FINTS

2016-05-25

China Wants to Set the Price of Gold, Oil, Iron Ore and More

The West will lose its pricing power if it is surpassed economically. It will lose pricing power sooner if it doesn't operate free and fair markets. The shenanigans in the precious metals market created a demand for competition, with many gold market participants looking forward to China setting a real market price, or at the very least a competitive rigged price.

Bloomberg: China Wants to Set Prices for the World's Commodities
“We’re facing a chance of a lifetime to become a global pricing center for commodities,” Fang Xinghai, vice chairman of the China Securities Regulatory Commission, said at the Shanghai Futures Exchange’s annual conference in the city on Wednesday. “On the way to realize this goal, we’ll see very intense competition. We have the advantage of trading size and economic growth, but our legislation is still not sound and we lack enough talent.”

...“We plan to use crude oil, iron ore and natural rubber futures as the starting point in our efforts to open the domestic market to more foreign investors,” Fang told the audience. China shouldn’t underestimate “the determination of current pricing centers to maintain their status,” he said.

Rust Belt Taps Shadow Lenders; Trusts Offer BMWs to Entice Investors

Reuters: China's wary lenders force rust-belt country to take expensive shadow bank loans
In several of the hardest hit industrial provinces, including deeply troubled steel and coal producing regions, the swing back to the shadow sector – lenders outside conventional banking who usually charge much higher interest rates than traditional banks - has been stark.

Firms in Liaoning, an industrial powerhouse in China's northeast, borrowed over 2,000 percent more from shadow banks in the first quarter of this year, compared with a year earlier. The borrowing accounted for 19 percent of the province's total financing, up from just 1 percent in the first quarter of 2015.

"Economically advanced regions, especially those with strong access to municipal bond funding, don't really have to fall back on shadow financing as much," said a director at a Shanghai-based asset management firm. "Smaller and poorer areas are different."

The sharp retreat of weaker regions into shadow lending - when credit as a whole has expanded massively - suggests that traditional creditors are rapidly abandoning the long-held belief that lending to state-owned enterprises (SOEs) is risk free because local governments nearly always bail them out.
Property lending is a bigger share of bank balance sheets and now the indebted rust belt companies are tapping finance products that charge high interest. Those loans are in turn marketed to unsophisticated investors. Meanwhile, behind the scenes are our old friend, the credit guarantee and ultimately the very banks that don't want these loans on their balance sheets.
Research firm Puyi said new trust products created in the first quarter offered investors annual yields averaging 8-9 percent, highlighting the risks for struggling economies borrowing from the sector.

In Liaoning, for example, the economy shrank 1 percent on the year in the first quarter.

Perhaps aware of growing wariness about shadow bank lending, some trusts are using creative methods to get investors to part with their cash. In Tibet, where shadow bank lending rose 50 percent in 2015, trusts are offering leased BMWs as an inducement to invest in one- and three-year products.
The tails are getting fatter in China.

Property Loan Risk Greater Than Anytime Since 2008 Crisis

Reuters: Property loans, the glass chin of China banks
China's top banks are lending more to homebuyers and developers than at any time since at least the global financial crisis, making them vulnerable to a property market downturn as prices overheat and real-estate firms struggle with a growing debt burden.

China's top five banks had mortgages and loans to the sector of 12.4 trillion yuan ($1.9 trillion) at end-2015, up 11 percent over the year, and representing 28 percent of total loans, a Reuters analysis of their balance sheets shows.

That is the biggest exposure on their books, more than to manufacturing or transportation, and it exceeds 40 percent, up from about 26 percent seven years ago, if all loans secured on property are included.
China relied on real estate post-2011 to drive growth as the economy slowed and this led to problems in 2014-2015. Mortgage financing has soared, with Shenzhen's total mortgages already up 50 percent in 2015 and Beijing on pace to double last year's totals as of April. There's already a sentiment shift in the market, with prices stabilizing and some expecting a drop by summer.

Identity Politics in Taiwan

Taipei Times: Tsai’s reform aims focus on future
Thus, even though Tsai also emphasizes the nation’s problems of youth unemployment, educational rigidity, growing disparities of income and wealth, an aging population, environmental pollution and loss of trust in the judicial system, she does so within a context of identity politics that points toward ultimate success in development potential, internationalism and openness to new ideas and technologies, a spirit of adventure and a willingness to sacrifice the misadventures of the recent past for the potential of the near future.

