Kaboom: Chinese Home Prices Soar 1.9 pc in March

CREIS reports their 100-city home price survey shows a 1.90% month-on-month increase.

The top 10 cities increased 2.59% mom. Shanghai led that group with a 5.09% mom increase.

The largest overall increases were 6.72% in Dongguan; 6.05% in Huizhou (both in Guangdong); 5.79% in Suzhou, 5.60% in Kunshan (in Suzhou county). The median month-on-month price change was 0.37%

There are still 38 cities seeing home price declines, led by the 2.26% drop in Quanzhou.

100 City Survey: 2016年3月中国房地产
Google Translated: March 2016 New Home Prices

Nailed It: Caixin PMI Rebounds to Expansion

Balding was correct, the PMI came in high. Balding: Look For China PMI Upside

Now the ball is back in Yellen's court. If economic data stays on course, she lost one of her arguments for delaying rate hikes.

Caixin: 2016年3月中国制造业采购经理指数为50.2%
CNBC: China's Caixin manufacturing PMI for March climbs to 49.7 from February's 48.0

Protectionism in China

Rebalacing to a consumer economy is easier if taxes on consumers aren't rising......

WSJ: China Tax on Overseas Purchases Set to Kick In
The changes, announced by the Finance Ministry last week, include raising the so-called parcel tax that is currently imposed on overseas retail products that e-commerce firms ship into China. On top of that, such goods sent directly to consumers will now be treated as imports and will be subject to tariffs and value-added and consumption taxes, whose rates vary depending on the type and value of goods.

The ministry said the changes, which become effective April 8, are intended to put foreign and domestic products on an equal footing. But industry analysts said the move seems designed to give a boost to “made-in-China” products and could dent a small, but growing market for foreign goods sold by Alibaba Group Holding Ltd., JD.com Inc. and other e-commerce players.

Those marketplaces feature nutritional supplements and food by brands such as Ocean Spray, as well as diapers and other baby and maternal products.

China Still Increasing Volatlity of Natl Balance Sheet

Reuters: China forex regulator buys $4.2 bln in stocks via new platform
China's foreign exchange regulator has bought mainland stocks worth over 27 billion yuan ($4.18 billion) via three low-profile investment firms it controls, the official Shanghai Securities News reported on Thursday.

Buttonwood Investment Platform Ltd, 100 percent owned by the State Administration of Foreign Exchange (SAFE), and Buttonwood's two fully-owned subsidiaries, have bought shares in a total of 13 listed companies, the newspaper reported, citing top 10 shareholder lists in the companies latest earnings reports.
ZeroHedge quotes David Cui of BofA: "The Buttonwood SPV": The Striking Details Of How China's Central Bank Is Directly Buying Stocks
The moderate size notwithstanding, it is a big surprise to us that SAFE bought stocks directly in 4Q. This broke at least two conventions for central banks: 1) central banks do not normally buy stocks directly (as they are supposed to manage their balance sheet conservatively); and 2) FX reserves, presumably what SAFE had used to buy A-shares, should not be used to purchase domestic assets. When the FX reserves were created, the equivalent amount of local currency was already issued on the back of the FX; using FX to buy domestic assets means that more local currency is created with the same FX backing.

A more transparent way to handle this, and with the same result, is for PBoC to simply expand its balance sheet and take on these stocks without going through SAFE. PBoC's loaning to CSFC and brokers to buy stocks was controversial enough, buying stocks directly is a step further, in our view. It is difficult for us to gauge the reasons behind SAFE's move. But this cannot be enhancing public confidence in the PBoC and, by extension, in RMB, in our view (What may trigger financial instability, Jan 3).
Aside from the potential for government intervention, this is similar to China buying mining assets to bet on its own growth. If growth continues the bet pays off big, if growth fails they lose on the investments and reduce stability. This increases long-term risk for short-term stability.

Realtors Told to Pull Exorbitant School District Home Listings

If you want to go to a good public school in China, you need to live in the right neighborhood. Which leads to cases such as those below, where tiny apartments sell for incredible sums thanks to enormous demand.
Yesterday, the Beijing Morning News reporters Zai Moutai and Xing Fangchan agency's official website found that the unit price of the most expensive housing price 149,900 yuan / square meter. Located Deshengmen Avenue, a 16.09 square meters in area elementary school attached to the total price of 2.41 million housing 13, 149,800 yuan per square meter; a historian elementary school district housing priced at 148,600 yuan / square meter. Prior to hanging out at high prices per square meter of housing tens of thousands had not a trace. In another well-known real estate agent websites, school district housing prices higher than that of the housing is not much, as the New Culture Street Elementary School District experiment two rooms, 170,700 yuan per square meter; West Wang temple elementary school district room, price 163,000 yuan / square meter.
Reporters were unable to substantiate rumors of a 460,000 yuan (US$70,700) / sqm home wereiFeng: 北京中介被要求下架单价15万元以上学区房

Local Govt Debt on Default Watch

Bloomberg: Now on China's Default Watch: $617 Billion in Regional Debt
While the resilience of local-government financing vehicle bonds has helped it trade at a lower yield than similarly rated corporate securities, that gap is starting to be eroded. The discount for five-year AA+ LGFV notes narrowed 6 basis points from a record high of 32 basis points in January. Total borrowing by 29 of China’s provinces surged to 16.2 trillion yuan at the end of last year, up 53 percent from 2013, according to a March 22 Bloomberg Intelligence report.

