2019-05-20

China and US Still Finger pointing on Trade Talks

iFeng: 特朗普指责中方破坏“协议”?外交部:美方又想混淆视听转嫁责任
Sogou: Trump Accuses China of Breaking the "Agreement"? Ministry of Foreign Affairs: U.S. Again Wants to Confuse and Pass on Responsibility
On May 20, Foreign Ministry Spokesperson Lu Kang held a regular press conference.

Q: It is reported that US President Trump said on the 17th that the US and China actually have an agreement, but China has broken it. What is China's comment on this?

A: I don't know what the United States means by "agreement". The U.S. side may have always had an "agreement" of its own wishful thinking, but it is certainly not an agreement that China has agreed to.

The 11 rounds of economic and trade negotiations between China and the United States failed to reach an agreement. The fundamental reason is that the United States is trying to realize unreasonable interests through extreme pressure. This did not work from the beginning. Under the circumstances that the blackmail failed and caused widespread doubts and market turmoil in the United States and abroad, the United States tried to confuse the public and shift the responsibility, which was also futile. The sincerity and constructive attitude shown by China in the past 11 rounds of negotiations are obvious to the international community.

I would like to reiterate once again that Sino-US economic and trade negotiations can only succeed if they follow the correct track of mutual respect, equality and mutual benefit.

The 2019 Pivot in Asia and Freegold Too

Last year I posted 2018: The Pivot Year and Dollar Breaks Again. I also did similar posts around 2015 or 2016. The posts were based mainly on technical analysis, with charts indicating a possible shift in market direction. Commodity charts and commodity producing countries had inverted head & shoulders patterns completing back in 2016. Last year and this year, there are false breakouts that reversed. Last year, I stuck with my macro position on dollar strength despite some dollar weakness and chart breakouts and it was the correct one.

Right now, the number one chart is still the U.S. Dollar Index, but for now the most important "subchart" is the offshore yuan, USDCNH. The PBoC chief drew another redline at 7.00. 人民币会“破7”吗?刚刚,央行副行长给了颗定心丸! For myself, a move through 7 to 7.25 or 7.50 is fine if it is driven by the U.S. dollar. If DXY is above 100 or at 105, USDCNY 7.25 signals nothing more than dollar fluctuation. Yet the PBoC has boxed itself in with a narrative here. The risk isn't that CNY goes through 7 as much as the "ominpotent PBoC" "they have reserves and can force the market whichever way they want" narrative dies.
iShares MSCI Emerging Markets (EEM). The red horizontal is from the 2011 top, the blue from 2007. Prices are $40.01 currently and $39.72. A break below these levels could invalidate the 2017 breakout. Support is down near $34 if it breaks. EEM is trading at $40.11 in pre-market on Monday.
Trade is the big story and South Korea is an economy that lives and dies by global trade. ROK's trade surplus was 8 percent of GDP in 2017, exports and imports combined for 70 percent of GDP. The target for USDKRW, if that's a completed H&S pattern, is 1250. If USDKRW makes it there though, it's likely there's breakdowns elsewhere, such as USDCNH. As for the iShares MSCI South Korea ETF (EWY), it has a failed breakout, major support around $45. EWY is below its 2018 low.
Below are several Southeast Asian ETFs. Indonesia (EIDO) is close to have a major test of support.
For "corroboration" here's the S&P 500 Index. The blue line is the trendline from the 2009 Satanic low of 666. It must recapture 2895.
Finally, here's the ratio of GLD to SLV, and GDX to SIL.
I won't rehash the topic here, but in quick and simple terms, freegold is the "freeing" of gold away from a medium of exchange and into more of a monetary asset, mainly a reserve asset that might be likened to Bitcoin's role in the cryptocurrency ecosystem (if transaction speeds never pick up). Gold is money as they say, whereas even silver has substantial industrial demand. The exchange rate for money/currency can be set an any amount. The dollar can equal 100 yen or 1,000,000 yen, and the economies adjust around that exchange rate. Obviously a transition from 100 to 1 million between dollar and yen would wreck the Japanese economy, but the initial exchange rate doesn't matter. Had they set it in the millions, we'd all be saying USDJPY 1 million. The same is almost true of gold (it does have some industrial users that will be upset by a soaring gold price) because it is money. Moreover, if all fiat currencies crash versus gold, the economy suffers a less disruptive adjustment because relative prices and exchange rates won't be as directly impacted they way they would if a similar collapse took place against oil or agriculture. USDJPY is 100 and gold is $1300 an ounce and USDJPY might be 120 if gold is $5000 an ounce. Finally, soaring gold valuations life central bank reserves, shrinking their debt levels and allowing them to restart the credit system.