However, of even greater significance, the address makes it clear that the issue of national identity is now to involve a dual emphasis and interrelationship of policies toward Aborigines and policies toward China.

Rather than indigenous affairs being an ad hoc and marginal feature of social or cultural policy, it is to move center stage, as Tsai’s key notions of “the entire nation” and fairness require that policy should better monitor and improve the social and economic relations between Aborigines and a majority Chinese population.

Policy toward Aborigines can no longer be presumed as cultural protection of outsiders who are within Taiwan. Aboriginal policy must now be central to a political economy that has a firm identity, and it can only be a political bonus that Aboriginal ethnicity cannot be defined in any way as Chinese in origin.

Again, the “Straits question,” or relations with China, can no longer be seen as purely mechanistic, economic or political, but deeply embedded culturally in the developing crisis of identity among Taiwanese of many backgrounds, ethnic or otherwise. It can no longer be dismissed in artificial appeals to “the concensus” or other spurious formulae designed to hide abiding contradictions.
The same political dynamics are underway all across the world. Although it expresses its form in many different ways, the victory of Tsai in Taiwan is ultimately driven by the same forces propelling Trump in the United States. The friction within and between nations is being driven by culture and identity.

Migrants Abandon First-Tier, Will Companies Follow?

"Although my annual salary is more than 200,000 yuan, but still very difficult to buy a house in Beijing, Suzhou, just to have a good opportunity to work on the move in July last year we came." After six years of struggle in Beijing, Zhang (not his real name) and his wife eventually chose to leave and in early May of this year bought a house in Suzhou to fulfill their dream of home ownership.
Well Mr. Zhang, you were late!
In fact, Zhang bought late. Yi Ju Institute think tank Center data show that, Suzhou (excluding Kunshan, Taicang and other county-level cities) this year in January - April the average transaction price of new commodity housing was 16,969 yuan per square meter, compared to the year 2015, up 28.91 %.
In addition to driving out migrant workers, rising prices may finally drive out key businesses including Huawei:
Although Huawei has denied rumors of a move to Shenzhen, but also warns of the many local governments, housing prices "Breakaway" will drive away a lot of good business, it may ultimately be "penny wise, pound-foolish."
Governments are trying to slow the rise in land prices, which in some cities exceeds the price of finished homes. See: Flour More Expensive Than Bread: Second Tier Land Prices Soar 180 pc
Many local governments have realized that the blind pursuit of land financial disadvantages. Suzhou, 23, on the 24th consecutive day land on the right pieces of the house implementation of the auction price, making the final bid is too high because of two house lots unsold.

This mechanism is similar to the stock market "fuse" or the first time in the land transfer process, although you can curb appearance of land kings, there are loopholes. "Once developers have a 'life or death struggle' mentality, you can blindly increase the price, and finally touch the red line, resulting in a failed auction." A real estate industry sources told CBN reporter.


For example, Lot No. 41 23 auction proceeds to two minutes, there have been 93 bids, the final result of the auction failed to deal over the red line.

24th auction seems to be more rational. In the morning, after 27 round of the competition, the Suzhou Industrial Park in the beam real estate to total 83.14 million yuan competing in the Soviet Union to 2016-WG-29 plots floor price of 10,549 yuan / square meter, the premium rate of 45.5%, becoming the first successful transfer of the block "to limit."

"And a lot of housing prices, we are positioning the Yangtze River Delta, Suzhou thus become the fulcrum of our major cities, next to the land, we acquired a project, and the future can be linked together with land development, reduce marketing costs." the new real estate Liang Su Jian, head of the Southern regional company told CBN reporter.
Regarding Huawei: HUAWEI SAYS NO PLAN TO MOVE OUT OF SHENZHEN
HUAWEI Technologies Co. Ltd. said Monday that it has no plan to move its headquarters out of Shenzhen in response to rumors claiming the technology giant will ditch the city due to its soaring property prices and labor costs.