DimSum Default: Guosen

FT: China investment bank defaults on ‘dim sum’ bond
A unit of Guosen Securities, China’s eighth-largest investment bank, has defaulted on a Hong Kong-traded renminbi bond, according to a document seen by the Financial Times, marking the first debt breach by a state-owned enterprise in China’s offshore bond market in nearly two decades.

The technical default by Guosen's Hong Kong affiliate puts at risk a Rmb38m ($5.9m) coupon payment due April 24 on Rmb1.2bn in “dim sum” bonds sold in 2014. Missing that payment would set a precedent for the offshore units of Chinese SOEs, whose creditors widely assume the onshore parent will always stand behind its affiliates, according to analysts.

The default was unexpected because Guosen’s onshore unit is by all appearances in rude health. With the city government of Shenzhen as its largest shareholder, Guosen Securities was fourth on the league table for stock and bond underwriting in 2015, according to AsiaMoney.

Balding: Look For China PMI Upside

Data shows an uptick in industrial activity. I've also seen the thrice monthly commodities report show broad price increases. Should be good for Chinese stocks if so, but U.S. is harder to call since improved China means the Fed can hike rates.

Balding: Little Treat Before Tomorrow’s Chinese PMI’s

Thanks Again Janet: PBoC Strengthens Yuan Again

DNA India: People's Bank of China fixes yuan midpoint rate stronger at 6.4612 per dollar

Earlier: PBoC to Fed: Thank You for Delaying


Third- And Fourth-Tier Still Rolling Out Policies to Boost Housing

Shenyang has rolled out 22 policies aimed at increase home sales, in an effort to grow sales 10 percent yoy.

For the property market to the inventory, local governments have also introduced "go" of measures. March 28, for the "zero down payment " controversy risk Shenyang in nearly a month after the release of a new version of the New Deal, for individuals to purchase housing urban levels of reward policy; reduce second-hand housing transaction taxes and fees; to encourage farmers into the city to buy a house live support graduates and students in the purchase of land supply in half, etc. 22 new real estate policies.

...Jiangxi Province, a Department of Finance told the "Economic Information Daily" interview, said that from last year, the year before auction and are not linked out. Local tax introduced in some destocking incentives, including lower transaction deed tax and other taxes, although this will affect revenue ten several hundred million, but still want to place these policies so that the real estate market to pick up some.

Sichuan Yibin City of destocking, announced that it will be fully liberalized housing subsidies, to 31 December, in addition to continue to implement the policy of housing subsidies of 200 yuan / square meters outside, Yibin area restrictions will cancel subsidies.

March 29, Sichuan Provincial Housing and Construction Office is issued a circular calling for cities (prefectures) carefully sort, perform the relevant legal procedures, policy continuity, making full use of the strong support of the real estate market housing fund "to reduce inventory."
The article goes on to discuss an article by economist Ma Guangyuan (recently covered here: Ma Guangyuan: Debt Cliff A Greater Threat Than Real Estate Bubble) who says the housing market isn't really a bubble. He argues that first-tier cities like Shanghai and Beijing completed their urbanization before the nation was fully urbanized. The prices will be high there because they will be bought by the wealthy; the demand exists. On the other hand, the real story is the foam in the lower tiers, 13 to 15 billion square meters of housing built, planned or under construction, equivalent to 10 years of sales. With this much inventory, some cities don't need to build any houses for years, and the best way to adjust is for prices to fall. The bubble is therefore not where the prices are highest, but where the inventory is greatest, which is in cities with already low prices.

iFeng: 中国三四线城市才是全球房地产泡沫最大的地方

PBoC to Fed: Thank You for Delaying

Last week, two voting members of the FOMC said an April rate hike was possible. Many believed the PBoC allowed the yuan to depreciate as a warning to the Fed (PBoC Warns Fed: Hike and We Devalue). Yellen is concerned about the effect of yuan depreciation, and on Tuesday, she told the world the Fed will slow/delay rate hikes due to concerns about China. After which, the PBoC went ahead and strengthened the yuan.

