodang.

2017-01-16

Provinces Begin Announcing GDP Growth Targets

iFeng: 18省调低今年GDP增速目标 多为区间目标(表)
In addition to Chongqing, the local government work report shows that Tianjin, Beijing, Shanghai and other 18 provinces to reduce this year's economic growth target, including Jilin, Beijing, Shanghai, Shanxi and other 16 provinces to its economic growth rate for the interval target .

Does this mean that the country's economic growth this year will be transferred to the interval target. 10, Development and Reform Commission Director Xu Shaoshi news conference in the country after the news conference that the economic growth in 2016 is expected to be about 6.7% in 2017 will be based on internal and external environment to identify an economic growth target, "GDP target is expected, and Consider employment and prices. "

ChiNext Tumbles, Growth to Value Shift


The ChiNext has only closed lower once following the 2015 peak. On September 15, 2015, it fell to 1797.56, but that was a spike down that was reversed the next day. Today's close at 1830.85 is the second lowest closing price. The intraday low was a new post-peak low of 1783.74.

This article about today's dip caught my eye.

Barron's: ChiNext Tumbles 3.7% As China’s Investors Ditch Growth For Value
Chinese retail investors, who typically prefer growth stocks, have discovered a new concept – value – as they chase after blue-chip Old Economy stocks over New Economy favorites, playing on President Xi Jinping’s supply-side reform.
This is exactly the same trend underway in the American stock market. Here's the price-ratio of ChiNext vs the Shanghai Composite, and the price-ratio of S&P 500 Growth vs Value in blue.

2017-01-15

Too Many Crooked Third-Party Payers in China, PBoC Forces Bank Deposits

ECNS: PBOC in move on payment agencies
China's central bank, or PBOC, said on Friday that it will eventually ban all non-bank payment agencies, including Alipay, from using clients' money. As a first step, it will require all platforms to deposit some 20 percent of clients' funds to appointed bank accounts.

The move is the latest step taken by the central bank to tackle the financial risks caused by a rising number of institutions found illegally embezzling the money.

Starting from April 17, a total of 267 third-party organizations with the central bank's licenses in China, including Alipay, have to submit around 20 percent of provisions to a single account opened in a commercial bank, with the central bank's approval.

..."The 20 percent level aims to leave time for institutions to adapt to new rules," said Xie Zhong, head of the central bank's payment and settlement department. "The final level will be 100 percent," meaning that the central bank will be the only authority governing provisions.
The Economic Observer outlines some of the recent firms running into trouble: 央行为何担忧第三方支付备付金存管?看完这些案例你就明白了
The People's Bank of China ordered the following misappropriation of misappropriation of funds and has not yet completed the funding gap of the shortfall of funding agencies to fill the gap, and control the implementation of the management system reform, and effectively protect the security deposit.

1. Xi'an silver letter to Electronic Payment Co., Ltd. misappropriation, occupied reserves of 3,393.73 million, funding gap of 23.252 million yuan.

2. An Yi Lian Rong Electronic Commerce Co., Ltd. misappropriated, occupied reserves of 94,621,300 yuan, the reserve fund gap of 33 million yuan.

3. Hunan Star Media Co., Ltd. misappropriated, occupied reserves of 23.6356 million yuan, the reserve fund gap 23.5532 million yuan.

4. Guangxi Paiduantong Business Service Co., Ltd. misappropriated and appropriated 9,953.91 million yuan of reserve funds, and the gap of reserve funds was RMB 66.6128 million yuan.

2017-01-14

Chongqing Home Sales Collapse Amid Restriction Blitz

Chongqing home sales collapsed 64 percent week-on-week by area sold in the week of January 2 to January 8 (iFeng: 重庆一周六次喊话遏制炒房 主城区楼市成交量大降60%), amid a government regulatory blitz that continued into this past week. With the supply of housing also rising 54 percent that same week, a slide in prices is all but inevitable.
January 6, there are reports that the name of flying to the Chongqing "real estate" phenomenon, the Chongqing Municipal Land and Housing Bureau, the relevant responsible person said, "the recent housing market, the city overall stable, the next step will strengthen the market judged, Timely release of market information, guide the people rational purchase, good policy reserves, to ensure the city's real estate market stable and healthy development.