Huawei said in a statement on its official website that the rumors spread over the weekend are “not true.”

“Huawei has been setting up all kinds of branches and research institutions across China and even in overseas markets since a couple of years ago to better support the company’s global expansion,” said the statement. “During the process, it is a normal business practice to adjust the responsibility of different entities.”
Whatever their intentions, the door is open for them thanks to global expansion.

SCMP: Housing crisis in China’s ‘Silicon Valley’: Huawei, other hi-tech giants head for cheaper cities as rising costs deter talents
Shenzhen, the southern city known as China’s Silicon Valley, could be losing its lustre due to a housing affordability crisis much like the one that struck the American original.

Led by tech behemoth Huawei, talent, resources and money have been flowing out of Shenzhen to cheaper locations, in particularly Dongguan, about an hour’s drive north.

Sudden Dollar Shortage in China as Big Banks Buy

Here we go...

As if overnight, Mainland dollar liquidity is suddenly scare. The large banks previously providing dollar liquidity began buying dollars, a number of commercial banks also have bought dollars in the interbank market and the swaps markets.

Within a few days, the dollar / renminbi swaps rapidly declined, with one week and one-month swaps on Tuesday hitting a new two year low.
The big banks may be soaking up dollars now to smooth the pain of yuan depreciation later:
Many analysts said that this is the result of multiple factors, combined to create pressure, and the Federal Reserve to raise interest rates expected to heat up not unrelated, but also within the tight dollar liquidity factors; they also do not rule out large banks "ordered settlement," in order to smooth future RMB devaluation pressure.
The dollar is the hot trade:
"After the Fed rate hike expected to heat up, the dollar to appreciate nature, the dollar enchants everyone." A stock line trader said.
A Fed rate hike in June is a shock event, as is a potential Brexit:
Also head of foreign exchange trading firm, said there are two black swan event in June will affect the devaluation expectations: the Federal Reserve to raise interest rates in Europe and the British retreat. If, unfortunately, these two things have happened, and that will bring a great impact to the renminbi expected, the central bank should be prepared in advance ready ammunition.
With the market already on edge about a possible rate hike, a switch in central bank actions triggered a sea change:
And perhaps this is expected to manage the central bank to make its usual supply of dollar liquidity in the market, large banks reverse and repurchase dollars, but the market touched the nerve, triggering market dollar liquidity shortage anxiety.

"The first day (the dollar) is tight I thought it was random, doesn't matter, so the next day like this, three straight days, the psychological endurance is limited, anxiety rises, so we can only ... buy (foreign exchange) as much as possible." one commercial bank trader said.
The PBoC is also suspected of moving ahead of a potential depreciation:
However, the above trading company trading executives pointed out that the central bank intervention in the swap market has powerful chain of effects, use a small amount of capital to achieve a large result; on the other hand can stabilize market sentiment. In addition, the central bank also made a gesture, that it would not wait for devaluation

The reason that the interventions are short and long-term is the central bank's trading strategy is to use the least amount of ammunition to achieve the best results. Because once the black swan happens, devaluation expectations will be significantly enhanced, which leads to delayed settlement of foreign trade enterprises, foreign exchange deficit will widen further bank, which will further increase the expected devaluation, creating a vicious cycle.

Earlier, SAFE has repeatedly said at a news conference that there is sufficient policy instruments to deal with the normalization of the Fed's monetary policy.
The end of June is also a potential time for tight liquidity in China, and the news of a possible Fed rate hike reignited those fears:
Although the distance between the end of the second quarter June 30 liquidity assessment more than a month's time, but if you take into account the mid-June Fed rate hike expectations, as this assessment from the point in time may be about 10 days, then the banks in advance hands-on management of liquidity and may not too late.

"Six months is a seasonal factor factor (purchase of foreign exchange) demand is there, because the feeling is June 15th FED may raise interest rates, the market is expected to stir someone to advance hands." Another listed bank head trader said.

He laments that the rapid rise in US interest rates in China recently, swaps declined rapidly in China showed that the Mainland reaction to the Fed rate hike is even more sensitive than the United States, but now look at the market reaction, "a bit exaggerated."
iFeng: 外媒:中国境内突现美元荒 大行意外回笼美元

Related: How Dollar Short Are Chinese Banks?