In practice, freegold will be visible in the price of gold breaking away from silver, other precious metals and all commodities. The gold/silver ratio
Since this chart is about pivots, this might also be a great time to be buying silver. It might be a great time to buy emerging markets if you think the dollar is peaking. Both the silver and EM trade should be powered by global inflationary forces. Or maybe the larger trend is still in place, but it's time for a short-term trend reversal. If instead there's a breakdown in emerging markets and gold takes on greater monetary status, it is likely deflation is out of control again. Currency volatility will take off. For myself, I'm still leaning towards a higher U.S. dollar and trouble ahead.

2019-05-18

Another Election Shock in Australia, Brexit Party Surges in Westminster Poll

Labor was expected to win, but instead the Liberals have hung on to a divided government.

AFR: The ultimate election guide
There is no overriding national mood for change but nor is there a strong appetite for the status quo, leaving it a seat-by-seat race with local issues, sentiment and candidates playing a critical role. Labor has long been ahead in opinion polls but the race has tightened.
The division is clearest in the Senate.

AFR: Election 2019: Coalition vote surges, Labor cannot form government
The new Senate

Political Editor Phil Coorey says the Senate count, while not final, looks like:

34 LNP Senators,
27 Labor,
nine Greens,
two One Nation,
two Centre Alliance
Jacqui Lambie and Cory Bernardi.

The government needs five extra votes to secure the 39 votes needed to secure its tax cuts and other legislation.
Note that if Labor shifted on immigration, it might have enough votes to take the Senate. Something to think about moving forward given Denmark's shift. In many countries there is dividend government because the two main parties/coalitions refuse to budge on issues that have rising support with the public, which leads to not only surprise elections, but surprise governments.

AFR: The biggest losers in a shock election result
This year's election has produced plenty of big losers: Bill Shorten, Tony Abbott, Clive Palmer, SportsBet.

But one of the biggest will be opinion pollsters. All the major media polls including The Australian Financial Review's Ipsos, Newspoll and Nine's election day exit poll all put Labor's two-party preferred lead at 51-52 per cent.

...However, there is one aspect where the polling was accurate, and that was Shorten's personal unpopularity.

Many in Labor will be asking the "what if" question that if they had a more popular leader - namely Anthony Albanese - as the front man would they find themselves in power?
Meanwhile over in the UK, no surprise that the Brexit Party is expected to win big in the European elections.

Metro UK: Brexit Party favourite to win votes in European elections, says poll
Nigel Farage’s party has doubled its support in the last fortnight – now in first place – and is now on track to get 34 per cent of the votes in this month’s elections. The latest Opinium poll shows Labour come in second place with 21 per cent of votes, falling seven points in the last two weeks, while the Tories lag behind in fourth place with 11 per cent. The Lib Dems are in third position with 12 per cent, having risen five points.
This is no surprise as UKIP pulled off surprise wins in European and local elections previously. What is surprising is the Brexit Party's polling for the next British national election (Westminster voting intentions).

BMG Research: BMG’s European Parliament and Westminster Voting Intention Results: May 2019
The poll shows that the Labour Party are in the lead for the first time since 2018, with a vote share of 30%. This a drop of 4% from April, and has then 3 percentage points above the Conservatives. The Conservative party have a predicted vote share of 27%, recording a reduction of 7% from last month.

Following on from a positive performance in the local elections, the Liberal Democrats predicted vote share is up 7 percentage points from last month on 18%. The Brexit Party enter BMG’s Westminster tracker with a vote share of 10%. Change UK and UKIP find themselves with just 3% of the vote share each.
Brexit Party polled at 6 percent in the April poll.