January 7, Chongqing City Land and Housing Bureau issued "on the strengthening of the main city commercial housing project pre-sale program management notice," respectively from the strict pre-sale program for the record, to strengthen the record price review, strict pre-sale program changes and strict pre-sale program Implementation and other four aspects to strengthen management.


January 10, Chongqing Municipal Land and Resources and Housing Authority to crack down on illegal sales behavior, announced the hotline, including 24-hour hotline to facilitate the acceptance of public complaints. At the same time, Chongqing Guotufangguan bureau listed 9 people in the purchase process can report the intelligence.

Followed by the financial sector.

January 12, Chongqing City, the housing provident fund management center in Chongqing, 12 local banks jointly issued a statement against the real estate.

January 13, the central bank of Chongqing, the Department also held a conference on housing credit, requiring members of the self-discipline mechanism to strictly limit the flow of credit funds to invest speculative buyers, and promote the steady and healthy development of Chongqing real estate market.
More detail on recent moves:

iFeng: 重庆再出重拳!外地户口首套房开征房地产税

DM: China's Chongqing imposes harsher property tax measures to deter speculators
China's southwestern city of Chongqing will impose a property tax on first-time home buyers who are non-residents with no job or company in the city, state news agency Xinhua reported on Friday.

The new rule, effective from Jan.14, is being brought in in response to recent large price fluctuations in Chongqing as speculators from outside the city flood the market, Xinhua said.

Under previous rules, non-residents who didn't work and owned no companies in Chongqing only needed to pay a property tax for second homes in the city.
This decision follows the voluntary tightening of credit by Chongqing financial institutions.

Yuan Bears Unfazed

Reuters: China slap at yuan shorts barely tickled bigger bears
Traders also suspect that while some of the hedge funds that routinely borrow short-term funds to speculate on the yuan might have been forced to square off their trades last week, the yuan bears are mostly longer-term funds with staying power.

"A lot of hedge funds do fund themselves overnight, but most people are in the three-month plus area, and it doesn't affect them," said Richard Benson, co-head of portfolio investment with Millennium Global in London. "Spot movement is spot movement, and you aren't forced to do anything."

The People's Bank of China (PBOC) hasn't explicitly confirmed it was behind the squeeze that drove interbank overnight CNH rates to 87 percent last Friday, from 4 percent a week earlier, and caused the biggest ever weekly gain in the offshore yuan against the dollar - just under 2 percent.

But that is the assumption of market professionals.

The Slow Collapse of the West

Yahoo: US woman dies of infection resistant to all 26 available antibiotics
A US woman has died from an infection that was resistant to all 26 available antibiotics, health officials said this week, raising new concerns about the rise of dangerous superbugs.

The woman, who was in her 70s, died in Nevada in September, and had recently been hospitalized in India with fractured leg bones, the US Centers for Disease Control and Prevention reported.

The cause of death was sepsis, following infection from a rare bacteria known as carbapenem-resistant Enterobacteriaceae (CRE), which is resistant to all antibiotics available in the United States.

The specific strain of CRE, known as Klebsiella pneumoniae, was isolated from one of her wounds in August.

Tests were negative for the mcr-1 gene -- a great concern to health experts because it makes bacteria resistant to the antibiotic of last resort, colistin.
Socionomics takes a positive view of positive mood, and a negative view of negative mood. During periods of positive mood, people see the upside in everything. Immigration brings new entrepreneurs, GMOs will make us healthier, AI will free us from labor. Negative mood makes people see the downside: immigration brings crime, GMOs will give us cancer, AI will kill us. Socionomics also applies positive and negative values to the two groups. Openness is good, xenophobia bad. Reliance on science good, reliance on superstition bad. There is some objective value however: negative social mood does lead to more disease outbreaks and war, for instance, but that makes it all the more important to avoid situations that create extreme negative mood.

The Austrian economist's view of the business cycle is a good way to look at it. Most people, and most economists, think recessions are bad, but the Austrians "like" recessions because they remove the bad from the economy. For an alcoholic, a recession is the first days, weeks and months of going dry. It is painful and difficult, but a positive step forward. Continued alcohol consumption is the worst outcome. Similarly, declines in social mood can offset the excesses of positive mood. In the case of the economy, avoiding the buildup of debt (a decision backed by extreme optimism in the future) is also needed to avoid an extreme depression. Similarly, avoiding the extreme excesses of positive mood can counteract the negative.

