China Debt Audit Completed; Local Govt Debt Sees 67% Growth in 2 Years

China’s Local Debt Swells to 17.9 Trillion Yuan in Audit
China’s local-government debt swelled to 17.9 trillion yuan ($2.95 trillion), underscoring risks to the financial system as President Xi Jinping rolls out economic reforms.

Debt including contingent liabilities rose about 13 percent in the six months through June, based on figures in a report by the National Audit Office, posted on its website yesterday. That followed a 48 percent increase over the previous two years.

China Says Local-Level Debt Soars, Stirring Fear
In the five years since the onset of the global financial crisis, local governments at the provincial, municipal, county and township levels across China have gone on a spending spree, loading up on debt to finance a surge of investment in infrastructure, real estate and other projects.

Analysts have expressed fears that many of these investments may never make enough money to repay the interest and principal on the debt.

.......Based on findings of the new report, Lu Ting, a China economist at Bank of America’s Merrill Lynch unit, estimated that China’s total public debt stood at 53 percent of gross domestic product. Adding corporate and household obligations lifts the total debt ratio to as much as 190 percent of G.D.P., he estimated.
China's change in local debt alone exceeded GDP growth by 100% in the past few years. The focus on government debt levels is misplaced. The total debt in the economy is very high and growth is heavily reliant on growth. If credit growth slows, the economy will slow, and lots of debt currently serviceable will go into default.

Overnight Repo Rate on Shanghai Stock Exchange Soars to 35%

This isn't bank rates, but it does reveal the stress in the financial system as firms settle up at year end.

Overnight interbank exchange calm broke 36% (银行间风平浪静 交易所隔夜升破36%)

Core Tip: Following last week's inter-bank market staged a short-term lending rate madness, the Shanghai Stock Exchange on Monday staged drama hurricane bond pledged repo (GC001) overnight interest rates again, day volatility in 12-37%.

Following last week's inter-bank market staged a short-term lending rate madness, put on the Shanghai Stock Exchange on Monday pledged bond repo (GC001) overnight interest rates again hurricane drama, volatility in the days of 12-37%.

Line traders on the "First Financial Daily" reporters refer to "read": I do not know what happened Shanghai Stock Exchange market resulted in the overnight repo rate collateralized debt soaring midday start, Wind data showed Monday 13:32 start, began to violently overnight repo rate to rise to around 20% of the average interest rate soared from morning to around 35%, after experiencing a short fall, 14:52 once again soared to more than 36%, then the ups and down to around 6.3% closing level.

Even more strange is that the interbank market yesterday, with a calm period is the weighted average interest rate of only 3.2549%, although there are round midday highs, but a maximum of only 4.85%, far less than one-tenth of the exchange market .

Differences in the two above-mentioned roller coaster of the stock market and bond market analysts and dizzy line traders, they have told reporters that the kinds of speculation, but in the end are "do not understand, just speculation" at the end.

Because both sides exchange market buy-back of non-bank institutions, so some analysts and traders most intuitive feeling is that non-bank money market, more than the inter-bank market.

A bond fund analyst Li Qilin told reporters: "It should now be Monday before the last day on which a withdrawal to fund, for example, if a customer year-end redemption pressure, to meet customer needs while avoiding the redemption of such Bonds sold under the background of a bear market, the high cost of lending institutions can only choose to, in the case of the current state of this debt-based radiate crash, the fund manager first thing to consider is to avoid selling coupons. "

Securities owned tube with the letter W Huang Ji also told this reporter, said: "Monday's repo rate hikes may be affected because the exchange takes three days, because overnight the product expires the next day, but the third day of the delivery, the delivery date happens to be New Year's Day. "

Market analysts said there are two markets overnight repo rate trend away from the obvious reason is that two different markets itself. After June interbank liquidity squeeze caused by excessive market volatility, the central bank window guidance on the implementation of the inter-bank market, the situation appears to prohibit excessive interest rates, which led to the bank of foreign lending are not enthusiastic. "This afternoon there is a burst overnight inter-bank borrowing is not good, because at this price Placements sure loss, but at cost split out the central bank will be guided." Tier one trader said the reporter.

Sealand Securities investment banking executive general manager Wang Jie, told reporters that the inter-bank market opening price influenced by the big firms, OTC transactions are also reference the current weighted average price; And relatively speaking, every time the Exchange The prices are determined by demand and supply, while volume growth significantly repurchase transactions, the relative proportion between banks increased their demand caused prices to enhance the uplink.

In other words, compared to inter-bank markets, exchanges overnight repo rate to some extent, may better reflect the actual supply and demand situation of the market.

In addition, Huang Ji wide that, given the overnight inter-bank market, the cost of capital and some too low, banks should exist between Tuesday upside market interest rates.


Diversity Destroys

Nothing new here for readers of this blog, but it is interesting to see the costs of diversity clearly laid out in a mainstream media outlet. Not the idea from Putnam and others that diversity reduces levels of trust, rather a story on the facts of what is happening in diverse communities. This story comes from California.

Rising immigration hasn't made Watsonville more diverse; it is a community heading toward racial isolation, a growing phenomenon in a state that offers one possible look at how the nation may change as non-Hispanic whites become a minority in the coming months.

..."For me, downtown Watsonville is like being in a small Mexican town," said Oscar Rios, who was Watsonville's first Latino mayor. "Everyone speaks Spanish. The restaurants are Mexican. It's got a very different feel than a traditional American town."

..."We have more people that probably lack legal status and that means more people that are really kind of living in the shadows," he said. "Certainly there's been white flight from this city as people's economic status improves and they wish to have better opportunities.

He added: "But do people flee because of race or language? I don't know."
The article goes on to say things aren't so bad, comparing the immigration wave with German immigration. But it completely ignores the fact that Germans eventually stopped coming and immigration was all but banned from the 1920s into the 1960s. Also, there were major anti-immigration political movements. Things can work out in the long-run, but there will be major conflict before there is assimilation.

Chinese Ask: Who Wants to Kill Bitcoin?

Who is killing bitcoins?
As the central bank of a paper order was reversed in bitcoin China's fate. December 16, the central bank interviews Paypal, money paid through other third-party payment companies, shall not be required to provide hosting, payment and settlement services for Bitcoin transactions sites. 18, bitcoin prices fell to 2,100 yuan from 4,000 yuan. Prior to December 5, the central bank and other five departments issued a document clearly not bitcoin currency. Previously, carnival Bitcoin ever jump up to a high of 7,395 yuan. Although in the last few trading days, bitcoin prices rebound is not small, but it can be asserted with the improvement and implementation of a variety of containment, control Bitcoin transaction rules Bitcoin regarded in China took a dead end, Hospice of difficult. Further, we can safely expect that if Bitcoin has been so hot down, trouble, will have the same fate abroad.

Frenzied speculation

Provoke fatal disaster

But even so, the Fengyun upcoming meteor passing, we can not rush sorry, it would be seen as mediocre two goods. In the absence of clear nature of Bitcoin, and we do not sullied mad to it. Because the value of the currency on the tool itself, we better take a rational neutral. After all, between the human and monetary scores longstanding hundred thousand turn back, thought-provoking; while banknotes as well as managers of the central bank Younger - which is a typical representative of the Federal Reserve - the reputation of always merely mediocre.

As a novelty, Bitcoin is covered with a mystery. 21,000,000 limited breeding scarcity muster a wildly speculative market. The "go country" of idealism seems to have laid the theoretical foundation of this speculation. Both complement each other, so that was a bit currency "float parade," mighty, menacing. Crazy speculation, coupled with the challenge of endogenous factors existing monetary system, bitcoin killer prepared for their destruction. Reason fingertips, such as interference with economic activity, disrupt monetary order, destruction of the country's financial policy, and so on. After all, the past six months of market performance, the enormous economic power Bitcoin is speculation has any monetary authorities are afraid to be underestimated. It can be said, if not regulated, crazy speculation will financial markets as a whole have a significant impact on economic activity. Therefore, Bitcoin is suppressed, the original speculators to blame.

Bitcoin is a competitive currency

Try issued

However, we can not therefore deny the value of bitcoins, especially in the Network Economy Bitcoin has the long-term value. The reason lies in the nature of Bitcoin is endogenous, can not be denied - it is challenging traditional monetary nature. Interpretation of the long history of money to tell us, now popular with the central bank as the carrier monopoly currency system is not the best system. Back in the mid-20th century, the famous economist Hayek conceived monetary "non-state", creatively put forward the idea of ​​competitive currency system is called theorists of the 20th century's most ingenious idea theory . Although this theory has been stuck on paper, but "monetary non-state" theory to restore the original appearance of the currency, the currency clarified contaminated river, revolutionized the sanctity of the central banking system, as we describe the competitive alternative picture of the currency system.