2016-05-24

SF Express Rushes to Cash Out Via Backdoor Listing

Nikkei: SF Express takes shortcut via 'backdoor' Shenzhen listing
China's delivery giant SF Express is seeking to list via a 43.3 billion yuan ($6.6 billion) reverse takeover, the latest of several logistics companies to attract public funds through the controversial method of backdoor listings.

SF's parent plans to merge with Shenzhen-listed Maanshan Dingtai Rare Earth and New Materials through an asset swap, and use it as a shell company to list on the local bourse. The little-known Dingtai Rare said in a filing on Monday that it plans to raise up to 8 billion yuan in a private placement of shares with private investors to finance an upgrade of its logistics and infrastructure.

...Nonetheless, industry watchers say SF's rush to list on the mainland bourse is more an attempt to raise funds amid a more challenging environment -- competition in China's courier industry is intensifying and profit margins are increasingly squeezed. Its net profit rose 80% to 1.97 billion yuan last year, but was barely an increase from 2013, when net profit was 1.96 billion yuan.
In the Economic Observer this rationale is refuted by economist Zhang Chao:
SF at this time decided to go public with the intention not of financing, but to cash out.

For two reasons: First, now there are many ways of financing, stocks, bonds, bank loans, PE, VC and so on. If, as the wind such enterprises to financing, he is likely to choose bonds or bank loans that do not split its equity financing in order to protect its future earnings.

Second, the stock market as a whole is not good now, backdoor listing using this approach is clearly worthwhile. So why choose this point in time of using stock to finance? The conclusion is that he is probably not in a hurry to finance, but in a rush to cash out.
He still sees a positive future for the company:
SF Why can cash at this time, which we do not know the reason. But in the express delivery companies in the market outlook is still good SF is certain.

The reasons are the following two points:

1) SF has successfully completed the company's own network of provinces and cities, its own in the management of the SF competitors have joined the system is difficult to match the advantages, so as to provide better service. In addition, unlike its competitors in the establishment of storage and other plans still need to consider a phased buyout franchisees and other uncontrollable circumstances, SF can be directly under the current local distribution optimized layout, to obtain first-mover advantage in the competition.

2) SF have differential advantage in the express delivery industry, at present, among the leading courier, SF only provides cold chain and transportation of drugs by the two services, the role of the vaccine virus in the first period, that the medical transportation will be the future market and one of the key directions of the government concerned, there is a big upside. The cold chain is after rising incomes in China increased emphasis on food safety is also based in the state promising.
EO: 说好不上市的顺丰上市了 真的是为了融资吗?

China's Debt Fueled Oil Flood

ZH: Why China Is Being Flooded With Oil: Billions In Underwater OPEC Loans Repayable In Crude
The summary is fascinating: China is being flooded with oil, on one hand due to ongoing purchases, but to a large extent because its oil-exporting counterparts (who need to remain on good terms with lender of last resort China) are scrambling to repay their Chinese loans by shipping out record amount of oil in the direction of China, so much so that even China's infrastructure can no longer handle the inbound traffic. As Bloomberg notes, "ships continue to be held up at Qingdao. At least 16 oil tankers with capacity to carry 21.2 million barrels have stayed near the port for more than 10 days over May 1-23. Half of them were there for more than a month."

How this unprecedented dynamic plays out, is at this point impossible to predict, but with such dramatic pockets of zero-sum inefficiency, where half of OPEC-loss is China's gain, we eagerly look forward to the conclusion and how it will impact the price of oil.
China will probably make out on the deal if they can sit on the oil long enough, they might end up making a lot of money depending on the price moves. The borrowers made bad deals. If you agree to repay in barrels of oil, the debt should be denominated in barrels. If that were the case, these countries would have counter-cyclical liabilities that fell along with their ability to pay and they wouldn't be in such bad shape. China made lots of pro-cyclical bets too though, so it's not like anyone had a monopoly on high time preference.

How Dollar Short Are Chinese Banks?