Britain Elects: How are the polls looking?
I suspect Brexit Party support is closer to 10 percent than 20 percent. Upstart and outsider parties have often under performed their polling, and there's no reason to think Brexit Party won't also follow that pattern, until it doesn't. Additionally, if the UK ever gets around to leaving the EU, support for the Brexit Party could vanish if it doesn't disband itself, as seems likely. Still, in the near term, a big Brexit Party win in European elections will give their leadership a platform and a loud voice in ongoing Brexit negotiations and debates.The potential for a surge into competition with Labor and Tories is not out of the question. If you remember your recent history and not the media narrative, UKIP started on the issue of an EU membership referendum and shifted to immigration after talking with voters. If the Brexit Party takes an entrepreneurial approach to the next national election, it might find one or two other ignored topics that will attract enough support to push it into the next government or make it the main opposition to another Tory-Labour coalition.

Chinese Hoarding Dollars Again

21st Century: 境内外人民币汇率双双创年内新低 跨境汇差套利交易再度活跃
Sogou: Both domestic and overseas RMB exchange rates hit a new low in the year, and cross-border arbitrage trading resumed
While the Sino-US trade friction has not yet been eliminated, the sudden rise of the US dollar has once again put new downward pressure on the RMB exchange rate.
In my opinion, there is very little evidence of trade friction in the markets right now. Maybe I'm wrong and the S&P 500 should be near 3200, with talk of Dow 30,000 picking up, and current prices are the result of trade friction. My sense is many people still believe a deal is coming, they believe Trump will not risk economic pain or stock market declines. On the other side of the ledger, I continue to expect this cycle will end with currency devaluation across the world, including or set off by the Chinese yuan, ending with DXY at a two- or three-decade high. Going back to the Logic of Strategy post, I expected an economic crisis in China would trigger trade friction, not vice versa.
In his view, this does not mean that the RMB exchange rate will quickly approach the "7" integer mark. The reason for this is that unlike last September's escalation of Sino-US trade friction, when the offshore one-year RMB exchange rate was expected to fall by more than 1,000 basis points, the current offshore one-year RMB exchange rate is expected to fall by only 500 basis points, which indicates that most overseas investment institutions believe that the pressure of the Central Bank of China to intervene in the foreign exchange market will make it difficult for the RMB exchange rate to effectively fall below the "7" integer mark in the future.

"This is very helpful to solve the problem of clearing the foreign exchange market. As long as the RMB can hold the 7-integer mark, the arbitrage of hoarding USD by many enterprises will gradually ebb, indirectly supporting the momentum of stabilizing the RMB exchange rate. " A head of the financial market department of a joint-stock bank admitted frankly to the reporter.

..."More importantly, good economic data in the United States has led hedge funds to sharply lower the Fed's expectation of cutting interest rates this year, thus strengthening the US dollar short covering." A U.S. hedge fund manager told reporters, "hedge fund's move is definitely not good for stabilizing the RMB exchange rate-the RMB exchange rate both at home and abroad showed a rapid decline on the 17th due to the impact of the jump in the U.S. dollar index."
This type of thinking is exactly why I worry about USDCNH going through 7.00. Many believe it won't despite understanding that the U.S. Dollar is driving the market. You can be near certain a break of 7 will not happen if you are certain the U.S. Dollar has no more than 2 percent upside left. Otherwise, uncertainty is high.

Additionally, it's important to keep in mind how CNY and CNH work with each other. In simple terms, the PBoC can set CNY where it wants and force the domestic market to buy and sell at this price. There are limits of course, they can't go too far above or below without risking major distortions or black markets, but if there was no CNH they would have far more power to set the exchange rate.

CNH introduces a new variable. When CNH is above CNY (the offshore yuan is stronger than onshore), it indicates capital flowing into China and into the yuan. If you're in Mainland China, you bring your foreign currency into China because you can buy yuan cheaper than in Hong Kong. Arbitrageurs will bring FX into China, buy CNY, and sell CNH in Hong Kong.