As we all know, from the shells, stones, to copper, silver, gold and other metals, to banknotes, currency evolution of diverse forms so that people come to realize the nature of money - credit. The credit is essentially naked decoupling of gold as currency and further highlighted. What support monetary unimpeded? Is the national credit, the central bank system in supporting the currency you? Only the backing of state power, money order like this popular day? No! National credit, the central banking system, but is kept in the currency of the veil. Moreover, the centuries, the veil was accented with a colorful vibrant colors, thus confusing the world's eyes. As a result, the central bank issued currency monopoly practices seems to be God's decree as not to encroach on others. However, it is discerning Hayek, through the mists of history, only to see the shortcomings of the traditional monetary system, raised money "non-state" theory of conception. The Bitcoin practitioner inadvertently become competitive currency regime.

Bitcoin is still a long way to go

In fact, no matter what the currency, whether its functions properly and fully exercised, the key lies in two factors: First, the currency's stability; second is the "lender of last resort" role OK. Under the existing system of central banks to the national credit backed by the central bank to act as "lender of last resort" role seems very authoritative, but also very convenient. Interpretation of the central banking system seems to prove this point. However, precisely because of its authority too strong too bright, people ignored them missing. As for currencies, the missing subversive. Under such a system, but extremely difficult to maintain currency stability. Economic development, improving people's livelihood, such as the distribution of wealth is often constrained by bitter inflation. And the history of currency manipulation, hyperinflation of more frequent too numerous. This is the path of monetary Hayek attack "non-state" theory, but also a competitive foothold monetary system. Bitcoin challenge genes with potential tension existing monetary system, there is no doubt jeopardize the existing monetary system, which also can imagine drawn the short straw.

Carefully pondered, Bitcoin is easy to see their own shortcomings. Currently, its development is not perfect. The most obvious is that under bitcoins in circulation, the question "lender of last resort" How established has not been resolved. We can even suspect that this issue has not been taken into account the scope of its founder. The baby was born, did not know where the comfort zone. Such parents are reckless and irresponsible. However, this should not be a reason to kill the baby.

Bitcoin can solve the "lender of last resort," the absence of problems? The answer is yes. In theory, the solution to this problem is not dependent on external coercive power, economic strength and the amount of material wealth, the issuer, but whether constructed from the constraints of the issuer of the mechanism and thereby the foundation for market confidence. If Bitcoin compared to smartphones, then Apple and Samsung is the best currency trading activities led them to become the people hold and accept the object. And there are other potential competitors to force Apple, Samsung caution, and strive to gain the favor of the market for a long time. This is the most effective Hayek ideal monetary system.

I even imagine that, if allowed to survive bitcoin, supplemented by appropriate guidance and return pipe, Bitcoin has grown into a worldwide non-State of the currency of a better future, the challenge has grown into a global currency - U.S. dollars - a huge potential. As the world's currency, U.S. dollars in circulation provides a convenient national economic trade. However, the U.S. government is narrow, selfish, can not do justice to the interests of the countries involved in the currency issue. Since 2008, the Fed's monetary big drain, so that the spread of global inflation is the proof. The good news is that the world's next bitcoin pain killers are not many countries, some countries even recognize the legitimacy of Bitcoin. Perhaps this Bitcoin left to live on, so that we can still dream about the future of Bitcoin.

The Cost of Development

These photos show part of a 6-hour incident with a knife wielding man threatening suicide because his house is being demolished. From the sign he put up, it looks like he was not given adequate compensation.

This is a typical news story in China, but it made it to the top of the pile today, either because there's nothing else to report, or a sign of negative social mood.


Pop Goes the Credit Bubbles: Turkey and Thailand in Crisis

Political problems follow accompany or quickly follow on the heels of credit busts because the decline in economic activity follows a turn in social mood that eventually spreads to politics.


April: Booming Thai banks wary of credit bubble
November: Thailand's Bubble Economy Is Heading For A 1997-Style Crash
December: Thai Opposition: Yingluck Will Leave Or Die

April: Turkey's ticking debt time-bomb
August: Turkish lira may need higher interest rates to escape emerging markets rout
December: Turkish PM struggles to contain corruption probe

Bonus: 1997 Asian Crisis Redux - Thailand Is Imploding
Many economists believe that the Asian crisis was created not by market psychology or technology, but by policies that distorted incentives within the lender–borrower relationship. The resulting large quantities of credit that became available generated a highly leveraged economic climate, and pushed up asset prices to an unsustainable level

Politics appears to be leading in Thaliand this time, but this paragraph is more applicable to China, the mother of all emerging market credit bubbles. Rough seas ahead in 2014.

Earn 60K on a 10 million yuan Deposit

A 0.6% yield isn't much.......unless you earn it over 3 days. Yes, the cash crunch in China is over, except for the fact that it isn't. Get ready for it to show up again soon, possibly as early as the end of January when New Year hits, or at the end of Q1 in March.

Google Translated link: Pull the end of the discount bank deposit war: propaganda, said three days to earn 60,000
Can benefit all parties involved, so supervision is difficult to grasp the core evidence

Just three days earn 60,000? It can achieve, provided that you have 10 million in cash.

A few days ago, a friend told reporters the industry, year-end "impulse discount" is the hottest platform QQ group.

Reporter conduct itself in the QQ search labeled "Ningbo discount" on the group, all of a sudden showing Ningbo discount impulse financial exchanges, Ningbo discount capital pools, Ningbo discount exchange, Ningbo discount deposits, Ningbo deposits and other groups 17 group discount information , of which seven belong to the active group.

The largest and most active group was undoubtedly "Ningbo fiscal impulse discount exchange" group, to 25 members of its group of 998 people, nearly 400 the number of people online. Reporters since a few days ago to join the group, has received thousands of pieces of information, fully aware of the bank had kept simmering Running pull more intense.

Meanwhile, the reporter also displayed on the phone messages and leaflets received through various channels and done a few years discount business intermediary or savers to exchange, learn some insider discount Lanchu end of the year.

Of course, the reporters know, we've learned, is just the "impulse discount" tip of the iceberg.

[Means Secret]

Impulse discount

Guangxi, Yunnan and Jiangxi deposit large sums of money quotes soared to 6 ‰ -7 ‰

"Guangxi Liuzhou RCCs last 10 million facility, funds speed links, point high", "Jiangxi four lines impulse mouth, then the individual models, 31 into three, one thousand six pack, no margin, you can check for insurance. Please contact handedly funds "," Nanning rural credit cooperatives 4 billion and 27 into two 5.5 "......" fiscal impulse discount Ningbo exchange "QQ group, which is looking for financial brokers for institutional impulse funding.

Impulse discount, discount refers to the red end of the year or years when the number. Impulse discount is characterized by short, popular to say, is "earned a ticket to leave."

"There 345W personal money, want to participate in the end of the urban impulse welcome to make an appointment contact, communication." "Existing 320 million personal funds, 200 million business models: do by the end of the impulse National Bank at the end of the impulse hole, started booking with a deposit of priority" , "a lot of money in one hand seeking impulse hole!!" ...... This is a personal or financial intermediary platforms inquiry through the QQ group, trying to find a suitable place for their money.

By a few days removed from the QQ group, known as the funds on hand hundreds of thousands reporters after opening a small window from time to time with the group Friends of the dialogue, get to know their jargon.

For example, there are capital requirements, known as hole, there is money to be saved is called "find the hole." "Seconds knot" refers to discount cashed immediately after the deposit is completed.

"31 into 3" "27 into two" difficult to understand, means that money out of the banking institutions account time. The "package $ 66", "5.5" belongs jargon, the most important discount price tag.

For example, the "big four packaged Jiangxi $ 66" for example, if you have 10 million of the funds, you can press the agreed "31 into three," you can get benefits in addition to your current bank interest outside , as well as a one-time discount of the total price of 6 ‰, is 60,000. It seems that some banking institutions would have spent a lot of blood to buy deposits, interest subsidy is far higher than its original interest.

Local banks kept relatively low number of discount

6 ‰, 5.5 ‰ belong to such a high price tag, and the group was said to be "special belonging to a place like Guangxi, Yunnan and Jiangxi opening price, the local is impossible so high."

Reporters in the group issued a "30 million in funding to keep Ningbo local inquiry", there are several brokers immediately opened a small window dialogue with himself.

Asking for a long time, the reporter learned that funds 300,000 less for impulse, on the 23rd, the 24th highest out of Ningbo local discount price tag is 2.8 ‰, to the 25th with the decline in interbank interest rates, basically at 2.5 ‰ look. Of course, if you have a huge amount of money, then the discount price tag on high.

Of course, the high starting point code corresponding funds are large, five million or even tens of millions started. To 26 am, is the last moment of impact, there is such a news release, "into account as early as the 27th paragraph, there are 300 million pairs private Nanning, the price to go to $ 17, with cuts through notification to."