CBN: China Raises Yuan Fixing After Yellen’s Speech

The Chinese central bank has raised yuan's daily reference rate for the second day as dollar dropped overnight. The People’s Bank of China on Wednesday rose yuan daily fixing to 6.4841 per dollar against yesterday’s fixing of 6.5060, strengthening the currency by 219 basis points (0.33%), the most in the past week. PBOC allows yuan to trade 2% up or down from its daily reference rate. Analysts believe the overnight decline in dollar value was the likely reason behind the rise in yuan daily fixing. Dollar slipped yesterday and headed for its worst month in five years, following the Federal Reserve Chair Janet Yellen’s speech yesterday.
The changes in exchange rates makes sense independent of central bank policy: a stronger dollar will cause the yuan to weaken versus the U.S. dollar based on the currency basket. For those who believe there is coordination between central banks, however, the past few days provide plenty of evidence. The most interesting aspect of this take is that if you believe the central banks are coordinating, it appears the Chinese are in charge.

I assume markets are in charge until I see evidence of coordination, not only because it is the mostly probable, but because intervention so often fails. At the present trend of lower USD and higher oil prices and assuming the economy isn't slipping into recession, the U.S. will have a big inflation problem in 6 months. Meanwhile, China might still be in trouble 6 years from now at their rate of rebalancing. At some point, the Fed will hike and the yuan will depreciate.

China does like to do things for show though, such as buying a bunch of Boeing planes ahead of a state visit China inks big deals with Boeing, Cisco Systems. If there is any "coordination", it's more likely to be one sided.

Yuan Depreciation Hammers Airline Profits

Bloomberg: China Eastern Air Takes $770 Million Forex Hit Amid Yuan Turmoil
China Eastern Airlines Corp.’s foreign-exchange losses surged nearly 250 times last year, as the dollar gained and the yuan fell just as Chinese airlines were expanding international capacity.

The losses ballooned to 5 billion yuan ($772 million) last year from 202 million yuan in 2014, China Eastern said in a Shanghai stock exchange filing Wednesday. Net income at the nation’s second-largest carrier by passengers rose 33 percent to 4.5 billion yuan in 2015, according to Chinese accounting standards, the company said.

China Southern's forex losses exceeded its full year profit.

WallStcn: 人民币贬值之痛:三大航去年汇兑损失激增 南航汇损超全年净利

Chinese Banks Not Interested in Debt for Equity Swap; Bad Debt Firms Circle

Bloomberg: China's Large Banks Wary on Li Keqiang's Plan for Bad Loans
Asked about the plan at the Boao Forum last week, China Construction Bank Corp. Chairman Wang Hongzhang said he needs to think of his shareholders and wouldn’t want to see a plan that simply converted "bad debt into bad equity."

China Citic Bank Corp.’s Vice President Sun Deshun said at a press conference last week that any compulsory conversion of debt into equity would have to be capped. And Bank of China Ltd. Chairman Tian Guoli said in Boao that it’s "hard to evaluate" how effective debt-equity swaps will be, as so much has changed in China since the tool was used to bail out the banking system during a previous crisis in the late 1990s.
The bad debt firms are the better choice:
One big difference with the previous bailouts of 1999 and 2004 is the fact that many of the banks, SOEs and the asset-management companies have since sold their shares, in many cases to international investors, and now have to take shareholder interests into account, says Guangfa’s Mu.

...While banks are hesitant, China Huarong Asset Management Co., one of the four bad-loan managers that took part in the 1999 bailout and swaps, is actively pitching for a role in any new round of debt-equity conversion. The government should provide 1 trillion yuan to 3 trillion yuan of funding support, with banks, SOEs and asset managers sharing the risks, Lai Xiaomin, chairman of Huarong, said in a proposal to the top legislature earlier this month.


Trust in China Slumps

The vaccine scandal strikes another blow against the government. If isolated, this wouldn't be a big deal, but combined with ongoing food safety, pollution, and generally rising health consciousness of the public, it is a huge story.

Xinhua: Official vaccine investigation begins
A large quantity of improperly stored or expired vaccines have allegedly been sold across the country since 2011. Twenty-nine pharmaceutical companies have been implicated in sales, and 16 institutions in purchases. More than 130 people have been questioned and 69 criminal cases have been filed.

Bernhard Schwartlander, World Health Organization (WHO) representative in China, called the national immunization system "one of the best in the world" in an interview with Xinhua on Monday.

The WHO has confidence in all Chinese vaccine manufacturers, based on over 15 years of working closely with the national vaccine regulators, Dr Schwartlander said, pointing out that the biggest risk is that parents might avoid routine vaccination of their children as a result of diminished confidence in the system.

He called for urgent action to restore public trust.
Caixin has the best take on the subject: Closer Look: Vaccine Scandal Has Roots in Officials' Push for Profits
The scandal came to light earlier this month, when police in the eastern province of Shandong said they arrested a former pharmacist and her daughter for illegally selling improperly stored or expired vaccines worth more than 310 million yuan since 2011. Their sales network covered 24 provinces and cities.