When CNH falls below CNY, it creates a bigger headache for the PBoC. First there is the reverse arbitrage, buy USD with CNY in China, then buy CNH in Hong Kong. Instead of having unlimited CNY to stop appreciation, there is limited reseves with which to defend the currency. Additionally, exporters can divert their capital from Mainland China. Instead of bringing capital home, they exchange it for CNH overseas or they leave foreign exchange in foreign banks hoping for even better prices in the future. Since capital controls are tight on the Mainland, falling CNH and rising depreciation expectations will divert capital away from China. Capital controls can also be avoided with cryptocurrency or through more expensive methods such as real and fake exports.
At present, foreign trade enterprises and overseas investment institutions are mainly involved in domestic foreign exchange arbitrage. They mainly use the name of cross-border trade settlement to purchase foreign exchange according to the domestic exchange rate to pay cross-border trade payments to affiliated enterprises, which will then take the US dollar position to the overseas offshore market for foreign exchange settlement for more RMB. After deducting relevant transaction costs, the risk-free foreign exchange earnings generated by the cross-border foreign exchange arbitrage exchange since last week exceed 1 percentage point.

At the same time, the cross-border arbitrage of foreign exchange difference has led to a sudden increase in domestic demand for foreign exchange, which has virtually put more downward pressure on the RMB exchange rate in the onshore market.

At present, he is most worried about the reactivation of cross-border arbitrage, which will lead to the offshore exchange rate "dominating" the current RMB exchange rate trend. If overseas speculative capital seizes this opportunity to "artificially" expand the range of domestic foreign exchange differentials by significantly depressing the offshore RMB exchange rate and stimulate the continuous fermentation of domestic foreign exchange differential arbitrage transactions, it may drag the RMB exchange rate close to the "7" integer mark in the short term.

"To reverse this situation, the relevant departments should not only take targeted intervention measures to reduce the foreign exchange gap in China at the necessary moment, but also choose the right time to intimidate speculative capital and prevent speculative short selling from continuing to ferment." This Hong Kong bank foreign exchange trader believes that.
The PBoC will wait for the right moment to burn the shorts, to get the biggest bang for their bucks.
Enterprises hoard U.S. dollars
With the RMB exchange rate falling below the 6.9 integer mark, more and more companies are hoarding USD positions for arbitrage.

The chief financial officer of a large domestic foreign trade enterprise disclosed to reporters that compared with the same period last year, the enterprise has retained more than 6 million US dollars in position, because the head of the enterprise thinks that the Sino-US trade friction may cause the RMB exchange rate to break "7" in the short term, and then the enterprise can exchange foreign exchange and exchange more RMB.

"Since this week, quite a few foreign trade enterprises have taken similar actions." The head of the financial market department of the above-mentioned joint-stock bank pointed out to the reporter. The reason why foreign trade enterprises hoard dollar positions is not necessarily to bet on the decline of the RMB exchange rate to take more RMB, but also to consider "preparing for a rainy day" for future foreign payment of USD-if the RMB exchange rate continues to fall, these enterprises have to reserve dollar positions in advance to reduce exchange risks, and also have to take into account the tightening of cross-border capital flow supervision measures, resulting in enterprises unable to pay USD on time.

In his view, this has led to a resurgence of the problem of clearing the foreign exchange market. In particular, when the demand for foreign exchange settlement in the market continues to fall below the demand for foreign exchange purchase due to the recent hoarding of US dollars by enterprises, the RMB exchange rate has again shown an inertial downward trend due to its inability to digest the "foreign exchange purchase order".

Andy Wester revealed that as long as the RMB exchange rate fell below the 6.9 integer mark in the past three years, the problem of clearing the foreign exchange market would follow one after another, causing the RMB exchange rate to drop rapidly to around 6.97-6.98 in the short term. This time, some speculative capital did not rule out taking this as a warning and took the short selling method of betting on the rapid decline of RMB to "draw chestnut from fire".