A Discrete Look At What Is Bigger Than All The World’s QE’s Combined
In October 2014, Bank of China issued its first AT1 (coco) piece at a whopping $6.5 billion, more than three times subscribed with $21.8 billion in orders. Though the deal flow skewed Asian, meaning Asian demand, that only reinforces what the eurodollar actually represents. A little over a month later, Commercial Bank of China funded a large triple currency AT1 starting with a RMB 12 billion (about $2 billion equivalent) piece, $2.95 billion in eurodollars, and a final, marginal €600 million piece. According to Moody’s, the biggest issuers of cocos since 2009 have been the Swiss, including, not surprisingly, Credit Suisse #1 at $19.5 billion (not all in dollars) and UBS ($18.5 billion), and the Chinese; Bank of China ($18.9 billion very likely mostly in “dollars”) and Agricultural Bank of China ($17.8 billion).

When the coco market fell apart in early 2016, with no issuance at all for nearly the whole of the first quarter, that disrupted intended funding not just for Deutsche Bank and European firms expecting to raise that €40 billion on the year, but also the Swiss and Chinese heavily in terms of their intended “dollar” flow. I haven’t found any published expectation for what Chinese banks, in particular, were planning on funding via this market in 2016 but it is quite reasonable to assume it was significantly more than zero. Where might they have gone instead to replace those expected “dollars?”

Chinese banks were likely moved into shakier short-term “dollar” funding arrangements or to be put upon the PBOC’s rolling crisis management. From this perspective you can appreciate the Chinese central bank’s increasingly impossible tradeoff between “selling dollars” and internal RMB liquidity, and why it swings so assuredly from one to the other at these regular intervals. Unfortunately, there is very little information about cocos in the months since the Deutsche Bank-led scare of the January/February liquidations. While UBS was the first to open up the coco market back in March, there isn’t much to indicate that banks are back to sourcing “dollars”, euros, or anything else at even close to the same pace as last year’s level (which was already, again, less than 2014). In other words, just another tightening of the systemic ratchet.

Related: December, 2015 Bloomberg: The New Love for Chinese Yield Chasers: Leveraged Coco Bonds
The Chinese yuan’s declines and lower local rates have encouraged the nation’s investors to go offshore in their quest for yield. That’s fueling more interest in leveraged notes linked to contingent convertible bonds issued by Chinese banks.

“In recent months, we have seen growing interest from onshore Chinese clients in offshore U.S. dollar-denominated assets,” said Deng Xixi, head of the financial products department at Haitong International Securities Group Ltd. “A lot more Chinese clients are shifting their focus from the Chinese stock market to cross asset solutions, especially China bank preferred share products with leverage features to enhance yield.”

Chinese lenders are the biggest issuers of such capital used to meet rules for lenders to have sufficient buffers to cover losses. The convertible preferred shares are sometimes called coco bonds. Leverage features allow investors to gain more exposure to the underlying assets, or coco note in this case, than they had paid for.

...“Leverage is the theme for clients in the Greater China region and we have seen a lot of leverage requests on coco bonds,” Hong Kong-based Chan said. “The leverage can go from a bit more than one to up to three times.”
FT: Chinese banks issue most coco bonds
Faced with increasing demands from regulators for capital that can absorb losses, Chinese banks collectively issued $59bn of contingent convertible, or coco, bonds in 2014, equivalent to a third of all global volumes according to research by Moody’s.Most coco bonds sit above equity holders in a bank’s capital hierarchy, meaning they are exposed to losses before senior creditors.

Han Huishi: USD Determines RMB Exchange Rate, No Change in Policy

Han Huishi of China Construction Bank comments on this WSJ story: A Rare Look Inside China’s Central Bank Shows Slackening Resolve to Revamp Yuan. He doesn't think it's as big a revelation as it seems.

iFeng: 韩会师:央行遭遇逼宫 将放任人民币贬值?
First, the article mentions "economists and bankers claim China's central bank to stop and allow the devaluation of the Renminbi against the market", which is not to say that the theory and practice, particularly in the banking system of collective opposition to the current exchange rate policy? Is the central bank is facing tremendous pressure, it is likely to indulge devaluation?

Second, the "near central bankers," said, "January 4 the central bank abandoned the private market mechanism," What does that mean?