QQ group large-scale intermediary organizations hundreds of millions or even more than a billion one-time funds are also possible. Small window open dialogue, there is an intermediary encouraged reporters to go put money in other provinces, "provincial high interest ah, kept a lot of people and if you enough money, then we go to the provinces kept the organization together." The question is how in the past it? "We give you book a ticket in the past." The caller said.

Deposit discount

After the deposit interest rate of 6% real discount

Deposit discount refers deposit in the bank deposits of discount. It is characterized by a long time, not a "one shot deal", the time span of more than six months in general.

Near the end, deposit discount groups have become active, newspaper boxes in the leaflets, SMS, online forums so you can find them on the scene.

"This deposit risk?" The reporter contacted a financial intermediary engaged in deposit discount Ms. Zhang.

Ms. Zhang said, customers can take the money to a designated bank counters, as regularly as usual deposit on the trip, kept her honor after a good discount. Currently 1,000,000 of funds, you can get a discount of 2.7%, plus 3.3% of the one-year deposit interest rate, one-year deposit interest can actually reach about 6%.

The very fact that, although the discount part of her hand after payment, but the money still comes from the bank. She also revealed that her husband, a former bank employee, so there are some resources in this regard.

Reporters later learned that in Yongcheng, currently one million yuan deposit a year, some of the highest discount of about 2.8%, according to reports, the discount section of about 2.4% in normal times.

Most of the money from the loans subsidized enterprises out

In talking about deposit discount price tag, there is quite a few intermediary with reporters stressed that depositors deposit to get the discount, you must promise not to withdraw their mortgage does not report the loss, if the early withdrawal, or there is loss, mortgages and other acts, this discount will be recovered.

So discount party who in the end is? "Discount party who is cooperative bank is the bank to attract deposits, and then lend him" one intermediary Q called "studio", said. Another agency said more bluntly, "Some banks are also in the middle square, he pulled together into corporate deposits, loans given recapture discount business."

Reporters also confirmed practitioners from a bank office, in fact, most of the interest subsidy money, and ultimately corporate pay. For example, a company wants to borrow, but banks do not limit, you can pay the discount fee equal to pull into the bank deposits, so he wants to get the loan. "In this way, businesses get loans, the amount the bank will not be affected."

Non-yang discount

Ranging from hundreds of millions to more than ten million jointly made by several intermediaries

Non-yang discount, this concept is relative to the sun is the discount. Non-operating characteristics of the sun is the big risk, of course, is accompanied by a high income. You can get the discount after the so-called sunshine discount is handled properly savers deposits.

It is understood that the amount of non-subsidized sun generally larger, ranging from several hundred million dollars to more than billions. No single person or company so much money, so a non-subsidized large single sun by a number of multi-agency joint made of each intermediary may link several households investors, and in order to gain the trust of investors, discount party will give the deposit, so that intermediaries have to mobilize funds.

It is worth mentioning that the discount on non-sun of certificates of deposit, the bank issued large deposits to depositors confirmed books, accounts only show the names of a few companies or depositors, many small farmers contributor's name does not appear.

Non-interest subsidy sun produce their specific needs, such as a business (project) need large sums of money, and this demand is unlikely or impossible to achieve in the normal bank loans approved line of credit, for banks and businesses together with the money, Looking for other funds in the name of all funds in a bank account and funds deposited in the account, the bank for deposit procedures. Which costs incurred by the borrower generally assumed, such as interest on bank deposits to normal, one-time discount depositors get additional revenue bank loan interest, operating costs, intermediary costs.

Return very impressive but the risk is known as a large deposit can not be checked

QQ group followed the release of information, the reporter contacted a broker in Shandong's capital. In his message published in non-sun discount, ranging from 500 million to more than tens of billions, geographic involve Liaoning, Shandong, Zhejiang, Jiangsu and other places.

"Non-subsidized high sun deposit, money is the existence of their own account, but the money can not be queried." This name broker said, compared to the sun deposit, the main characteristics of the non-sun deposit after deposit, the money can not be query, we can not open online banking and so on. Use of the funds, mainly used in the enterprise.

"Such deposits can secure?" The reporter asked.

"This you can be assured that we are all large state-owned banks and cooperative throughout, and if funding problems, the bank's first president himself unlucky." He said, in a non-sun deposit business, the bank is also intermediary role, because the money through the bank and then to business, business to lend money directly than reassuring than that. "Banks actually do with the credibility of a guarantee."

Because the non-sun deposits generally do not enter the bank account of normal, uncontrolled credit ratio, so the risk is much greater funding, which also makes the sun to considerable non-deposit returns than the sun deposit.

"Now the country's highest Shaanxi, Shandong and other regions, capital gains discount just saved a year can reach 15% -16% annualized, Jiangsu, Zhejiang region slightly lower, about 14% -15%." The reporter claimed, There are twelve hands of millions of dollars, he was not interested. "We generally do have at least 50 million or more, a small number of us earn some money."

Background Checks

Discount deposits so popular sorts?

Although these financial discount brokers will form a "sunshine" and "non-sunshine" distinction, in fact, are disguised to raise deposit interest rates, are violations.

Some of the banking financial institutions, high interest Lanchu is very clear violation, why participate? This is mainly due to funding constraints, pressure loan ratio assessment, many banks will deposit with the completion of the task and job promotion linked bonus, plus the legal concept of the internal mechanism of the weak, some of the staff in the banking industry to embrace high interest discount deposit.

"It is simply a high income, interest to the more." QQ group in a "40 million in funding to find discount" depositors that is directed at the end of the year to absorb a lot of money banks need to do when eloquence, 400,000 Yuan deposit for a few days, once the performance was a thousand dollars, so the income is quite substantial.

The broker who is keen to this, it is entirely interest dictates, reportedly pumped into them to 0.1 ‰ majority.

We come to an account balance. The above mentioned one-time discount of 6 ‰ for example, with 10 million yuan of funds to calculate, depositors deposit banks three days (31 into 3) the interest portion of the normal 0.35% / 360 × 3 × 1000 million = 291.67 yuan ; The demand side out of the funds for the 10 million discount × 6 ‰ = 6 million is not a small attractive for savers. As intermediaries, contributed butt 10 million of funds, can get $ 1000 commission.

Financial brokers who in the end who is?

Intermediary business scope is very broad, and when there is a risk of Ningbo savers too reluctant to put money to go so far away, they will recommend the impulse of local banking institutions discount.

24 pm, a done for several years with the reporter quotes a financial broker, "If you have 10 million of funding to the impulse, the price I can give to you 5.8 ‰".

"My money in the end which is saved to a local bank to go?" For such a problem, the answer is always the intermediary did not elaborate, it said, "I do have nine banks", or simply cite a City firm or the name of the joint-stock banks said, "Anyway, it is the largest bank in the money into them reliable. you money ready, sure to keep up, call me with your past memory."

"You are the employees of the bank do?" When a reporter asked the identity and financial brokers, and their answer is "mysterious", has said, "there is someone in the bank," there are vague to say "working for the bank," others say "We are professional deal with employers, banks, brokerage, discount party relationship, intermediary lubrication."

Regulatory challenges

December 24 to 26 is the peak trading

Busy no less than eleven dual power business

During the interview, QQ group, the Forum's fund-raising information display, in order to complete the assessment tasks at the end of the deposit, some banking financial institutions through various channels, "discount buy deposits," mad impulse can be described as an unprecedented degree.

Just three days to earn the condition as long as you have 10 million in cash. This is three days of non-ordinary course, is the "impulse discount" jargon unspecified "31 into three." December 31, 2013 into 2014, January 3 Sunrise, obviously, this is money impulse across years ago.

In addition, there are a few banking institutions to assume the role of intermediary funds from corporate discount to attract depositors to the bank to deposit the money and then lending to businesses.

"Discount", as the name suggests, refers to the additional interest subsidy beyond the statutory income. After the funds entrusted to the demand side, financial brokers who aggregate information through various channels funds parties and promote the supply and demand side docking, while they receive from rake. Because a lot of money designated "27 into two", so December 24 -26 is prime time of their work, no less than the electricity business busy dual XI.

Of course, the reporters know, we've learned, is just the "impulse discount" tip of the iceberg.

National injunctions prohibiting mention disguised interest

Regulators said discovered handled

"Discount banking deposits Secret." Interview, the reporter who referred to a number of bank deposit interest subsidies, most people are a closely guarded secret.

Part of the banking financial institutions to attract more deposits than previously presented to the statutory interest of depositors bullion, oil cards, supermarket cards, in-kind or reimbursement of expenses, which has touched supervision "red line", while the discount is high interest directly Lanchu irregularities.

China's current system is the central bank's interest rate benchmark deposit rate of commercial banks in accordance with the provisions of the lower limit of the central bank deposit rate to determine the interest rate, as they are allowed to take deposits or disguised raise deposit rates to raise deposit interest rates, unfair competition, severely damaged the financial order is subject to regulatory attack.