The pair allegedly sold 25 types of non-mandatory vaccines used to combat chicken pox, rabies, meningitis and hepatitis A. The shots were for both children and adults.

The State Council issued rules for vaccines in 2005 that divided them into two categories. The mandatory category 1 vaccines, such as those for hepatitis B and tuberculosis, are provided to the public by the government for free. Category 2 vaccines included those that members of the public can choose to get at their own expense.

The first type is strictly controlled by provincial-level disease control authorities, from purchase to distribution and inoculation. The expenses are covered by the government and are transparent, a person close to the disease control department in Shandong said.

The business of category 2 vaccines is more complicated. The 2005 rules opened the door for more market players to participate in the production and sales of non-mandatory vaccines in the hope that competition would lead to fairer prices.
Rabies vaccine is not mandatory, but it is if you are bitten by a potentially rabid animal.
This has encouraged some to take risks. In June 2005, police in Si County, in the eastern province of Anhui, arrested several individuals, disease control center employees and doctors, for buying hepatitis A vaccines from unlicensed dealers and inoculating more than 2,400 students without parental permission. One 4-year-old girl died after getting a vaccination.
That is one of the arguments of anti-vaxxers in the U.S., that vaccines are merely a way for drug companies to earn money, and then cause needless deaths in the rare cases where the vaccine has a fatal effect.

CASS Researcher Predicts Home Price Rise Will Abate in Q2; Langfang Prepares Buying Restrictions

Recently Shanghai, Shenzhen and other cities have issued a purchase of credit limit New Deal caused concern, Chinese Academy of Social Sciences, 28, said the expert, first-tier cities housing prices skyrocketing prompted the government to introduce more stringent price control measures to control growth in demand will also promote the follow-up market sentiment. Expected in the second quarter, first-tier cities housing prices rose overall speed will slow down.

CASS Institute of Finance and Economics Strategy on the 28th held in the first quarter macroeconomic situation analysis. City hospital and Real Estate Economics Research assistant researcher Zoulin Hua at the seminar said that the current real estate market in the area of ​​clear differentiation, high inventory and the housing shortage coexist, suggesting housing "total demand" era has faded into the "structural surplus" era.

In the first quarter, favorable policies in the macro backdrop continues to raise the first-tier cities housing sales accelerated, rapidly rising house prices in some cities such as Shanghai, Shenzhen or alarming. Zoulin Hua believes that this makes tier cities housing prices energy can be released in advance.

In addition, most second-tier cities housing prices also rose steadily, but three or four lines and the following cities are facing high housing inventory levels, aging population, difficult industrial restructuring, lower demand growth and other issues. Zoulin Hua believes that price stability is still the amount of walking tier cities in 2016 and below the main line. Since these cities the purchase cost of credit at historic lows, plus a variety of future government support and stimulus will have been introduced, prices will steadily short-term, but do not have the foundation to rise.

iFeng: 社科院专家:二季度一线城市房价增速将放缓

Langfang is expected to increase the minimum down payment on first homes to 30%, and to 60% for second homes. Also mentioned are population controls to limit the long-term demand for housing.
Regulation mainly includes two aspects: First, the full credit limit. For the first time apply for the purchase of housing households, commercial loans down payment of not less than 30%; to have a set of housing households, to improve the living conditions again apply for a commercial loan to purchase ordinary housing, the down payment ratio of not less than 60%.

Second, in the case of "north three counties' total population control, actively implement the points settled system.
iFeng: 消息称廊坊拟全面限贷 二套房首付比例不低于60%

Yellen Admits Dollar Too Strong, China Too Important

Fed Chair Yellen: The Outlook, Uncertainty, and Monetary Policy
One concern pertains to the pace of global growth, which is importantly influenced by developments in China. There is a consensus that China's economy will slow in the coming years as it transitions away from investment toward consumption and from exports toward domestic sources of growth. There is much uncertainty, however, about how smoothly this transition will proceed and about the policy framework in place to manage any financial disruptions that might accompany it. These uncertainties were heightened by market confusion earlier this year over China's exchange rate policy.

A second concern relates to the prospects for commodity prices, particularly oil. For the United States, low oil prices, on net, likely will boost spending and economic activity over the next few years because we are still a major oil importer. But the apparent negative reaction of financial markets to recent declines in oil prices may in part reflect market concern that the price of oil was nearing a financial tipping point for some countries and energy firms. In the case of countries reliant on oil exports, the result might be a sharp cutback in government spending; for energy-related firms, it could entail significant financial strains and increased layoffs. In the event oil prices were to fall again, either development could have adverse spillover effects to the rest of the global economy.

