2017-06-25

SOEs Inflating Profits

SCMP: Audit report reveals China’s economic fault lines
An official audit report published on Friday said that 18 of the 20 state-owned firms that were audited have in recent years inflated their revenues by more than 200 billion yuan (US$29 billion) and boosted their profits by 20 billion yuan with faked business and manipulated books.

The companies audited include China National Petroleum Corporation, China State Shipbuilding Corporation and Sinochem Group.
Much of China’s spectacular growth has been fuelled by lending.

Lu Zhengwei, chief economist from Industrial Bank, said that although the fake profits only accounted for a small proportion of total takings at the country’s state-owned entities – less than 2 per cent – it showed the problems they had deleveraging.

2017-06-23

Beijing Has Mortgage Lending Standard: 25pc Total Lending

Mortgages only accounted for 28 percent of new lending in May, a new all-time low. Banks have a minimum standard of 25 percent. Since mortgages are 28 percent through May, they'll have to fall to 21 percent for the rest of the year. The lending standard could also crush credit growth rates.
At the end of May, individual housing loans increased by 90.76 billion yuan compared with the beginning of the year . The proportion of newly added loans was 28% , which was lower than that in the first quarter of 2017 (37.6%) and 2016 (47%), down 9.3 and 18.7 percentage points, trending towards a reasonable ratio.
According to the report, Beijing banks have a target for mortgage lending: 25 percent of new lending. Since the ratio is 28 percent at the end of May, it requires a decline to 21 percent in the rest of 2017.

From January 2017 onwards, the People's Bank of Operations in the MPA assessment to further highlight the credit policy-oriented effect assessment, in accordance with the macro-prudential requirements, to join the individual purchase loan growth factor, the Beijing area of ​​all banks strict control of individual purchase loans Accounting for the proportion of all new loans, and the annual control target is determined to be about 25% of the reasonable level.

From the implementation of the situation, the first quarter of 2017 new personal purchase loans accounted for 36.1% of all new loans fell sharply from the fourth quarter of 2016 proportion of 67.4%, down about 31 percentage points. Especially as the main bank in Beijing, the main bank more obvious: ICBC Beijing Branch fell to 24%, Construction Bank Beijing Branch fell to 29%, Bank of China Beijing Branch fell to 15%, Agricultural Bank of China branch in Beijing fell to 35% , China Merchants Bank Beijing branch fell to 23%.

From these two words can be found, the Beijing area for the new mortgage accounted for the minimum standard control at 25%.

According to the May data, the current Beijing new mortgage accounted for 28%, if you want to reach 25% level, what will happen next?

According to the previous year lending of 605.9 billion yuan, and a 10% new loans growth rate, we estimate that in 2017 Beijing new loans may reach about 660 billion. 25% of that is 165 billion, that is, Beijing's new mortgage size to control the level of 165 billion or so.

The first five months, Beijing banks have issued 90.7 billion housing loans, then that is, the next 7 months left 165 billion -90.7 billion = 74.3 billion or so the amount of loans.

Just to say, if the remaining 7 months to 2016 all new loans for the base calculation, according to 10% growth rate, then all the loans may also be issued about 340 billion.

In this case, 74 billion (74.3 billion) accounted for only 21.7% of the 340 billion, that is, if the future to achieve 25% of the new housing loans accounted for the target, the remaining 7 months, the proportion of mortgages in total lending can not exceed 21%.

To know that the 25% threshold can be said to be a minimum standard, if more than expected, then the future does not rule out the individual months of the new mortgage accounted for less than 15%, or even lower.
Beijing lending was 324 billion in the first five months. Plus 340 billion for the rest of the year comes to 664 billion. However, what if banks can't offset the decline in mortgage lending? We'll find out very soon if there are other borrowers prepared to step in to the gap created by the slowdown in mortgage lending.


iFeng: 楼市传来大消息:房贷数据创新低 房价受影响大

2017-06-22

China Chooses Deflation, For Now

Bloomberg: China's Banking Regulator Seeks Details of Wanda, Fosun, HNA Loans
The China Banking Regulatory Commission asked some banks to provide information on overseas loans made to Dalian Wanda Group Co., Anbang Insurance Group Co., HNA Group Co., Fosun International Inc. and the owner of Italian soccer team AC Milan, according to people familiar with the matter.