Third, "the central bank did not respond to the Information Services Department," Wall Street Journal "request for comment" mean the Bank of guilty, it does not respond.

Fourth, the recent devaluation of the renminbi against the US dollar stage, this report is not now thrown in for further devaluation do to prepare public opinion.

This "Wall Street Journal" reported from the content is completely paraphrased the content, not to mention what might stand newspaper itself, but "people close to the central bank," the statement doesn't come from a professional place. For questions raised above, I believe that to a large extent this reflects the current market is not familiar with the pricing mechanism of the RMB, so should not have any fears.
He lists why he isn't concerned:
First, the closed-door meeting is not a mystery.
People say lots of things in closed door meetings. Next, he goes on to blast the source as being "near to central bankers," a field so wide it is meaningless and unrelated, including even the janitor who cleans Zhou Xiaochuan's office.
Secondly, the "near central bankers' central bank and the two concepts are irrelevant.

Category "near central bankers" can be infinitely wide, he can be both tutor central bank officials may be central bankers reporters often interview can also be a People's Bank door armed police on duty, even responsible for cleaning Zhou Xiaochuan's office cleaning uncle, so this statement can not listen to people in general, because no one is responsible for these things, of course, can not be responsible for lip service.

Let us look at "close to the central bankers," the specific position, there are many problems.

The first question: the person said, "January 4, the central bank abandoned the private market mechanism." So January 4 exactly what happened?

January 4 is the first trading day of the new year, the day the yuan central parity reported 6.5032, compared with the 2015 closing price opened 96 basis points lower on the central parity devaluation led to the spot exchange rate, the yuan hit 6.5381 daily low, than 2015 closing price fell 445 basis points. Note, however, in December 2015 and January 2016, banks on foreign exchange settlement deficit (spot + forward) were as high as 965, and $ 88.3 billion, under so much pressure deficit, devaluation of the RMB against the US dollar seems to be "follow the market mechanism" rather than "abandon the market mechanism." So I am a bit confused, in the eyes of the person "market mechanism" is what that means.

The second question: the person said, "the central bank again back to the old way the yuan central parity adjusted according to the wishes of the authorities." This is clearly demeaning to members of the central bank and commercial banks.

Now every day making banks, RMB yuan central parity should be submitted to the central bank's reference price, the offer is based on "a basket of currencies" + "reference closing price" of double reference to the principle of central bank regulations. Meaning this person is obviously that the various market-making banks offer no use, according to the central bank free to develop their own ideas yuan central parity every day. But the reality is not the case, seems to be close to the central bank, the person said not only do the major city banks offer members say considered.

According to the author of the survey, a number of banks to the central bank central parity gap reference offer submitted and published by the central bank is not large, it seems to indicate the central parity of the central bank's offer is more transparent, rather than more secret operations. I do not know whether this person to do the city bank conducted the field survey. The author in the article which micro-channel many times more than 12 hours ahead of central bank estimated that the next day the central parity, at least six consecutive calculations, the author quotes and estimates the central bank to maintain parity on the final direction of change 100% agreement the gap between the specific point has been largely controlled in less than 30 basis points. This shows the central parity offer absolutely rule-based, not arbitrary racking our brains beat out.
He goes on to explain how the dollar is driving the USDCNY:
Take today's market data, for example, this afternoon, the yuan closed at 6.5567, if tonight the international market maintains the dollar's appreciation, the dollar index closing price to a level above 6.42 [DXY of 95.642?], then tomorrow, the People's Bank is likely to open central parity above 6.5600.

If tonight dollar index fell to about 95.2, and yesterday's closing price is about the same level, the central parity of the central bank is likely to start tomorrow in the vicinity of 6.5500 or slightly higher.

If the dollar index flattening out tonight, closing near 95.30. Tomorrow the central bank is likely to open in the vicinity of the central parity of 6.5550, plus or minus 20 basis points.

Simply put, as long as the dollar index fell tonight, tomorrow or the central parity approximation breakthrough 6.5500 is a high probability event, the spot exchange rate is a high probability event swinging around 6.55.
In conclusion, much ado about nothing:
"Wall Street Journal" reports should be true, but the sake of discussion participants, the paper quoted and "near central bankers," the statement was not a professional, there can be no possible objective. Just text various kinds of "person" in March the views expressed and the current devaluation of the RMB market is just more attractive market attention, so many of my friends to cause some trouble. If the central bank for the text with the Information Services Department of the suspect based on hearsay evidence to be able to respond, it is estimated that several ISD staff already died from overwork.