In February last year, the CBRC issued "on the regulation of banking institutions operating in the non-standard notice", the proposed "Seven allowed four open" requirement.

Seven are not allowed in the "no deposit linked to" a request loans and deposits should be strictly separated, are not allowed to deposit and lending approval as a prerequisite.

In addition, the central bank has also been issued "strictly forbidden to solicit depositors high interest rates, the use of improper means to absorb the deposit notice", requiring financial institutions must strictly enforce the deposit rate Chinese People's Bank, is prohibited fees, agency fees Reserve Association, Absorbing Award , premium savings, referral fees, gifts in kind, such as names disguised to increase deposit rates.

Ningbo banking supervision department, told reporters that the discount solicit depositors and other acts, regulatory authorities have taken discovered handled in strict control attitude, people found banking financial institution or bank employees for such services can be made to the bank supervision department complaints .

Equal opportunity for all parties involved

Evidence is not easy to grasp the core

Reporters found that, as part of the deposit interest subsidy payments are often carried out by a third party intermediary, and bank deposits intermediaries, depositors, SMEs Quartet games fall into this fund beneficiaries, regulators want to master the core evidence is not easy.

"If companies do not absorb funds to specific populations, may be defined as the illegal fund-raising, but subsidized by the bank deposits, to avoid suspicion of illegal fund-raising." Beijing Wei Heng (Ningbo) Fu Libin law firm lawyers believe that subsidized deposit model can be used to describe the secretive as to grasp the core evidence of foreign deposits and intermediaries generally not quiet. And in the law, because of the lack applicable law, the discount is defined as the illegal deposits is difficult, but he believes that is certainly a breach of regulatory violations, bank regulators can be regulated.

He believes that the general public will deposit funds for interest subsidies, there are certain risks. "Most of the discount deposits, although the principal in the bank is safe, but the discount section in case of disputes, it is difficult to obtain legal protection." And if the sun deposit such similar non-high-risk deposits, once the funds are not withdrawn from circulation, break the chain of interest because the normal bank deposit accounts do not enter.

In reality, examples of high interest returns because of greed and the drain is not without cause. 2011, Hangzhou had three people because of the high discount credulity, cheated of 40.5 million yuan of principal. These criminals often through genuine certificates of deposit substitution, secretly opened the way online banking, mysteriously swept away depositors principal.

Comparison of three methods Lanchu

Impulse discount short time, the general is a few days, you can get discounted after the deposit belongs to "earn a ticket to leave." The purpose of mostly mid-year or end of the impulse.

Deposit discount characterized by long time span is generally more than six months. After the deposit can also get discounted immediately, but can not report the loss of deposits and withdrawals of deposits during the period. Deposits are generally lend the ultimate business.

Yang discount capital needs of non-pre-pay part of the deposit direction intermediary to facilitate the attraction he go home. In this way the general funds, high return, but generally do not enter the normal bank deposit accounts, uncontrolled credit ratio, and therefore liquidity risk is much greater.


Chinese Gold Buyers Flock to Chrismas Sales

Chinese retailers broke 300 yuan per gram for the holiday. Spot is currently about 235 yuan. Chinese shops sell most gold at a per gram price including jewelry. The price is listed on a big board and the jewelry "price" tag only has the gold content listed in grams. Sometimes a craftsmanship fee is added, but it is usually very small relative to the total price. Most of the cost comes from the markup on the gold, which is the same across most products.

There is bullion available for investment at near spot prices, but bullion with a nice design often costs as much as beautiful jewelry and gold statues.

In an event, as the photos at link show, Chinese like sales, they like gold and they love gold sales.组图:黄金价格年末再降 民众圣诞节蜂拥抢购

Update 10 AM: This news made it's way onto ZeroHedge. What Chinese Consumers Are Rushing To Buy This Christmas

Chinese Banks Sign Living Wills

The first snip says it all. 银行业陆续签署“生前遗嘱”中行招行先行
In order to collapse in the face of the crisis without sacrificing savers and taxpayers' money, China's banking industry is gradually to sign a "living wills" for this proposition.

Here's English coverage of this news in China.
Bank adopts 'living will' to fend off crisis
It is the first time that a Chinese domestic public bank has announced a "living will" and it comes just one month after the Chinese bank regulator required privately-owned banks to make such "wills" before these banks are officially established.

In July 2012, the US regulators required 124 financial institutions to prepare "living wills" to ensure a more orderly wind-down in case of a future Lehman Brothers situation.

Here's recent coverage of the U.S. living will policy:
Biggest Banks Face Higher Bar in Rewritten Living Wills


China on the Verge of Major Financial Crisis

Thus summer I wrote Get caught up on Chinese local debt levels and join the bears and The Strictest Audit in History Will Open Local Government's Black Box of Debt

At that time, a strict audit of Chinese local government debt was expected to be completed by the end of October. I linked to one piece that noted the following estimates:
That local government debt totalled 12 trillion by 2012 simply looks too good to be true. Even the auditors themselves won't believe it. Dong Dasheng, deputy minister of the National Audit Office, said in May the latest debt scale for governments at all levels was between 15 to 18 trillion yuan, while Xiang Huaicheng, a former finance minister, said in April China's local governments might have already borrowed more than 20 trillion yuan.

For investors, I noted that the first major audit was completed around the time the Chinese real estate market first cracked in 2011. The second audit was completed this past June, when China's cash crunch emerged and global assets tumbled. The third and most complete audit still hasn't been announced......but there are solid estimates.

Debt doubles at local govt level in 2 years
China's local government debt may have doubled to almost 20 trillion yuan ($3.3 trillion) by the end of 2012 from 2010, a report released by a government think tank showed Monday.

The country's local government debt rose to 19.94 trillion yuan by the end of 2012, a report released by the Chinese Academy of Social Sciences (CASS) showed Monday. An audit into local government debt by the National Audit Office (NAO) showed the figure stood at 10.7 trillion yuan by the end of 2010.
So the bears were right and China's debt levels are at the high end of the estimates, assuming this government think tank has access to some of the latest audit numbers.

Over this period the Chinese economy grew by $2.3 trillion; local government debt alone increased by $1.6 trillion.

The reports downplayed China's total government debt, which is about 53% of GDP, but the threat here isn't a collapse in Chinese government bonds. The threat to the economy comes from a slowdown in credit growth. In 2008, U.S. government debt also was not very high, by the huge private market credit bubble led to an economic depression and a subsequent rise in government debt. China's local government finances are tied to real estate prices and the local economy, which was goosed by local government debt binges.

China Pledges to Tackle Local Government Debt Amid Reform
This year’s goal for GDP growth is 7.5 percent, the same as in 2012. An annual target of 8 percent was in place from 2005 to 2011 and it was 7 percent in 2004. Premier Li said in October that China needs annual expansion of 7.2 percent to keep unemployment stable, after indicating in July his “bottom line” for expansion was 7 percent.

The State Information Center, a government research institute, said China may set next year’s target at 7 percent, the Economic Information Daily reported Dec. 3, citing an annual report from the organization. The state-run Chinese Academy of Social Sciences also believes the goal will be set at 7 percent, the newspaper said.
I will take the under on these estimates, assuming the government is serious about tackling local government debt. If Lie Keqiang's figure is correct, unemployment will go up in 2014.

China Changes Stance on Growth-Hampering Local Government Debt
"The implied scenario here is to first tackle the increment. If the debt stops ballooning, China's debt level will decrease as its GDP grows," Ding added.
Short of some positive growth shock, China will also have a recession. The market is priced for rapid credit growth, which very simply means a lot of debt is Ponzi finance, where the ability to repay is contingent on rising asset prices that are fueled by rising debt. Slow credit growth and asset prices will stop inflating, leading to debt failures and then falling asset prices, more debt failures, etc. In other words, the bust.

China's local governments borrowed heavily to fund their construction and other investments as part of a stimulus in 2008 that was announced to buffer against the global financial crisis.

Officials controlling local governments were competing with each other to launch heavy infrastructure and industrial projects, as they expected faster promotion on the back of high economic growth provided by the projects. They had borrowed aggressively to finance their projects.

Many analysts found the situation to be highly risky, as local government borrowing kept ballooning. Subsequently, the regulators banned banks from directly providing loans to local governments.

Nevertheless, the local governments were able to get loans from the highly-active shadow banking in the country. They used shadow banking products like trust loans and other wealth management products to fund their projects.
Even if the local governments are 100% solvent and make whole on their debts (which is not the case in at least a few cases), the debts themselves are often tied to economic projects that will prove to be malinvestments. Marginally viable investment projects in the private sector that rely on high GDP growth rates financed by local government debt binges will be the first to fail. These failures will hit the high yield trusts offered by banks, which themselves have no deposit insurance whatsoever. What impact that has on the confidence of Chinese investors and savers is unknown, but it won't be good.