"The most effective way to solve the current problem of clearing the foreign exchange market is for the Central Bank of China to directly intervene in the foreign exchange market, breaking the expectation that enterprises and speculative capital are betting on the RMB to break 7. As a result, if companies fail to hoard U.S. dollars for arbitrage, they will turn to quickly settle and stop losses when the RMB exchange rate rebounds, and the relationship between supply and demand in the foreign exchange market will also tend to be balanced and stable, thus laying a firmer foundation for the stabilization of the RMB exchange rate. " The head of the financial market department of the above-mentioned joint-stock bank believes that.
The PBoC has two problems in defending the yuan. One is that it cannot control EURUSD, USDJPY, USDAUD, etc. Thanks to dedollarization efforts, a dollar bull market can chip away at those reserves indirectly. Second, USDCNY 7.00 has become a thing and it is less than 1 percent away. If the dollar is rising and speculators want to press their bets, the PBoC will have to spend.

Maybe concerns are overblown again. Maybe the U.S. dollar is peaking or has peaked. Maybe a trade deal is coming. If not, could be a lot of surprised people saying:




2019-05-17

Chinese Demand Fruit Freedom as Prices Soar

Caixin: Fruit Prices Spike in China on ‘Extreme Weather’
“I spent two-thirds of the money I made today on these,” an internet user wrote online while posting a photo of a handful of strawberries and cherries that she had bought. “When can I have fruit freedom?”

The phrase “fruit freedom” — or the ability to buy as much fruit as one wants — became a buzzword in China’s online lexicon following a surge in fruit prices over the last month or so.

China to US: You Didn't Build This

This article is both true and completely misses the point. American workers were sold out by the American establishment, which is why although he doesn't say it as much these days, President Trump frequently calls the previous American leadership stupid. Saying the USA built China is a nationalist statement, it is a condemnation of America's political, financial and corporate establishment. China needs better America hands and fast. The corrupt and selfish establishment is quickly dumping Russia as enemy number one and pivoting to China as America converges on an anti-China narrative after Russiagate laid the groundwork for unrestrained jingoism.

iFeng: 从来就没有什么救世主(钟声) ——“美国重建中国论”可以休矣
Sogou: There has never been a savior (bell)-the "American theory of rebuilding China" can be stopped.
CGTN: Some Americans should get rid of savior complex
China's rapid development has been hailed by the international community as a “miracle of China.” However, some senior American officials have claimed that it was the U.S. that “rebuilt” China over the past 25 years. The claims make no sense at all.

According to some Americans, China's success derived from the state manipulation of the country's exchange rate and the consequent trade imbalance between China and the U.S. They claimed that “the U.S. has run a huge deficit with China over the past two decades and gifted China an immense amount of wealth” and thus came to the conclusion that China's success was largely built on the investment of the U.S. in China and they totally ignored the hard work of the Chinese people over the decades.

The idea of “rebuilding China” reveals the deep-rooted “savior complex” of some Americans.

The trade deficit between the U.S. and China emerged because of the comparative strengths of the two countries and the international division of labor. China has been conducting its foreign trade in compliance with market rules and in a fair manner. Stephen Roach, former chairman of Morgan Stanley Asia and senior fellow at Yale University's Jackson Institute for Global Affairs, pointed out that the U.S. runs trade deficits with 102 countries in the world. So has the U.S. "rebuilt" these 102 countries as well?

The China-U.S. bilateral trade is by no means a so-called “one-way street” where wealth only goes from the U.S. to China. According to reports issued by third parties such as the Deutsche Bank, from the perspective of commercial interests, the U.S. has in fact gained more commercial net benefits than China from their two-way trade. The China-U.S. trade and economic cooperation is mutually beneficial in essence. No one is happy to do a loss-making deal, let alone those Americans who are champions of “America First.”

Since 1987, China has accumulatively utilized foreign capital of more than 2 trillion U.S. dollars. Investment from the U.S. was 81.36 billion U.S. dollars, accounting for 4.06 percent.

In fact, since the “rebuilding China” claims were brought up, the U.S. fact-checking website PolitiFact said that it is an “overly simplistic casting” of the economic relationship between China and the U.S. Scott Lincicome, a scholar at the libertarian Cato Institute who specializes in international trade politics, said that trade with all countries, including the U.S., has been part of a major market reform that has lifted millions out of poverty in China. Reforms to property and taxation have been much more fundamental.