The inquiries, which come a week after reports of an investigation into Anbang’s chairman, are likely to put a further chill on China’s outbound takeovers after tighter capital controls cut deal activity this year by 56 percent from the same period in 2016. By targeting some of the country’s most powerful tycoons, Xi Jinping’s government may be sending a signal of its commitment to cleaning up the financial system before a key Communist Party leadership reshuffle later this year.

“We are now in an environment where preventing financial risks is lifted as the top priority, so I think the regulators are trying to gauge the total exposure,” said Wei Hou, a Hong Kong-based analyst at Sanford C. Bernstein. “Regulators must have seen some red flags.”

...Shares of billionaire Guo Guangchang’s Fosun and related companies tumbled in Hong Kong, mirroring a similar rout at units of Wanda. Fosun International fell as much as 9.6 percent, while Shanghai Fosun Pharmaceutical Group Co.’s dropped as much as 7.8 percent.

Wanda Film Holding Co. tumbled as much as 10 percent in Shenzhen, its biggest loss since January 2016, before its shares were suspended from trading. Wanda Properties International Co.’s 2024 notes plunged as much as 10.7 cents on the dollar to 101 cents in morning trading in Hong Kong, the biggest drop on record, according to Bloomberg-compiled data.

“I don’t think it’s the right time to invest or buy into these companies,” said Alex Wong, a director of asset management at Ample Capital Ltd. in Hong Kong. “Sometimes this kind of event can accelerate very quickly.”
The ChiNext fell 1.44 percent on the day, all of it in afternoon trading following the news.

2017-06-21

Will China Run out of Reserve? What's Your DXY Target?

CFR: China Isn’t Going to Run Out of Reserves Anytime Soon
At the same time, I think the evidence continues to mount that the scale of outflows is significantly a function of expectations—so the best way to limit outflows is simply to hold the exchange rate stable for an extended period of time (technical note: China has an ongoing current account surplus, so stable reserves imply ongoing outflows at a modest pace).
China merely provides the fundamental backdrop. This is entirely a story about the U.S. dollar. If the U.S. dollar declines, then China dodges a bullet. Global credit growth will revive, global economic growth will follow, the U.S. dollar will decline. If instead credit growth remains tight, global economic growth will disappoint, and the U.S. dollar will rally.

23.1pc of Depositors Plan to Buy Home in Next 3 Months, New High

The PBoC Q@ surveys are out. Depositor sentiment declined slightly from Q1. The number the press locked onto was 23.1 percent of depositors saying they plan to buy a house in the next three months. It was the highest total ever recorded.

The question asked was: do you have any big spending plans in the next 3 months? Respondents could choose more than one. Travel was tops at 33.6 percent, education 26.2 percent, healthcare 23.6, big consumer item 23.3, house 23.1, entertainment 18.3, insurance 14.6.

iFeng: 央行:23.1%居民准备未来3个月买房 比例创新高
PBoC Depositor Survey: 2017 年第二季度城镇储户问卷调查报告 (pdf)

The banker survey shows bankers more confident about the macro economy, but the only time they were less pleased with monetary policy was in 2011.

Banker Survey: 2017年第二季度银行家问卷调查报告 (pdf)

Entrepreneur confidence is at its highest level since the first quarter of 2014. The foreign and domestic orders index crossed 50 percent, the first time in at least 3 years. The last time these were well above 50 percent was in 2011.
Entrepreneur survey: 2017年第二季度企业家问卷调查报告 (pdf)

2017-06-20

MSCI Adds China to EM Index at 0.7pc

Marketwatch: MSCI to add 222 China A shares in emerging-markets index
The move, which was widely anticipated, could trigger an inflow of as much as $210 billion into China’s equities over the next five years, according to Goldman Sachs.

“This is a significant and highly symbolic recognition of China’s importance to the global economy, and a big vote of confidence in the Chinese growth story from MSCI and its clients,” said Danny Dolan, managing director of China Post Global, in emailed comments.

Even so, the immediate impact on the Chinese stock market from portfolio rebalancing following MSCI’s announcement is likely to be muted, according to Capital Economics.

“What’s more, a steady increase in the inclusion of A-shares in the MSCI Emerging Markets Index will probably only happen if China continues to liberalize her financial markets, including granting greater access to foreign investors and addressing fears over capital controls,” said John Higgins, an economist at Capital Economics, in a note.