Chinese economic conference warns of downturn
A four-day Central Economic Works Conference convened by the Chinese leadership, which concluded on December 13, warned that the world’s second largest economy is facing downward pressure, with industries confronting serious overcapacity, and huge local government debts threatening financial stability.
......According to a Chinese Academy of Social Sciences report yesterday, total government debts reached 28 trillion yuan, or 53 percent of gross domestic product (GDP), in 2012, while non-financial corporate debt totalled 113 percent of GDP—higher than the average levels of 90 percent for the developed economies of the OECD. Moreover, the report identified a huge gap of $US1.24 trillion between net increased assets and GDP, as an indication of “ineffective investment” that accounted for 18.7 percent of GDP, mainly due to large overcapacities built into the economy.
And not a small amount of that corporate debt was money essentially given to Chinese state owned enterprises, since there was very little due diligence. Not a small amount of that founding eventually made its way into real estate projects.

Do Chinese state owned enterprises count as government debt? If so, China's government debt levels could easily surpass those of the United States in the event of a downturn in the economy, assuming the government did not tap its currency reserves. Tapping those reserves, however, would lead to a rapid devaluation in the renminbi.
At a forum last week, central bank governor Zhou Xiaochuan said borrowing costs could rise once interest rate controls were lifted. This could provoke unforeseen financial turmoil. A clear sign came last weekend as banks struggled to meet their short-term financing needs after inter-bank lending rates doubled in just five days. The seven-day repurchase rate soared to a level similar to the last credit shortage in June, when China’s money markets almost froze up.

The danger of a credit crunch in a country awash with credit appears paradoxical. In fact, the banks have made huge loans to real estate companies and local governments, leading to rampant speculation, while those desperate for credit, especially small and medium firms, found it difficult to obtain loans. They turned to the underground bankers who charge extortionate interest rates and in turn borrow from the major banks. As a result, despite unleashing massive amounts of credit, the banking system has repeatedly faced a credit crunch, as financial institutions are deeply suspicious of each other’s large and murky debt exposure. The deregulation of the state banking system will only generate further uncertainty and crises.
That's from the World Socialist Website, where they naturally oppose privatization. They aren't incorrect though; their only mistake is blaming the market reforms for creating the crisis. The crisis has already been created by massive malinvestment due to a centrally planned economy fueled by a partially privatized banking sector. Reform of the banking sector will reveal the truth: China is very short on capital because it has been destroying capital at an epic rate in one of history's largest credit bubbles.

Here are two posts by Ye Tan
失信、欺诈是债务危机根源 (Dishonesty, fraud is the root cause of the debt crisis )
叶檀:信用体制不建立 金融市场化将是庞氏骗局 (Credit System Not Built Financial Market Is A Ponzi Scheme)
On the surface, the local government land, coal, nonferrous metals and other assets pledged, when the economy into a downward cycle, local real estate and private lending chain collapse together, such as land and coal asset prices plummeted synchronization. In fact, asset prices are the result of the release of money, or is the result of economic development, if the government will continue to release a burst of inflation monetary crisis, low investment efficiency if the government led to the damage of wealth, the reputation of the government's credit will be discredited, worthless . When injected large banks listed on the government's credit crisis has occurred, by economic development, development of securities market to solve the problem, but the market did not therefore solve the crux of credit, up to today not unexpected.
Google translate isn't great, but she's talking about how all of China's balance sheet assets are going to collapse along with real estate prices and GDP growth.

Michael Pettis has dubbed this the volatility machine. Revisiting my 2011 predictions
I don’t want to sound in this issue of the newsletter as if I am on a book-peddling mission, but I discuss all of these waves of financing followed by crises in one of my earlier books, The Volatility Machine: Emerging Economies and the Threat of Financial Collapse (Oxford University Press, 2001).

In the first three or four chapters of my book I examine the history of each of these periods, and try to show that it was not just, or even primarily, fundamental changes in the recipient economies that drove economic growth (or the political process of economic reform) but rather that exogenous changes in global liquidity determined the timing of the process. Among other things, I argued, this suggests that in order to predict the performance of individual countries, including the direction and pace of economic reform, it may be at least as important to understand external liquidity conditions as it is to evaluate domestic economic polices – something the much-discussed Fed tapering may be about to remind us again.
In another recent post by Ye Tan, she argues that the taper won't cause a crisis in China, bad debt will be the cause of a crisis. However, tighter liquidity conditions may well be the trigger.

Related news: China city governments may issue municipal bonds
China may allow city governments to issue municipal bonds as early as next March, the state-run China Daily newspaper reported on Tuesday citing unnamed sources.

The Ministry of Finance and the People's Bank of China have been studying a plan which could relieve the debt burden of local governments and provide an engine for China's urbanization plan.

Currently only six local governments are allowed to issue bonds directly. They are provisional governments of Zhejiang, Guangdong, Jiangsu and Shandong as well as city governments of Shanghai and Shenzhen.
Chinese local governments will need to issue municipal bonds in order to bail out their failed investments. There will be a transfer of debt onto the local government's balance sheet.

Indians Smuggle Gold From Dubai; Can Asia Corner the Gold Market?

Smugglers smile as NRI carriers bring gold into country legally
It was evident last week when almost every passenger on a flight from Dubai to Calicut was found carrying 1kg of gold, totalling up to 80kg (worth about Rs 24 crore). At Chennai airport, 13 passengers brought the legally permitted quantity of gold in the past one week.

"It's not illegal. But the 80kg gold that landed in Calicut surprised us. We soon got information that two smugglers in Dubai and their links in Calicut were behind this operation, offering free tickets to several passengers," said an official. The passengers were mostly Indian labourers in Dubai, used as carriers by people who were otherwise looking at illegal means, he said. "We have started tracing the origin and route of gold after intelligence pointed to the role of smugglers," he said.

Reports from Kerala said passengers from Dubai have brought more than 1,000kg of gold in the last three weeks. People who pay a duty of Rs 2.7 lakh per kg in Dubai still stand to gain at least Rs 75,000 per kg, owing to the price difference in the two countries. Gold dealers in Kerala say most of this gold goes to jewellery makers in Tamil Nadu and Andhra Pradesh.
NRIs are non-resident Indians. It is legal for them to bring in 1 kg of gold.

All the Western gold bugs can be clueless rubes who believe in outdated monetary policies, and it still doesn't change the fact that rising incomes in India and China are fueling gold savings and consumption, plus some investment.

The longer the gold price remains low, allowing Asians soak up ever more global supply, the greater the chance for a dislocation in the gold market. Many gold bulls are looking for the next move up and see manipulation in the gold price, but I still believe it has more to do with social mood and the lack of demand for credit.

As laid out in Gold Lied, Inflation Died, inflation expectations collapsed because credit growth rates have collapsed. Gold is a casualty of this trend and even some inflationists such as Michael Pento have come around to this argument.

Nevertheless, this is only one part of the story. Eventually, investment demand for gold will bottom, while demand from Asia will continue growing. Short of a major deflationary wave that wipes out emerging markets (a non-zero probability) and takes gold to the Elliot Wave targets sub-$1000 and even sun-$500 (though you may be unable to obtain physical at the price), the current trend in gold prices and demand is very bullish for the long-term.

Today, it is very easy for small investors to buy gold. Supply is ample, premiums are low and the price is low. The gold bugs are not clueless rubes who believe in outdated monetary policies; they are merely off on their timing because they didn't factor in the destruction of credit money. Eventually, a great price will be paid by the money printers in New York, London, Tokyo, Frankfurt, Beijing, New Delhi, and gold will be the cure for their pain. It could come next year or as long as 15 years from now, but the day of reckoning is coming.

All the while, the number of people acquiring physical gold for long-term savings is growing. A slow motion "corner" is being effected on a global scale and the tighter the grip of the bulls, the smaller the available gold supply. How tight is the Indian saver's grip on gold? They are smuggling it into the country by the kilos to evade government restriction on importation, a policy specifically designed to crush this demand! There will be only one way to break open the gates and get the gold flowing to the mass of savers and investors across the world when the next global financial crisis erupts, and that will be an incredible rise in price relative to nearly all assets.

H/T: Liberty Blitzkrieg


SHIBOR Declines on Second PBOC Intervention

Ten Chinese Banks Raise ¥350 Billion This Year

10银行再融资3482亿 次级债撑起半壁江山

Google translated clips:
Refinancing scale of about 348.2 billion yuan in total, there are more than 200 billion yuan of funds from the amount of subordinated debt. Although not included in core capital, but for some great capital of commercial banks in terms of the pressure better than nothing, to a certain extent, ease the money hungry.

The banks aren't in trouble, but their capital ratios are down this year:
As of the end of September, Nanjing Bank 's capital adequacy ratio of 12.2%, compared with the previous year dropped 2.78 percentage points, compared with a decrease of 1.46 percentage points year; core capital adequacy ratio of 9.81%, compared with the previous year dropped 2.32 percentage points, compared with 0.92 percentage point decline in .