One country has to rely on itself for development. A country with a population of 1.4 billion cannot be expected to grow strong on others' almsgiving and charity. Moreover, no country has what it takes to “rebuild” China. China has made remarkable achievements because it has the right leadership of the Communist Party of China and the path of socialism with Chinese characteristics, because it is committed to deepening comprehensive reform and opening-up, and because the Chinese people are hardworking and full of wisdom.

China does not pursue development with its doors closed. Instead, what it has been doing is seeking mutually beneficial and win-win cooperation with others with its doors wide open. While developing itself, China continues to open its market and increase its outbound investment, which also creates more opportunities for other countries in the world, the U.S. included. A Yale University economist believes that without China's part in the U.S. sovereign debt and corporate investment, the U.S. would not be able to sustain years of growth in the areas of real estate, defense and business. In this highly interconnected world, it is hard to say who is rebuilding or being rebuilt.

There is no such thing as "Savior U.S." Instead of embarrassing themselves by making groundless claims, some Americans should acknowledge the facts, stop making accusations against China, and do something to contribute to positive trade relations between China and the U.S.

China Auto Emissions Standards Rise in July

Chinese auto sales have been slumping and one reason may be the rollout of stricter emissions standards.

Caixin: Stricter Vehicle Emission Standards May Spell Further Bad News for Hobbled Industry
The country will soon adopt the sixth phase of its vehicle emission standards, which China claims is even stricter than the European Union’s. Once it goes into effect, dealers will no longer be able to sell vehicles with that don’t meet the rigid requirements.

As China grew increasingly aware of pollution, the government decided in mid-2018 to move up the implementation date for the new standards in certain prominent areas including Beijing, Chengdu and south China’s Pearl River Delta. The new rules will go into effect in July 2019 – one year earlier than their previously scheduled date.
World Platinum Investment Council: China clean air, PGMs and platinum
China has some way to catch up with PGM loadings in more mature markets. The right-hand graph above shows PGM loadings per vehicle in North America, Japan and China. Several factors explain the differences including average engine size, fuel mix differences (thus excluding Europe), and, most importantly, emissions standards. Nonetheless, as emissions standards and wealth improve in China, PGM loadings should continue to approach those of more developed regions, thus providing a demand push for PGMs, including platinum, by potentially as much as a gram per vehicle.

As palladium goes further into deficit, it should tighten the platinum market. The Chinese demand trend is significant as it represents 26% of global PGM demand. Should Chinese automakers see supply risk and/or cost disadvantage in palladium, the platinum market offers ample capacity to satisfy increased PGM demand.

Maotai Bubble is Back, But Competitors Are Striking

21st Century: 一线调查:53度飞天茅台价高缺货 五粮液、泸州老窖补位进攻
Sogou: First-line investigation: 53-degree Feitian Maotai with high price out of stock Wuliangye and Luzhou Laojiao's replacement attack
For two consecutive months, according to the on-the-spot investigation conducted by 21st century business herald reporters from Beijing and Chongqing, not only are there no 53-degree Feitian Maotai sold in the self-run Maotai shops in the two places, but they are out of stock for more than one month, and even many Maotai dealers say they have no goods to sell. Many tobacco hotels and Maotai dealers in Yubei District of Chongqing reported that the 53-degree Feitian Maotai liquor was priced at around 1900 yuan, and department stores such as Beijing Cuiwei Department Store Peony Garden even priced at over 2400 yuan.