If such downside risks to the outlook were to materialize, they would likely slow U.S. economic activity, at least to some extent, both directly and through financial market channels as investors respond by demanding higher returns to hold risky assets, causing financial conditions to tighten.
The initial reaction is positive because the speech is dovish on U.S. rates. The underlying message is grim if you are at all bearish or skeptical on China's rebalancing efforts.

Chinese Debt Buildup, More on Dongbei Steel

Reuters: China bank profits flat-line as bad debts continue to soar
Non-performing loans (NPLs) reached a 10 year high of 1.27 trillion yuan ($195 billion) last year, or 1.67 percent of all loans outstanding as of December, showed data from the China Banking Regulatory Commission.

However, analysts said some banks appear to be delaying recognising some loans as soured. The potential real bad loan ratio may be 8 percent to 9 percent, banking analyst Li Nan at Beijing Gao Hua Securities wrote in a recent report.
Remember this story from a week ago, via Caixin: Gov't May Let Banks Hold Less Cash in Reserve for Sour Loans. Whatever earnings are reported, they are likely to be inflated going forward based on those account changes.

Reuters: China's BoCom sees tough 2016 as corporate banking dives
Bank of Communications Co Ltd (BoCom) (601328.SS) (3328.HK), China's fifth-largest lender, said hitting 1 percent profit growth in 2016 will be a stretch, reporting a dive in corporate banking as bad debts keep mounting.

BoCom reported its fourth year of slowing profit growth on Tuesday, while the bank's bad loan ratio increased for the 15th consecutive quarter.

"To maintain 1 percent net profit won't be easy," BoCom's president Peng Chun said during a news conference in Hong Kong when asked how the bank's earnings would compare to last year.

...BoCom's non-performing loan ratio rose to 1.51 percent by end-December, from 1.42 percent at end-September.
No surprise to the market and BoCom's stock is up in March.
BoCom's net interest margins - the difference between a bank's borrowing rate and interest earned on loans - fell to 2.22 percent from 2.24 percent at end-September.

The bank said in its annual results that the margin squeeze was "due to the gradual acceleration of interest rate liberalisation."

Loan loss provisions, the amount of capital a bank has to set aside to buffer against bad debts, fell to 155.57 percent from 165.3 percent in the previous quarter.
All negative for real future earnings, with big earnings restatements coming later should NPLs take off.

Finally, FT provides more details on the situation at Dongbei Steel: China steelmaker Dongbei Special defaults on $131m debt

Culture and Currency: Hold Gold to Avoid Collapse

Many (most?) American universities exist to hand out pieces of paper which are supposed to be tickets to lucrative careers. Many students find otherwise, with a massive debt that in no way matches the earning power of their degree. Universities do not work to increase the value of the degree, instead they churn out more paper at a higher rate. The price of any fiat currency, in this case the currency of credentialism, eventually returns to the intrinsic value of the paper itself. If you are a business selling rapidly depreciating paper and in competition with other businesses selling the same product, you have two optimal strategies. One is to defect and begin selling a high quality product that cannot be replicated. The other is to sell as much paper as possible, no matter how much it debases the value, for as much money as possible before the whole thing collapses.

Reuters: As SAT was hit by security breaches, College Board went ahead with tests that had leaked
Thanks to the booklet, Ding said he already knew the answers to about half of the critical reading section of the SAT when he took the test in Hong Kong in December 2013.

“I felt really lucky,” Ding said.

His score on that section? A perfect 800, he said.

Ding’s advance look at material from the test he took was no fluke. His cram school is part of a vibrant Asian industry that systematically exploits security shortcomings in the SAT. Chief among them is a vulnerability created by the owner of the exam: the routine practice of reusing material from tests that already have been given.
There was a cartoon in my Chinese econ textbook back in the day. A restaurant customer is buying a bottle of XO Cognac with cash. Both customer and waiter are laughing because the money is counterfeit and the cognac is fake. Both were also happy because they only cared about the superficial value of the good. In this case, American universities are taking real cash from wealthy students able to pay the full tuition, and won't let a pesky thing like an entrance exam (and later academic standards for handing out degrees) get in the way.
A confidential PowerPoint presentation reveals that College Board officials had documented widespread security problems in June 2013, shortly after canceling a sitting of the SAT in South Korea. The PowerPoint, reviewed by Reuters, shows that half of the SATs in inventory at the time had been “compromised” – the College Board’s term to describe exams whose contents have leaked, in whole or in part, outside the organization. Four of the exams had been compromised by an unnamed “Chinese website.”
Uh oh. Sounds like the SAT might cut off the universities' gravy train.
The new exam leaves in place a fundamental weakness plaguing the old one: the recycling of test material. The practice will continue with the new SAT, the College Board told Reuters. And that reuse of test material has proved to be a major security hole.
Crisis averted.
Security breaches abroad are increasingly significant for U.S. higher education because schools are allocating more seats than ever to foreign students. About a third of the 761,000 degree-seeking foreign students in America come from China, according to the Institute of International Education. Overseas students are especially attractive because most don’t qualify for financial aid and thus pay full price. Chinese students spent almost $10 billion on tuition and other goods and services in America in 2014, Department of Commerce statistics show.
That paragraph needs a small edit:
Security breaches abroad are increasingly significant lucrative for U.S. higher education because schools are allocating more seats than ever to foreign students. About a third of the 761,000 degree-seeking foreign students in America come from China, according to the Institute of International Education. Overseas students are especially attractive because most don’t qualify for financial aid and thus pay full price. Chinese students spent almost $10 billion on tuition and other goods and services in America in 2014, Department of Commerce statistics show.
Fake degrees are a major U.S. export. If 250,000 Chinese students are paying $10 billion a year, American can close its trade gap by bringing in 9 million Chinese students each year.
Evidence that some foreign applicants are displacing Americans because of an unfair advantage on the SAT could add to a backlash against standardized testing in college admissions.
Sort of like the backlash currently taking place in the Democrat and Republican presidential campaign.