Ningbo Bank capital adequacy ratio was 12.52%, Tier I capital adequacy ratio and core capital adequacy ratio were 9.61%, down 0.3 percentage points and 0.23 percentage points respectively compared to the end of June this year.

Huaxia Bank , Bank of Communications , Industrial Bank , Shanghai Pudong Development Bank , China Everbright Bank 's capital adequacy ratio were 9.81%, 12.24%, 10.89%, 11.14%, 9.65%, compared with year decline was 1.22 percent, 0.44 percent, 0.21 percentage points, 0.06 percentage points and 0.02 percentage points.

The article goes on to chronicle all of the secondary equity offerings, IPOs, and debt issuance by these banks.


Ratings Debate Centers on China Banks
The different approach by Fitch compared with how the bonds are evaluated by Standard & Poor’s or Moody’s centers on their expectations of government support for China’s state-owned banks.

All three of the main international agencies rate Basel III-compliant subordinated bonds lower than senior debt. However, Fitch starts notching down its credit score from the issuer’s credit rating — a measure that is adjusted higher for Chinese banks to account for potential government support.

Moody’s and S&P, in contrast, start from the bank’s standalone credit rating, which does not account for government support.

China sovereign fund Huijin completes purchase of bank shares
China's government has completed its purchase of shares in the country's four biggest banks, marking the end of the latest round of interventions aimed to support its chronically weak stock market.

Central Huijin Investment Co, which holds Beijing's investments in state-owned financial firms, finished buying shares of Industrial and Commercial Bank of China , China Construction Bank , Agricultural Bank of China , and Bank of China , the four banks said in stock exchange filings on Monday.

Huijin bought its stakes through purchases of freely floating common shares on the Shanghai stock exchange, meaning that the banks' registered capital levels are unaffected.

In June, the four banks announced that Huijin planned to increase its equity stake through purchases on the stock exchange and that the purchases would occur gradually over a period of no more than six months. The latest announcements mark the end of the planned purchases.

Chinese Deposit Wars Back On; Banks Refuse To Move Deposits and Poach Depositors With Enticing Rates

Back in September, there were worries of another quarter end cash crunch. Banks were actively buying deposits from other banks to avoid fines of ¥10 million. As one banker said, why not spend ¥8 million and save ¥2 million in the process? See Chinese Cash Crunch Could Return in September; Why Not Spend ¥8 million to Avoid a ¥10 million Fine?

Chinese banks are at it again.

年末钱贵:银行贴息6‰“买”资金冲量 (Year End Expensive Money: Banks Discount Bills 6% to Buy Capital)

Deposit war season is back on. Banks are refusing to move large amounts out of their banks, while other banks are offering huge discounts on very short-term deposits. Banks sell bills priced at a discount. Rates have spiked from 3% to 4.5% up to 4.5% to 6%, with time extended to about 10 days.

Banks have also told agents that they won't move large deposits after December 27, to stop their own deposits from being drained as the cash crunch accelerates into year end. Whereas banks typically move money instantly, now they are limited withdrawals and telling customers it may take 1 to 3 days to settle a transfer.

Agents need a couple of days to open accounts. They collect a minimum of ¥50,000 from individuals or small companies and group it into ¥100 million or more (bigger banks want ¥500 million to ¥2 billion), then move it into the target bank on the 29th. On the 1st of January, they move the money out.

Here's an English article from December 12, before this crunch began, that explains the deposit wars.

Deposits Race in China Raises Fears
Chinese banks currently offer an annualized interest rate of between 4% and 6% on WMPs that mature in one to six months. On traditional deposits, the rates they can offer are limited by a central-bank benchmark—which right now means they top out at 2.86% on three-month deposits and 3.08% on six-month deposits.
According to the above Chinese article, investors can now capture this annualized interest rate for very short-term deposits.

These high interest rate products aren't safe though. While there's no deposit insurance in any Chinese bank, these products lend money to distressed borrowers and those with impaired credit.
The main concern among regulators is banks' ability to make good on the principal and interest owed to investors in WMPs, whose risks are often poorly disclosed to investors. Some of the money going into these products has been used to make high-interest loans to risky private businesses shunned by the banks themselves, a phenomenon critics say could exaggerate loan and investment losses in China's financial system if an economic slowdown led to widespread defaults.

Such fears have been exacerbated by the recent collapse of a 140 million yuan WMP offered through a Shanghai branch of Huaxia Bank Co. 600015.SH +0.39% , which ranks 13th among China's commercial banks by assets. Proceeds were invested by a third-party private-equity firm in four businesses in the inland province of Henan, including a pawn shop.

Investors were promised returns of between 11% and 13%, but when the one-year product matured late last month, they weren't paid back—triggering days of protests by dozens of investors and an intervention by Shanghai authorities. The bank is now negotiating with investors to try to reach a "reasonable solution," said people with direct knowledge of the matter.
This leads to a situation where many depositors are chasing high yields:
One of the investors who bought is Zhong Tao, a 62-year-old retiree who said that after years of having savings accounts she withdrew all her money and now rolls it out of one WMP and into another.

"With deposit rates so low and inflation so high," Ms. Zhong said, "I would be stupid not to do this."
Until the music stops.

Back in June banks were taking similar actions, see Chinese bank offers 6% return up front for ¥1 million 1-Yr CD. No doubt there will be similar stories coming out in the next few days.

The central bank has also done a reverse repo worth ¥29 billion, likely no enough to make a dent. And as ZeroHedge points out, the big banks are sucking up the cash, even though the cash crunch is occurring at the small and medium sized banks. See China Folds, "Un-Tapers"; But Repo Rates Remain Elevated

The big banks have direct access to the central bank's easy money, where have we seen that before? And if you think the smaller banks have it bad, imagine what it's like for the small and medium private businesses who are borrowers at these banks.

Everbright Bank and China's Cash Crunch

Everbright Bank Failed to Pay CNY6.5 Bln Interbank Loan on Eve of June Cash Crunch
China Everbright Bank Co. (601818.SH) said that two of its branches failed to repay short term loans worth 6.5 billion yuan ($1.06 billion) due on June 5 to other financial institutions in China's interbank market, although the full amount was paid the following day.

June 5 marked the start of an interbank cash crunch that sent the interest rates banks charge each other for short term loans as high as 30% as banks suddenly became reluctant to lend. At the time, market chatter had it that some banks had defaulted on interbank loans, but no bank publicly acknowledged failing to pay its debts on time.

Everbright made the statement in its prospectus issued ahead of a public share offer and a planned listing on the Hong Kong stock exchange. It said that late in the afternoon on June 5, two of its branches "failed to receive from certain counterparties the expected proceeds from such inter-bank deposit commitments."

It did not name the counterparties but it suggested they might have been smaller financial institutions.

Here is news from Friday: China Everbright Bank Shares Fall on Trading Debut
Everbright Bank raised about $3 billion last week in an initial public offering — Hong Kong’s biggest of the year — after pricing its shares at 3.98 Hong Kong dollars, or 51 cents, apiece, near the lower end of their marketed range.

The stock opened at 3.95 Hong Kong dollars on Friday morning, and later in the morning traded as low as 3.78 Hong Kong dollars, a decline of 5 percent. The shares closed down 3 percent, at 3.87 Hong Kong dollars, compared with a 0.3 percent decrease in the benchmark Hang Seng Index.

Also, Everbright Bank slides in HK debut amid China cash crunch fears
China Everbright Bank Co Ltd fell in its Hong Kong debut on Friday, as renewed cash crunch fears about China's banking system exacerbated weak sentiment towards a mid-sized lender that has taken three attempts to come to market.

Everbright, which raised $3 billion in its IPO, is the latest in a raft of banks rushing to tap investors to meet more stringent capital rules, and which have seen profits shrink and unpaid debts climb amid slower economic growth.

While other China bank IPOs have also been lacklustre, Everbright's listing has been particularly unsung, with cornerstone investors accounting for about 60 percent of the offer - more than double the normal level - as underwriters sought to lock in as much institutional demand as possible.

Everbright, which is also listed in Shanghai, also had the misfortune to debut amid a spike in interbank rates. China's benchmark money market rate climbed to a six-month high on Friday despite attempts by the central bank to calm sentiment, showing signs of a scramble for cash reminiscent of a massive crunch that occurred in June.

Shares just debuted in HK. Here's a look at how Everbright (601818) has been trading against other Chinese banks listed on the Mainland.

China's Financial Crisis Began in June; PBOC Must Pump More or Deflation Will Return

Earlier I posted: SHIBOR Drops After Chinese "QE"; Downward Pressure on the Economy

I referred to the PBOC's liquidity injection as "QE" because of its massive size (and according to reports, it has already failed with rates moving higher once more). Relative to their economy, the PBOC's three-day effort exceeds the Fed's monthly asset purchases. More importantly, these interventions are now becoming a normal part of PBOC policy.