The spread of infectious diseases is a direct consequence of peak social mood. It is considered xenophobic to stop migrants who carry diseases, in fact the United States doesn't check at all. The national news media doesn't connect the dots for you, but there are a growing number of local news stories around the country, reporting the spread of diseases long thought gone, but which are still common in Central America or other parts of the world. President Obama had a policy of flying migrant children into the country, the U.S. government picked them up on planes and flew them into the U.S. so as to help them avoid the dangerous journey by foot. These migrants, along with ones who came across the border, were then sprinkled around the country without any medical checks. Later, there were stories of TB outbreaks, enterovirus and measles, among others.

Tolerance also spreads disease. The AIDS epidemic exploded because it was considered homophobic to shut down gay clubs in cities, such as New York City, where the disease was spreading. Homosexual groups fought for social acceptance in the 1970s and refused to give up their gains. The result was millions of deaths around the world. Nothing has changed more than 30 years later.

Center for Infectious Disease Research and Policy: Shigella in gay men growing more antibiotic resistant
Nearly a quarter of Shigella isolates tested in New York City showed decreased susceptibility or resistance to recommended antibiotics, and most of those infections were among gay men, researchers reported today in Emerging Infectious Diseases.

..."The introduction of this MSM-associated S flexneri 3a lineage into Taiwan in 2015 illustrates that the pathogen can spread rapidly across continents, possibly through intensified sexual networks among MSM," the authors write.
The rise of Trump, Brexit, Le Pen, AfD, nationalism, anti-immigration, this whole stew is not a temporary or short-term phenomena. It can't be dealt with as a problem because the source of the problem isn't the nationalist sentiment, it's the globalist, peak social mood excesses that people are reacting against. Even if no one connects the dots between ideology behind the rise of drug-resistant diseases, the democratic governments in power will lose legitimacy as the economy, society, and even basic science and medicine crumble.

Much of the "Establishment" in the West still has no idea of the level of change underway. There is a sense among the more alert that the religious indoctrination taking place on university campuses is out of control, but there's no sense yet that the ruling ideology/religion in the West is fundamentally flawed, or at least hijacked by peak social mood. Everything has become political in the West, and the correct decision is what is "politically correct," not what is scientific or logical or practical.

Against this backdrop, many look to China's rise as the new global leader. But more likely, at least for right now, is there is no replacement for the United States, and no change in leadership. There will be no smooth transition as there was from the UK to the US. Instead, order will transition to disorder.

Yahoo: Chinese leader meets Davos elite as voters revolt
In that context, it is noteworthy that Xi Jinping will become the first Chinese president to attend the forum when he gives a keynote speech on Tuesday that is expected to extol Beijing's efforts to negotiate new types of regional trade deals shorn of US influence.

This year's Davos "may be the start of China's new role as a leader in promoting globalisation and a speedy recovery of the global economy", as Western countries turn to "isolationist self-centredness", commentator Sun Ding wrote for China's official Xinhua news service.

IHS Markit chief economist Nariman Behravesh stressed China is in no position yet to replace the United States as a global hegemon, but told AFP: "In Davos, Xi will likely articulate China's vision for the world economic and political order."

2017-01-13

Leveraged Bettors Blew Up Bitcoin

This explains why the pullback in Bitcoin was so deep.

SCMP: China’s bitcoin market: another ticking time bomb?
With the market in free fall, Ding was unable to log into his account with China’s biggest bitcoin trading platform, Huobi, meaning he could not sell off his holdings or top up his principal to meet the margin call.

By the time he managed to log on in the evening, most of the bitcoins in his account had been compulsorily sold off by Huobi for 6,361 yuan each, lower than his purchase price of 8,101 yuan. This included the part of his investment he had bought using a loan he obtained from Huobi by pledging the bitcoins he owned originally.

Property Tax Back On?

SCMP: New rules to nudge local governments into property tax action in China
According to the guidelines, the central government will encourage local authorities to explore innovative approaches to urbanisation, state firms, regional financial markets, property taxes, health and elderly care.