The above is a small slice of an in-depth report from Reuters. Well worth reading the whole thing.

In Germany, the leaders threw out German concepts of equality without batting an eye, opting instead for Shariah law compliant trains. German train operator begins women only carriages over fears of migrant attacks
A German train company will start operating women-only carriages, a move which has been met with controversy.

Several reports suggest that the new carriages, for women and women travelling with children, are a response to the sex-attacks in Cologne on New Years Eve, which was largely blamed on migrants.

Regiobahn line announced this week that the women-only carriages will be available for passengers travelling between Leipzig and Chemnitz.

If the Germans will not defend their value of equality, will they defend the value of their euro? If the Americans will not defend the integrity of their education system, will they defend the integrity of the U.S. dollar?

The money in everyone's bank account has value only because people believe it has value. Most money isn't even printed anymore, it lacks basic intrinsic value as toilet paper, firewood or building blocks for children. If the public lose trust in the leadership, in the values of society, in the key institutions, the currency will not be far behind.

The Case for Depression: Friedman's Plucking Model

Here's the really bearish view of the US economy: it is turning Japanese. Instead of working back to positive trend growth, trend growth is flat-to-negative in the long-run as the economic base is consumed.

Charts from Alhambra. Lots of discussion and explanation there: Durable Goods May Not Actually Show Recession, And That Is The Worst Case

Milton Friedman's "plucking model" is an interesting alternative to the natural rate of output view of the world. The typical view of business cycles is one where the economy varies around a trend value (the trend can vary over time also). Milton Friedman has a different story. In Friedman's model, output moves along a ceiling value, the full employment value, and is occasionally plucked downward through a negative demand shock
Economists's View: New Support for Friedman's Plucking Model

An earlier article on the plucking model: Friedman's "Plucking Model"

China's Worker Bailout Fund on Hold?

AAP: Mounting debts could derail China's plans
China's campaign to slim down its bloated industries could be derailed by more than $US1.5 trillion ($A1.97 trillion) of debt in its steel, coal, cement and non-ferrous metal sectors, which threatens to overwhelm local banks.

Tackling industrial overcapacity has become a priority for Beijing to make its slowing economy more efficient and address a supply glut that has hammered coal and steel prices.

China is providing more than 100 billion yuan ($A20.2 billion) in the next two years to handle layoffs from coal and steel, but that will only be made available once debts have been settled.

...China's statistics bureau puts coal and steel debts alone at eight trillion yuan, of which about a third is bank debt.

If 20 per cent of that were to go bad in 2016, which industry analysts say is not unrealistic, it would raise Chinese banks' non-performing loans by nearly half.

Bankers say city and regional banks set up by party or provincial government officials are most exposed, and that official NPLs, which already doubled in 2015, underestimate the scale of their problem lending.

"China needs to set up a new organisation, a special bank just to take over these debts in order to avoid the local banks going bankrupt," said steel industry consultant Xu Zhongbo.

..."To cut capacity we cannot just shout slogans and issue targets - we must have a realistic and effective mechanism," said Wang at Huaibei Mining Group.

He said it was unreasonable to expect local governments to take the initiative in closing zombie coal firms, given the contribution coal makes to local gross domestic product, employment and government revenue.
I assumed the worker bailout funds were designed to shutter the firms and move the debt restructuring process along, but not it appears the layoffs are coming later in the process. The longer it takes, the more bad debt will pile up...

Railfax Traffic Shows Slowing U.S. Economy

The Atlanta Fed GDP Model cut its estimate of GDP growth to 0.6% in the first quarter. It could change substantially as more data comes in next month, but for now it signals a slowing economy as well.