The first cash crunch came in June. In September, there wasn't a serious cash crunch, but there were fears, which I covered in Chinese Cash Crunch Could Return in September; Why Not Spend ¥8 million to Avoid a ¥10 million Fine?

Now the cash crunch is back in December.

In the past three end of quarter periods, Chinese banks either experienced a cash crunch or have feared one.

June: China bond market ends up following PBOC’s net capital injection
Since June, the central bank had injected 305 billion yuan in total via open market operations.

September: PBOC makes record liquidity injection
China's central bank pumped a record 290 billion yuan (45.74 billion U.S. dollars) into the money markets via reverse repurchase agreements (repos) Tuesday in an effort to ease a cash crunch.

December: China Shares End Up; Banks Lead Following PBOC Cash Injection
Borrowing costs in China's money market soared again Monday afternoon following a brief fall earlier in the session, despite the PBOC's cash injection. The People's Bank of China said late Friday that it had injected over 300 billion yuan ($49.3 billion) into the financial system over a three-day period.

June: Inject ¥300 billion in one month; success.
September: Inject ¥290 billion in one day; success.
December: Inject ¥300 billion over three days; failure.

This is the same pattern seen with QE in the West. Central bank interventions must increase over time because the market tolerance to interventions increases.

There will be a bigger PBOC intervention before the end of the quarter, or the problems of June will reemerge and we will see global assets tumble.

June marked the beginning of China's financial crisis. It wasn't clear then, but it is clear now: the Chinese financial system will have recurring cash crunches every three months because it has a solvency crisis. These crises will expand in time, coming earlier each quarter, or expand in size (or both), requiring ever larger liquidity injections by the PBOC. Eventually, the PBOC will formalize its interventions into a policy and strenuously avoid calling it QE.

America's Slow Motion Collapse

This is the help page at the California Affordable Care website. Not only is every line wrong, they can't even spell "button" correctly.

This shows the problems with Obamacare, but it also reveals the deterioration of California. Even with the smartest people in the world running the show, centrally planned economies are utter failures when compared to private economies organized spontaneously by individual human action. California government is dumb. If the ACA is relying on sites like these to make the policy work, they are in really deep trouble.

Also, at the individual level, you would be insane to give personal information to this website. Even Nigerian scammers spell better.

H/T: Slope of Hope: California Careless

SHIBOR Drops After Chinese "QE"; Downward Pressure on the Economy

SHIBOR spiked higher, so the central bank poured liquidity into the market.

On Friday, I also pasted this chart:

It shows the searches for the term "cash crunch." Now: China "Fixes" Liquidity Crisis By Banning Media Use Of Words "Cash Crunch"
As The FT reports, Chinese propaganda officials have ordered financial journalists and some media outlets to tone down their coverage of a liquidity crunch in the interbank market, in a sign of how worried Beijing is that the turmoil will continue. The censors have warned reporters not to "hype" the multiple-sigma spikes in overnight-funding rates and have forbidden the press from using the Chinese words for "cash crunch."

Story is here: China pressures media on cash crunch story
Chinese propaganda officials have ordered journalists and media outlets to tone down their coverage of a liquidity crunch in the interbank market, in a sign of how worried Beijing is that the turmoil will continue when markets reopen on Monday.
As the table on top shows, the turmoil continued.

China Money Market Rates Fall After PBOC Cash Injection
Borrowing costs in China's money market fell sharply early Monday after the country's central bank announced late Friday that it had injected over 300 billion yuan ($49.2 billion) into the financial system over a three-day period as interbank rates surged to their highest levels since June.

The seven-day repurchase agreement rate, a benchmark measure of the cost that banks charge each other for short-term loans, opened trading at 5.57%, down from 8.20% Friday, which was the highest since China suffered an unprecedented cash crunch in June.

The People's Bank of China said on its official Twitter-like Weibo account on Friday that the banking system had current excess reserves of over CNY1.5 trillion and it called that level "relatively high."
China dumped the equivalent of $100 billion U.S. (comparing GDP, by the size of the financial system, much more) into the financial system over the past three days. The Fed is buying $75 billion a month.

Here are some Chinese articles: This one is about the Chinese central bank rescuing the market Shibor持续攀升 央行向市场注水3000亿救急

This one should be familiar to Americans and Europeans: It's about how the banks were saved, but the companies suffered during the June cash crunch. “钱荒”第二季的温州表情:银行轻松 企业煎熬

This piece covers a report from CITIC Securities, about "downward pressure" on the economy: 中信证券策略周报:钱荒阴霾难散 积极布局大消费

Here's a bit of Google translated excerpts:
Investment advice: hard money shortage haze dispersed, multi-factor repression under the interim weak die hard. Although the money shortage is the main cause of last week's stock market decline, but not the only factor in the weeks before the stock market weakness. Downward pressure on the economy looming, the reforms are expected to fall after the peak, and is now hidden when the debt risk, which is also an important reason for the past two weeks the stock market decline. The second round of money shortage impact on the market less than June's first round of money shortage, but its duration will be longer, but in late December liquidity tight pattern remained significant; SLO and the central bank's reverse repo position, future market Even short-term oversold bounce is still hard to change mid-disadvantaged.

This article (岁末钱荒再袭蓉城 房贷“吃紧”购房者慌) discusses how some banks have stopped issuing mortgages (some banks stopped much earlier this month) and this has unnerved home buyers.

On the bright side of this as of yet mini-crisis, much of the general discussion is about how China will allow market forces to set interest rates. Unlike in the West, China's financial crises lead to greater economic freedom, not less. In the long-run, that's very positive. In the short-run, there's a major credit bubble. There is not a liquidity shortage anymore than there was in the United States in 2008. There is a solvency crisis in China and pain will come in great quantities in a short amount of time, or by a thousand cuts over many years.


Surging SHIBOR Signals Stress

Here's the search data for "cash crunch" in Chinese.

This chart shows the past few months. The spike in September was due to concerns that a cash crunch could emerge at the end of September. See Chinese Cash Crunch Could Return in September; Why Not Spend ¥8 million to Avoid a ¥10 million Fine?

Also, the Asian currency mini-crisis in India and Indonesia ended a couple of weeks earlier at the start of September. This time, the spike in "cash crunch" searches is coming at the start of a possible trend.


Sky City Thwarted By Wetlands, But Tallest Building in China's Midwest Under Construction

China's leaders have figured out how to use environmentalists to advance their personal agendas.

This article gives a good summary of the news.
Breaking Down the Hiccups and Screeching Halts of the Construction Saga of the World's Next Tallest Structure

The latest I could find in Chinese is still this: 当“天空城市”遭遇大泽湖湿地 (When SkyCity Ran Into the Da Ze Wetland), which talks about the environmental problems facing the construction. This "temporary" halt continues to plague Sky City. I put temporary in quotes because its still unclear if this halt is really about clearing a regulatory hurdle or if this is the government slowly killing the project.

Back to the original Sky City: 天空城市暂未开工 远大试搭建J97超高层建筑

In searching for news about the planned 838 meter tall Sky City, I ran across something called J97. (As in the headline above) Turns out a 349 meter skyscraper (Mini Sky City) in under construction: CHANGSHA | J97 Tower | 349m | 1145ft | 97 fl | U/C. This building will be the tallest building in China's midwest, at least until the Sky City gets built—if it ever does. The developers are throwing up J97 to prove the strength of their designs for Sky City.

A Google Translated bit from this article: 远大试搭建J97超高层建筑
Insiders said the building could be completed as soon as possible in order to highlight the lofty building 838 meters tall strength.


Signs of a Bubble Bursting

Hard Landing in Norway?

How The Credit Boom Ends: Chinese Tycoon Who Threw Lavish Wedding Sees Firm Go Bust

Originally posted on December 16. Updated due to English language coverage.

The English media finally picked up the broke coal baron story.

A Chinese Coal Baron Tumbles into Debt
Liansheng Group is the 10th-largest coal company of more than 130 in Shanxi, and the biggest privately owned one, as well as the biggest private company in the province, People’s Daily reported. With the president, Xi Jinping, recently calling for the market economy to play a “decisive” role in China’s future development, its financial fate may be a litmus test for indebted firms, the newspaper seemed to suggest.

“A new Liansheng Group may be able to lead the way in today’s market environment,” it wrote. “In addition, if the restructuring of Liansheng Group is successful, it will explore the way toward a proactive and effective rescue route for companies that are presently in trouble.”

The creditors are many, reported Money Weekly. It cited the company’s lawyer, Zheng Zhibin of Beijing Jindu Law Firm, or King & Wood Mallesons, as saying that debts would be paid in this order: outstanding taxes, workers’ salaries and, lastly, investors. Mr. Zheng was not immediately available for comment.