Pilot property tax schemes were introduced in 2011 in Chongqing and Shanghai, ahead of a planned roll-out nationwide.

Shanghai’s tax is aimed big new properties, while Chongqing’s targets owners of luxury homes, including high-end flats and villas. The tax rate in both cases is about 1 per cent.

ChiNext Analog Breaks to New Currency Adjusted Low

The ChiNext is a little more than 5 percent above its post-bubble low in renminbi, but adjusted into the dollar, the ChiNext broke to new lows this week.

2017-01-12

The Return of the Eagle

You can't look at any issue in the U.S.-China relationship separately anymore. Under Trump, everything is on the table and the United States has a big advantage over China. If the U.S. can force an economic confrontation, it will hurt China far more than it hurts the United States. China cannot afford an economic war (the yuan is toast in that scenario), and probably for the next 18 months to 2 years at least, the situation will only worsen for China.

SCMP: Trump’s secretary of state nominee Tillerson wants to deny Beijing access to South China Sea islands
Asked whether he supported a more aggressive posture toward China, he said: “We’re going to have to send China a clear signal that, first, the island-building stops and, second, your access to those islands also is not going to be allowed.”
Luttwak's The Rise of China vs. the Logic of Strategy remains a must read.

Chongqing Financial Institutions Refuse Credit for RE Speculation

January 12, according to the Chongqing Municipal Bureau of Land and Housing Bureau Web site news, recently, the Chongqing Municipal Bureau of Land and Housing Bureau issued a continuous maintenance of Chongqing real estate market sustained and stable development of relevant measures and strengthen the supervision of Chongqing as the main body of housing finance, ICBC Chongqing Branch, Chongqing Branch of Agricultural Bank of China, Chongqing Branch of Bank of China, Chongqing Branch of Construction Bank, Chongqing Branch of Bank of Communications, Chongqing Branch of CITIC Bank, Chongqing Branch of Industrial Bank, Chongqing Branch of China Merchants Bank, Chongqing Branch of Chongqing Bank of Postal Savings Bank of China Agricultural banks, the Three Gorges Bank and other 12 financial institutions and the city housing provident fund management center, expressed firm support, and jointly issued a statement: against "real estate"!

Thirteen financial institutions, said a healthy and stable real estate market is the real estate development of the financial nature of the requirements, I hope the real estate market in Chongqing to maintain a healthy and stable development trend, do not want the real estate market ups and downs, resolutely opposed to all forms of real estate speculation and resolutely The implementation of the Chongqing real estate control policies, to take measures to combat the behavior of real estate speculators.

First, resolutely implement the Chongqing City real estate a series of regulatory policies on the "three noes" Lai Yu staff "real estate" credit not handle;

Second, on suspicion of driving up prices, hoarding and illegal businesses publish false information, to suspend business for housing mortgage loans and fund loans;

Third, continue to do the people's housing financial services, support of the masses living reasonable demand for the purchase, maintenance, Chongqing City real estate market is stable and healthy order.
iFeng: 重庆十三家金融机构联合发表声明:反对“炒房”!

M2 Spikes in December, But Trend Still Down

M2 grew 1.3 percent in December, but the 3-month growth remains in downtrend.

SCMP: China credit expansion exceeds estimates as loan demand rises in December
The economy ended last year on a strong note as producer prices rebounded, factory activity stabilised and corporate profit recovered. Businesses are showing more willingness to borrow, with private investment expanding in recent months after slow growth in early 2016.
China is trying to do three things at once: squeeze a credit a real estate bubble, defend the currency, grow the economy. Except the latter requires faster, not slower, credit growth. Major supply-side reforms such as further removing Chinese state influence from the economy could deliver growth without the need for credit, but...

Bloomberg: China Is Planning a New, Relaxed Approach to Growth
"China’s reaching the point where it has to pick its poison and giving up a half percentage point of growth would be far less politically damaging than instability in the bond or currency markets," said David Loevinger, a former China specialist at the U.S. Treasury and now an analyst at fund manager TCW Group Inc. in Los Angeles. "Looking past the Party Congress later in the year, President Xi Jinping may realize that unlike his predecessor, Hu Jintao, he can’t kick the can to his successor, even more so if he plans on extending his term" beyond 2022.