Debt for Equity Swap Needs Growth that Doesn't Exist

Chinese bad debt in the late 1990s was phenomenally high as a percentage of assets, but as a percentage of rapidly growing GDP, it was a trivial matter to solve it. Not so today.

Here's Faser Howie panning the debt for equity plan.

Nikkei: Fraser Howie: China's debt swap plan isn't the right solution for bad loans
China's banking sector underwent many years of reform, hard work and accounting magic to get into shape. The 2009 stimulus undid much of that, as the banks reverted to being credit taps that the government could turn on and off. This latest swap proposal goes further to make the banks political pawns, subject to industrial state interests.

Much has been heard about supply-side management and reform of state-owned enterprises, both of which are essential to clean up the state sector, but the debt-for-equity proposal has all the makings of a short-term fix that will only make an already difficult and opaque situation worse. The debt-for-equity swaps worked well 17 years ago because China boomed in the subsequent years. The outlook now is very different, and stronger medicine is required.
In the article he also raises the issue of Cinda and Huarong, the bad debt companies that should be playing a major role in restructuring debt this time around. Instead they seem to be on the sidelines...

Why Is Zhou Xiaochuan Always Misunderstood?

An editorial in the Economic Observer asks, "Why is Zhou Xiaochuan always misunderstood?" 为什么周小川总是被“误读”

The answer, as has been the case for the past three years or so, is investors are constantly looking for stimulus. Take the most recent talk of using equity markets to ease the debt burden. This is a reform agenda for the government, to have financial markets play a greater role in capital allocation. Investors who see stimulus everywhere they look, interpret PBoC statements through the lens of a stimulus effort, instead of the same reform path that's been followed (ever so slowly) for the past few years.
High proportion of lending is actually trying to resolve a 20-year proposition. In China, bank credit-based indirect financing accounted for about 80%, only 20% of direct financing, but the opposite is true in the United States and other developed market economies. In terms of avoiding risk concentration in the banking system, or optimizing asset allocation point of view of the structure of residents, improve the proportion of direct financing is a very critical thing. China has more than 60 trillion of savings, which provide equity financing to a large pool of money, and gradually establish and improve multi-level are capital markets, more equity financing to provide more space. "Equity financing through the capital market can make a greater proportion of national savings in equity funds for financing" can be said it is an inevitable trend.

But the trend does not equal reality. As Zhou said, China's capital market development relatively late, the stock market began to appear in the early 1990s, market development time is shorter, private equity financing is relatively weak. Due to lack of private accumulation of wealth and opportunity into equity is also relatively small. Moreover, in the past many years, the turnaround for the index ups and downs, the stock market is a lot of time various complex target interference, not playing solid foundation market. Destructive Enthusiasm, knowing the consequences do not ask. Liu Yu as the new Chairman of the SFC said, how blowing up the bubble, how it will burst.

The current stock market is in a stage of recuperation. After experiencing abnormal fluctuations last year, regardless of the market or a regulator, the stock market needs to get to the root of the change. During the two sessions this year, Liu Shiyu said the Chairman of the Commission, after the arrival of his abnormal fluctuations in the stock market to do a special understanding and research, and thereafter suspended registration system, fusing mechanism aside, strategic and emerging board shut down, until recently, ST Bo Yuan delisting, we have reason to expect a pragmatic market-oriented regulatory revolution. If so, the proportion of direct financing of the promotion is a natural thing.

It may be said of Zhou's misreading, of course, is a misreading of monetary policy, but also on China's economic reality misreading, it is the concept of policy-makers and commitment to reform misreading. It is said that the investment itself was a long practice, if want to do so, not just investors, including regulators, including the market players can be less impetuous.

U.S. IPOs With Negative Earnings at Bubbly Heights

Source: Initial Public Offerings: Updated Statistics (PDF)

Founders Secs Chief Economist: Real Estate Sales Have Peaked, Prices to Follow

Founder Securities chief macroeconomic analyst Guo Lei says the current sales wave has peaked and prices will follow, but he does not see systematic risk or a collapse in prices.

1. This round of property sales peak has emerged, beginning April sales growth will gradually decline, but the cliff-style drop national data does not appear. We judge March sales growth ( real estate sales growth of more than 35 percentage points, 30 metropolitan real estate sales growth of more than 70%) will be a top of the current cycle, and thereafter gradually decline. Refer to the previous rounds of the regulation is expected to Shanghai, Shenzhen's real estate transaction could fall in the coming months to 3-month high of 30-50%, the average monthly sales area of 30 cities will drop to 500-700,000 square meters.

2. Real estate sales price correction will occur. According to past experience, the control measures after landing, the second-hand housing transaction volume will decline more obvious, the price will be accompanied by a correction of this process. And this cycle exists in February 2016 after a jump, is not expected to stabilize, the price correction trend may be more significant. In Shanghai, for example, the outer ring average price decline rate may be around 20%, the Central will be more than 10%. Shenzhen will be slightly larger than the magnitude of price adjustment.