As I previously stated, according to the current pricing mechanism of the RMB, the yuan is the current trend can be expected, the depreciation of the market is a normal reaction in the dollar strong background, not to mention the central bank conspiracy. So even if tomorrow the central parity continues to depreciate, and even new lows, you do not feel strange.

A long time did not write such a long text, and tiring. I want to help an old friend.

Chinese Protest Uni Admissions Change

FT: China university rule change sparks protests in 4 provinces
Like their state-run counterparts in the US, Chinese universities reserve a certain percentage of places for students from their home province, which are allocated through a gruelling annual exam known as the gaokao. In an effort to increase access for non-local students, the education ministry ordered universities in many of China’s most populous provinces to reduce such quotas.

The changes sparked an immediate backlash from parents whose children would be disadvantaged by the reform.

Reflecting the sensitivity of the issue, internet censors have taken down social media postings and online discussions about the reforms and ensuing protests. But some appeals are slipping through their net. One posting on WeChat, China’s most popular messaging app, called on parents in southern Hunan province to join a protest scheduled for Tuesday.

In an open letter to the State Council, parents in Henan also complained about alleged discrimination for places at the country’s most sought-after universities, such as prestigious Peking University in Beijing. According to the letter, first reported by the South China Morning Post, Peking University accepted only one out of every 8,900 Henan applicants in 2013, compared with one out of every 325 applicants from Beijing.

Yingli Debt Restructuring Plan Expected Soon

Southcn: 二次违约 英利债务重组将剥副业

SA: Yingli Energy (YGE) Likely Already Restructured Large Part Of Its Debt. Here Is The Proof. When Will U.S. Investors Be Informed?

China Cinda Asset Management : Yingli Restructuring Plan to be Released Soon

China Bond Defaults Exceed All of 2015, 57 pc of AAA Bonds Are Junk

Through May 24m 16 companies have defaulted on 30 bonds. The bonds are worth more than 20 billion yuan and nearly 18 billion of the total hasn't been repaid.

Wind: 前5月债券违约规模超去年全年!这个锅该评级机构来背?

Defaults are accelerating, as evidenced by this chart:

The list of all the defaulted bonds:

Ratings downgrades are also accelerating:

Bloomberg: Look Closer: 57% of China AAA Bond Issuers Have Junk-Like Risks
About 57 percent of bond issuers listed in China and whose securities are rated AAA in the nation may have default risk consistent with what Bloomberg’s quantitative, independent default-risk model deems a below-investment-grade company. The model tracks metrics including share performance, liabilities and cash flow. It doesn’t take into consideration guarantees or make assumptions about government support, regulations or future earnings.

...Investors are pushing for more accurate ratings after at least 10 companies defaulted so far this year, already exceeding the tally for 2015. Dagong Global Credit Rating Co. didn’t cut its grade for China Railway Materials Co. from a second-ranking AA+ until three days after the company suspended trading on its 16.8 billion yuan ($2.6 billion) of notes on April 11 to study debt repayment issues. Bonds rated AA- or lower are considered as Junk in China’s onshore market.

Remain Storms Into Lead Ahead of EU Referendum


In The Case For Brexit, ZH publishes a chart showing the market is not buying the polling data.

Shanghai Home Prices Falling

The real estate slowdown in the first-tier has reached Shanghai. Luxury apartment prices have stabilized and now there's news of a home being slashed from 17.5 million to 15 million, or 14 percent.

In Beijing, May existing home sales are at the lows of 2016, and prices are starting to come down 3 percent to 5 percent according to brokers. The same price trend is seen in Shanghai. Shanghai brokers say about 20 percent of homeowners are willing to cut prices. Traffic is still strong on the weekends, but a larger share of customers are making inquiries, not buying.

The rate of increase in existing home prices is expected to decline moving forward.

iFeng: 一线楼市现反转 上海市有房价格直跌达250万