Housing Bubble Fallout: Fake Divorces Turn Real

iFeng: 一次假离婚,相当于增加10年收入!有人这样做,结果悲剧了
Reporters learned from the Beijing Municipal Civil Affairs Bureau, 2014 to 2016, three years of marriage remained stable, are about 170,000 pairs. However, in the case of a generally stable number of marriages, the number of divorces increased year by year, reaching 97,600 in 2016, up 73% from 2014. At the same time, in 2016 Beijing recruits the number of 22,607 pairs, up 131% over 2014.
As you might guess, couple that had a "fake divorce" sometimes ended up with a real divorce. There are 3839 cases in the courts involving "fake divorces."
Huge interest in the temptation to leave a divorce to buy a house seems to be a "smart" choice. But economics has a common sense, the proceeds are proportional to the risk, the other side of the high-yield divorce is high risk. Each microblogging (micro-signal: nbdnews) to "fake marriage" as the key word in the Chinese referee document network search found that the relevant litigation ruling reached 3839.

In many cases of divorce due to fake divorce, the most tragic is undoubtedly due to false divorce finally fake into a real, wealth and two empty.

According to the information Times reported that in order to avoid bank credit policy and property purchase policy, Guangzhou, a man Chen Liang and married seven years wife Liu Fang "fake divorce", also signed a "net income" divorce agreement. Guess his wife fake play really do not want to be remarried to be sued.

August 2015, Chen Liang and Liu Fang ready to jointly buy a room in Guangzhou Nansha and pay the deposit and the first payment, but Liu Fang told Chen Liang, because Chen Liang personal credit records caused by his name can not be signed in the purchase contract The To this end, Liu Fang asked to "fake divorce" approach to circumvent the purchase policy to buy the room. The next month, the two divorce procedures, and in the Civil Affairs Bureau signed a divorce agreement. The same month on the 30th, Liu Fang and developers signed a contract to buy the room.

After Liu Fang explicitly refused to remarry, and refused to return all belong to Chen Liang's share of the property. Two of the "divorce agreement" this agreement: Foshan, a room and a room owned by Guangzhou Liu Fang, Chen Liang voluntarily give up belong to the property under the name of Liu Fang; daughter by Liu Fang to carry support, Chen Liang monthly maintenance fee 1500 yuan.
The courts response to fake divorces that turn real: tough shit.
In September 2016, Chen Liang sued the court Liu Fang, asked the court to revoke the "divorce agreement" to change the custody of her daughter, and confirmed that the two suites in Foshan and Guangzhou jointly owned by both sides.

The court of first instance that, according to the marriage law, divorce procedures only for both men and women can voluntarily, no need to review whether the feelings of the two sides rupture, do not consider the reasons for divorce between the two sides, so Chen Liang Liu Fang for divorce registration date has been dismissed The Chen Liang advocated the "divorce agreement" there is fraud, the court held that Chen Liang, Liu Fang has reached a consensus on whether the divorce, and the civil affairs department audit, even if Chen Liang is due to avoid the purchase policy and divorce registration, Is the two sides agreed to divorce to avoid policy, so there is no fraud. Chen Liang said the two sides had agreed to buy a house after the remarriage, but now Liu Fang does not agree to remarry, that she is not voluntary consent to remarry, so even if the two sides have agreed to remarry, the agreement because of the voluntary and invalid. And the issue of child support and property division, Chen Liang failed to prove that the two sides had other agreement on the issue or with other conditions.

Accordingly, the first instance ruling dismissed all of Chen Liang's claim. Chen Liang appeal, the second instance dismissed the appeal to maintain the original verdict.

"Marriage Law" clearly stipulates that both men and women voluntarily divorced, allowed to divorce. As long as the legal requirements of the divorce conditions, the implementation of the relevant procedures, with legal effect. In other words, even if the parties exist false divorce, divorce registration has also been effective, unless it can prove that "divorce agreement" is not its true meaning that.

Fujian Linhui law firm director Lin Minhui lawyers said that whether it is true divorce or false divorce, as long as the two sides in the divorce process is true and voluntary, without any side of the coercion, coercion, divorce is effective and irrevocable.

2017-06-19