At a time when the price of Feitian Maotai liquor is high and out of stock, the market space vacated by Feitian Maotai liquor is being replaced by other famous liquors, the most prominent of which are Wuliangye and Luzhou Laojiao, which are closely followed by Feitian Maotai liquor.
While speaking, a phone call for wine came in. The shopkeeper answered, "Maotai liquor is expensive. if you drink it yourself, I recommend you to buy Wuliangye, a collection limit for the high-end department of Wuliangye. The original price is more than 2,000, and we have received gifts from large manufacturers, so we will give you 1100 yuan. The quality of the wine is much better than that of ordinary Wuliangye, and it is 1.5 kg and has high cost performance. "

After taking Wuliangye discounted high-end collection liquor PK Feitian Maotai, the other party was moved. The shopkeeper went on to lobby: "You think Feitian Maotai is expensive, take Maotai series? Maotai series wine is also of high cost performance, but are you good enough to entertain guests at a price of over 200 yuan and 300 yuan or 400 yuan? "

The words sound just fell and the other party immediately said at the other end of the phone that they would send a "Guoyun Chang" to us sometime. After finishing this large order, the shopkeeper turned to persuade the reporter who hesitated between Maotai and Wuliangye to buy the wine. Seeing that the reporter was not in a hurry to place the order, he quickly sent the picture of Wuliangye wine to the reporter's mobile phone and turned out the Wuliangye picture album, pointing out that the wine and the yudingjingsheng series that Wuliangye sugar will appear this spring are both ultra-high-end products, allowing the reporter to find him at any time.
Compared with the "shortage" of ordinary Maotai liquor, the ultra-high-end products developed by Guizhou Maotai are not out of stock.

"30-year maotai liquor is 9,700 yuan, and kg maotai is 3,800 yuan. these are all sold today." At Chongqing Ran Jia Ba Yu Song Zhi Lu Dian Wu Liang Ye Ming Hotel, the owner took stock of the May 7 delivery note and told reporters in 21st century business herald.

Similarly, at the self-run store of Chongqing Guojiu Maotai Sales Co., Ltd. located in Longshan Street, Yubei District, Chongqing, the clerk told the 21st century business herald reporter who bought the liquor as a consumer that although both Feitian Maotai of 53 degrees and 500 milliliters worth 1499 yuan and Wuxing Maotai of 53 degrees and 500 milliliters worth 1699 yuan were out of stock, the fine Maotai liquor was temporarily available at 3199 yuan.

The first quarter of this year showed that the net profit of Guizhou Maotai (600519.SH) increased by nearly 10 points over the increase in revenue. From January to March, the company realized operating income of 21.6 billion yuan, up 24% year-on-year, and net profit of 11.2 billion yuan, up 32% year-on-year. Pacific Securities believes that Guizhou Maotai's first-quarter results exceeded expectations, with product upgrades being the main reason. During the reporting period, the actual quantity of Maotai liquor shipped was close to 7,000 tons, the product structure and the price per ton of liquor increased, and the fine Maotai liquor was released at the end of last year. Judging from Guizhou Maotai's 2018 annual report, gross profit margin is as high as 91.25%, up 1.4% year on year.

Fine Maotai is becoming the new profit growth engine of Guizhou Maotai. At the national spring sugar cocktail party in March, no matter the first low-alcohol maotai dealer symposium or the maotai spring dealer symposium, many dealers took the initiative to talk about the market share of the fine maotai at the price of 3,000 yuan being expanded. Maotai ultra-high-end products, represented by premium Maotai, personalized Maotai and aged Maotai, are changing the strong market pattern dominated by 53-degree Feitian Maotai.

Returning to the shortage of ordinary maotai liquor, is it natural or artificial?

Under the marketing system in which the sales income of distributors and wholesale agents accounts for 95% of the overall sales income of Guizhou Maotai, the market price of 53 degrees and 500 milliliters Feitian Maotai has reached about 2,000 yuan. Self-owned or direct-selling stores supply a small amount of Feitian Maotai at 1499 prices. Will they not wait for customers to come to their homes and immediately become another drive-up by neighboring cigarette hotels or dealers?

Parity Maotai disappeared, leaving most Maotai dealers unscathed. However, for the consumers who are getting closer to Guizhou Maotai in the past two years, it has become a worry that they can't buy a bottle of Maotai in their own stores or run straight stores. "I am the manufacturer who issued the Maofen passport. As a result, I can't even drink the Maotai liquor with the manufacturer's guiding price of 1499, which will affect our loyalty to the product for a long time!" An anonymous Maofen in Chongqing called a reporter from 21st century business herald and said.