As many as five out of seven members of the nation’s top leadership committee are expected to be replaced at a twice-a-decade Communist Party Congress later this year, a gathering that traditionally spurs a greater emphasis on maintaining stability.

FX Reserves Fall to 13.5pc of M2 at Year End


There are now 51 yuan per U.S. dollar of forex reserves, and reserves can only cover 13.5 percent of M2.

Where you place your bet now depends on if you believe Chinese government actions represent prudent prevention or reveal growing panic.

Reuters: Exclusive: Banks forced to cover tracks of China's forex regulator
China's forex regulator is telling banks to keep its instructions about curbing capital outflows secret and to ensure that research analysts keep any negative views about the yuan's prospects to themselves, several bankers said.

...SAFE, which is part of the People's Bank of China (PBOC), is insisting in oral instructions to dozens of banks that they don't reveal its role in such restrictions, six bankers said, which was damaging their relationships with clients since they were unable to explain why they were turning away business.
Capital controls are on.

Land Ministry Calls for Halt to Land Sales

The Ministry of Land and Resources said third- and fourth-tier cities with housing inventory problems may need to reduce or halt land sales.
Ministry of Land and Resources said today that we must resolutely implement the central authorities on the real estate regulation and control of major decisions to speed up research and development in line with national conditions and adapt to the law of the basic land market system to promote the healthy and stable development of the real estate market. The establishment of classification control system. The distinction between indemnificatory housing and commercial housing, the implementation of affordable housing land should be guaranteed as far as possible, according to supply and demand situation of commercial housing due to city policy, the establishment of residential land supply classification management system. On the housing prices to pressure the city to a reasonable increase in land supply, land use structure adjustment, increase the proportion of residential land; to reduce the great inventory pressure in third- and fourth-tier cities will reduce or even suspend residential land supply.
国土部:对去库存压力大的三四线城市要减少以至暂停宅地供应

2017-01-10

Chinese Inflation Still Accelerating

Inflation was set to rise because of year-over-year comparisons in commodities, but Chinese inflation is still accelerating. The U.S. CPI will jump in January and all of 2017 because oil prices are up 100 percent off January 2016 lows, but this bump looks like a pig in the python for now. The monthly inflation rate won't increase faster unless something changes in the economy. In China, the year-on-year PPI is 5.5 percent in December 2016, but extrapolate 3-month inflation data you get a figure in the high teens. The one-month annualized figure is more than 20 percent.

Bloomberg: China Factory Prices Rising Fastest in 5 Years Adds to Reflation
Only four months out of a multi-year factory deflation, the world’s second-largest economy is poised to export inflation around the globe through its supply chains as manufacturers squeezed by higher input costs raise asking prices. Whether that rebound will be sustained hinges on how the global economy fares under a Donald Trump presidency and whether trade tensions flare between the U.S. and China.

Economist Takeaways

"Reflation continues in the factory sector," said Julia Wang, an economist at HSBC Holdings Plc in Hong Kong. "The stable CPI suggests that the reflation is confined mostly in the industrial sector and hasn’t filtered into the real economy. So the PBOC would possibly not respond to it until inflation expands to the real economy."
China can't transmit the prices globally unless others are willing to pay higher prices. If not, the reflation will collapse as it has at every turn since 2011.

Another factor is the yuan. A 5.5 percent depreciation in the yuan sends USDCNY to 7.30. If inflation in China accelerates, will the yuan rebound because investors see Chinese growth picking up, or will Chinese investors dump the yuan even faster to buy real or foreign currency denominated assets?

NBS: 2016年12月份工业生产者出厂价格同比上涨5.5%

2017-01-09

Hebei Limits Alternative Energy Subsidies to Local Firms

Protectionism isn't only between national governments, but local as well. The main complaint against Baoding doesn't seem to be the buy local requirement though, rather it hasn't issued its policy yet. Baoding is a major producer of solar panels and the home of Yingli (YGE).
aoding, Hebei Province of eight companies still waiting Baoding Finance Bureau for a final version of the statement. According to the latter to the Economic Observer reported that although these users because of the "outside the province to buy" failed to enter the list of the first subsidies, but the Baoding Financial Bureau is actively self-financing, for batches, Home companies to subsidize the new energy bus.