“Mr. Zheng is known as the best bankruptcy lawyer in China,” the magazine wrote.

Money Weekly said creditors include major banks and trust companies: China Development Bank, Jinshang Bank, Bank of Communications, China Merchants Bank, Huaxia Bank, the Liulin Credit Cooperative, Beijing International Trust, Shanxi Trust, JIC Trust and Jilin Trust.

The Financial Times picks up the trust angle: Coal tycoon’s plight shines light on China trusts
High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/e91bcad0-66d2-11e3-aa10-00144feabdc0.html#ixzz2nqdK6zv8

Trust companies in China are often very demanding in their requirements for physical assets as collateral, but the Liansheng product was backed only by third-party guarantees. Jason Bedford, a former big four auditor who has focused on the Chinese trust sector for the past six years, said he had never seen a product that relied exclusively on third-party guarantees.

“This is clearly very risky,” he said. “If this was fully disclosed in the product prospectus and there is no evidence of mis-selling, then the loss could be passed on to investors.”
Liansheng’s troubles are a reminder of the thin dividing line between China’s banks and its shadow lending industry. The Liansheng loan product sold by Jilin Trust was distributed in part via China Construction Bank, the country’s second-biggest lender by assets.

Banks tell customers they do not guarantee trust products, which offer returns far higher than traditional bank deposits, but buyers often ignore the warnings in the belief they carry the banks’ implicit backing. The Liansheng investment product targeted an annual return of 9.8 per cent.

Oringal post.
If people know about Xing Libin at all, they probably came across this story last year.

Shanxi coal tycoon throws daughter a US$11m wedding
Xing Libin, a well-known coal tycoon in Shanxi, recently drew attention for holding a large expensive wedding and a concert costing 70 million yuan (US$11.1 million) for his daughter.

The website of the Guangzhou-based 21st Century Business Herald reported that Xing's main source of income is operating and leasing coal mines. He spent 80 million yuan (US$12.67 million) to acquire a 100% stake in the state-owned Xingwu Coal Mine in Liulin county of north China's Shanxi province, which has a stock of 1.5 billion tons.

Xing later became the richest man in Shanxi and currently has assets exceeding tens of billions of yuan.

Cut to today (the following article is translated via Google): Luliang richest man collapses Beijing Xing Libin liabilities 20,000,000,000 deep trust (吕梁首富邢利斌负债200亿崩塌 北京信托深陷)
A well-known bubble finally burst of rupture.

For most people, know the Shanxi coal suppliers Xing Libin, because he was in early 2012, in Sanya, Hainan threw 70 million yuan, to the daughter to do his best in a luxurious wedding. After the wedding, about coal's source of wealth, lifestyle, had set off a vigorous discussion.

But for the purposes of financial institutions, the richest man in Luliang, was already a spent force. Coal prices continue to decline, the Lend Lease Group Libin, the situation began to wage arrears. Lend Lease has a lending relationship with the Group's banks and trusts, have started to care about the solvency problem Liansheng.

Two years later, Xing Libin finally admit their insolvency. November 29, Liulin County, Shanxi Province People's Court held a news conference to announce the acceptance of Shanxi Liansheng Energy Limited and its companies, 12 companies under the jurisdiction of the restructuring application. Liulin according to data released by the People's Court, the current financial position of the Group worrying Liansheng, financial liabilities of nearly 30 billion, debt settlement has basically lost the ability, and facing unpaid tax, employee pension insurance, engineering models, materials, equipment, etc. a number of financial issues. Among them, the Lend Lease Group has secured relationships with more than 10 private enterprises, the scale of credit funds owed more than 20 billion.
Translation is obviously poor through Google, but there is no English coverage of this story yet.


PBOC Pops the Bitcoin Bubble

What China buys goes up in price. What Chinese regulators crack down on, collapses in price.

The Google translation is pretty bad on this one, but it conveys the negative news as the central bank cracks down on third party payment.

First here's English coverage of the rumored shift, based on closed door meetings between Bitcoin companies and the PBOC yesterday.

China Bans Payment Companies from Working With Bitcoin Exchanges, Sources Claim
A reputable source told CoinDesk that the People’s Bank of China (PBOC) met with most of the top third-party payment companies this morning.

The source said the meeting topic was unrelated to bitcoin, but digital currency became an important part of the discussion.

“PBOC, in no uncertain terms, directed third-party payment companies not to do business with bitcoin exchanges in China,” they explained.

.......They went on to say that if and when this happens, people will still be able to withdraw their money from Chinese exchanges, they just won’t be able to deposit new funds.

“There’s no need to panic and do a run on the bank. People will still be able to sell their bitcoins for local currency and then withdraw that currency,” they concluded.

Here's the Chinese article, Google Translated below.

央行约谈第三方支付防范比特币风险 (Central Bank interviews with third-party payment bitcoin risk)
"The central bank regulations third party payment institution shall not provide hosting bitcoin trading site for the trading business." Yesterday afternoon, the central bank called third-party payment companies meeting revealed the news.

  "First Financial Daily" reporters learned exclusively, December 5 issued "on guard against the risk of Bitcoin notice" (the "Notice") Following the central bank again yesterday, "attack", interviews with more than 10 third-party payment companies relevant person in charge, it may not be explicitly requested to Bitcoin, Wright credits (LTC) and other trading sites offer payment and settlement business.

  In less than two weeks time, the central bank even out "two trick" to prevent the risk of Bitcoin, and convey the spirit of the meeting is to be interpreted as "drastic" Many Bitcoin insiders.

  Third-party payment "three line"

  A large third-party payment company, told reporters that the participants who, yesterday morning, more than 10 third-party payment companies convened by the central bank, in Beijing held a closed-door meeting. Such persons in an interview with this reporter revealed that the meeting, Deputy Director of the settlement payment was chaired by the Secretary golden week the central bank, every company has sent 1 to 2 participants stakeholders.

  "Justice Week at the beginning of the meeting made it clear that the meeting was not convened to discuss whether the companies about Bitcoin-related businesses can conduct, but to convey the attitude of senior central bank, which may not be the first third-party payment companies to bitcoin, Wright currency and other trading sites provide payment and settlement services; Secondly, for payment institutions business cooperation has occurred should be lifted, the stock of money at the latest to complete the withdrawal before the Spring Festival, the new payment services may not occur; Third, strict implementation of the December 5 the central bank issued a "notice". "these third-party payment companies told this reporter.

  According to newspaper reporter to get a third-party payment companies participants recorded meeting minutes, the meeting, in addition to domestic regulations do not allow third-party payment agencies engaged in related businesses bitcoins, the central bank will also be After studying the relevant requirements for access in the territory of Bitcoin-related businesses overseas payment mechanism.

  After Golden Week convey relevant spiritual, individual companies have made the payment that he will strictly enforce the above three requirements. But it is worth noting that one of the world's most active trading site BTCC (bitcoin China) as well as Bitcoin, Wright currency trading site OKCOIN have third-party payment agencies from the original co-pay through fiscal replaced by another third-party payment Companies, meanwhile, have users complained that two sites are currently only using money paid through withdrawals, but not through its recharge.

  "Alipay has not any bitcoin trading site had business cooperation," Alipay stakeholders in an interview with this reporter, said, "If investors find recharge channels Alipay, you need to be alert to whether the other individual accounts, if really is a personal account, the investor must be aware of the risks. "

  There Bitcoin Insiders believe that the contents of the central bank from yesterday's meeting, the central bank for risk prevention efforts may result in a larger bitcoin, but he also expressed puzzled, because this might make the original line open and transparent Bitcoin trading platform is transferred to the ground, the difficulty of monitoring will also rise.

  Bitcoin bleak future in China?

  "Come after" notice "is issued, we are in this thing to worry about third-party payment will not do it, did not think of a prophecy." Bitcoin transaction, a person in charge after hearing the news of the newspaper Reporter said.

  After the "notice" issued by the vast majority of people in the industry believe that the "caliber looser" or even "a regulatory innovation" is different, the spirit of the meeting of the central bank to bitcoin industry obviously caused some blow. Many industry insiders have said that bitcoin future development of the situation in China worrying, will choose different levels of "escape", or transferred to offshore trading platform Bitcoin transactions.

  Earlier, the central bank's "notice" had explicitly requested at this stage of financial institutions and payment institutions shall not conduct business associated with bitcoins are not allowed to bitcoin for a product or service pricing, may not be sold or traded as a central counterparty bitcoin not covered with Bitcoin-related insurance business or insurance bitcoins into range. After the "notice" is issued, although Bitcoin market has movement fell short, but soon that recover "lost."

  Yesterday's meeting will have much impact on prices bitcoins is still unknown, but as of press time newspaper reporter, BTCC Bitcoin price has fallen from yesterday's highest 5335 yuan to 4600 yuan, a decrease of 15%.

H/T: ZeroHedge