On the 949 bus, a total of 3.9 billion in subsidies, when exactly, how to implement the eight companies in the view, the Finance Bureau still failed to come up with specific programs, Hebei Province, the relevant practices, Was unable to get subsidies as scheduled on the user labeled "local protectionism" label.
EO: 新能源补贴资金告急!外地车被挤出首批补贴名单

2017-01-08

Japanese Firms Return as Chinese Wage Growth Slows

JETRO released its survey results for 4642 Japanese companies in 20 countries and regions in Asia Pacific last year. The results showed that 40.1% of the respondents expect to expand their business in China, compared with the previous year Increased by 2 percentage points, and this result is the first time since 2013 rose.

More importantly, China's labor costs have come to an end, making the Japanese manufacturing industry began to "return to China" trend. From 2015 to 2016, China's salary increase rate is 6.1%, in the Asia-Pacific 20 countries and regions among the 9th. 2017 is expected to control the annual 5.7%. Especially in the textile and other related industries such as clothing, re-evaluation of China's low cost of raw materials procurement, once again expanded production trends in China has emerged.

On the other hand, it is noteworthy that, due to the aging population, the lack of successors is becoming increasingly serious, more and more SMEs in Japan began to seek "inheritance" in China. Japanese non-government investigation of the Empire of a survey, two-thirds of Japanese companies that lack of successors. From the scale of view, sales of less than 100 million yen in the small micro-enterprises, the lack of successor companies accounted for about 80% of the whole, to a very high level.
EO: 2017,日本人来了

Post-Peak? Scare Article Discusses Banks Taking Homes

This article from 365地产家居网 was at the top of iFeng's real estate section today. It discusses how prices declines will damage the economy, and how homes may be more difficult to buy due to lower incomes and tighter credit. It also says the home speculators will do fine because they'll snatch up homes as soon as demand starts kicking in. Then the government will bail everyone out, and the speculators will make money, but average people won't be able to take advantage of the drop.



For these innocent children's paper, Xiao Bian really do not have the heart to tell you: Once prices fall, whether you can repay on time, the banks have the right to take away your house! Theory is not clear, we come to make a good analogy: A 2016 to spend 1 million to buy a house, down payment of 300,000, 700,000 loans, repay 10,000 a year later, leaving 690,000, and then prices rapidly decline, so that your house's prices shrunk by half, the market price of only 500,000. At this time the bank will come to you: when your house mortgage loan is 700,000, but now only worth 500,000, according to the bank's lending rules, you need to fill the balance of insufficient mortgage 190,000 (690,000-500,000). At this time unless you deposit 190,000, to do early repayment, or other value of not less than 190,000 of collateral pledged. Otherwise, the bank will "pop" a hammer and put your house to auction.
The article goes on:
1 Once house prices plummet, your income will be greatly reduced. Real estate as a pillar industry in China, if there are problems, all sectors of the economy will be affected. Corporate profits, layoffs, pay cuts will be commonplace. Income less, buy a house even more difficult.

2 Once the housing prices plummet, the economy will decline sharply, banks will be the biggest victims.

Data show that house prices fell 30%, the bank will increase at least one trillion more than bad debts, not only will bring huge banks, the national financial crisis will face collapse.

Therefore, once prices fall, banks will be more stringent loan approval, raise the proportion of the first payment, reduce interest rates.

3 once house prices plummeted, the market will be a sharp decline in new homes, second - hand housing activity will decline. Depression of the property market, not only no extra house for you to choose, housing quality and design are not so high standards, a lot of the house after you buy will let you down.

4 once the house prices plummeted, land prices will inevitably fall, the government's income will be reduced, a direct result of the Government's fiscal expenditure reduction, those for the construction of low-income housing security room, limit room will enter an impasse, difficult In addition, housing prices plummeted, the economy slumped, unemployment increased, buy a house or unattainable. Once the price plummeted, people who have multiple suites will be profitable up to the surface, with many sets of real estate people will lose the most, but the fact is the opposite, this group is the most profitable. why?
iFeng: 房价一旦下跌 没房或仅一套房的人将会哭死!