3. The new growth will start comparing January-February decline, but may still be greater than the next two quarters, the growth rate in the fourth quarter of last year, real estate investment growth will continue to minor repair. Due to the current regulation still is in some first-tier cities, and will not deny a small supply repair cycle bottomed out after the current round of real estate from the root; we will determine the follow-up of newly started 1-- high of February dropped to lower bits number, but still higher than last year's fourth quarter, about 14% of the growth in internet.

4. Repair of industrial added value of this round of real estate regulation will not stop, but the slope of the recovery after the third quarter may be more gentle. The current round of economic stabilization and recovery, there are three driving factors: First, this round has reached 13 months of real estate sales pulse; the second is to invest in infrastructure assets increase (from January to February this year, a total investment of new construction planned growth rate of 41% ); Third, with deflation (CRB index and PPI) and bottom up stock began manufacturing investment will be repaired. From the positive sense, the real estate regulation began early, leverage under control, follow-up leads to a serious bubble low probability of systemic risk. We judge began to rise in March industrial added value will not be reversed in the second quarter economic data will gradually rise, we remain positive inventory cycle round judge. But the rule of thumb, the industrial performance will lag the performance of the real estate department drop impact strength of slightly more than expected will lead to the recovery of real estate regulation after three quarters slope less steep.

iFeng: 政府为什么突然不让我们买房了 看懂楼市五个现状

Reinhart on China: Banking System A Risk, Float Yuan

Project Syndicate: China’s Incompatible Goals
Those looking for a rough outline of the Chinese economy’s future would be wise to revisit what happened in Thailand in 1997, when the collapse of the baht precipitated the Asian financial crisis. Of course, China in 2016 is different in many ways from Thailand in 1997; but there are key similarities in their responses to ongoing capital outflows.

...History shows that when an economy starts to sputter, central banks find it extremely difficult to resist domestic calls for action. This is especially true when the emergence of systemic banking problems calls for support from a lender of last resort. In our academic work, Graciela Kaminsky of George Washington University and I have shown how, as financial markets have been liberalized and become globally integrated, banking-sector problems have regularly set the stage for currency crashes.

...Since 2008, however, much of the Chinese policy stimulus in response to the global financial crisis has taken the form of a markedly expansionary monetary and credit policy. As a result, money growth outpaced reserve accumulation during the 2008-2014 period.
...China may find it advisable to allow the renminbi to float sometime soon, rather than waiting until a full-fledged confidence crisis forces its hand.
Chinese steel mills were clearly headed for trouble back in 2011 and 2012, and in 2013, the Beijing Times ran story on collapsing steel margins. Now it is 2016 and bad debts are finally being exposed, and hopefully resolved. Can China continue this pace of dealing with economic problems or will reserves run out first?

People's Daily: Can Down Payment Loans Be Stopped?

Down payment loans may be much harder to eradicate due to the myriad credit channels available.

Xinhua (orginally published by People's Daily): 叫停首付贷,真能落地吗?
down payment loans really died down?

March 21, this reporter went to Chaoyang District, Beijing transit home real estate company to find out if the down payment loans. The reception staff of reporters, said service can provide down payment loans: if the customer needs 300,000 yuan down payment, and no real property in Beijing, so the agency can help packaging identity to the banks for unsecured credit, but you can not tell the bank it is for a down payment, say it's for consumption or renovated property.

According to the company staff, customers only need to provide proof of individual work, bank, credit reports, academic credentials and fund card. Even those customers with bad credit record can also be "wrapped" through internal channels to ensure that customers apply for loans to the bank a one-time success, but the "packaging" need to pay service charges.

300,000 in cash loans as an example, when the intermediary company to help customers to bank loans, 3-year loan interest rate of 10%, according to the matching principal and interest repayment, which is 300,000 yuan in cash loans to sub-36 also, each need also 10,500 yuan, all to pay off a total of 378,000 yuan, of which the agency charges a 2% agency fee, that is 6,000 yuan.

Reporters then asked several Internet and financial companies. It is understood that the 97 Mortgage Network, Bo Min Easy Loan, easy loan net loan company launched a number of loan products, you can still act as a "down payment loan" role.

With easy loan network, for example, March 21, reporters on the P2P platform applied for a 450,000 loan. Platform staff asked reporters after income and work, said: you met the conditions, you can borrow.

The staff member said, easy loan network with a number of small loan companies, can help customers simultaneously borrow from dozens of lending companies, despite the small amount from these loan companies it is effective, you can borrow several hundred thousand yuan at one time. "The money can be used to pay the down payment, to buy a house or a car, whatever the consumer wants to do."

"For example, young people who want to buy a house, but can't get the money for a down payment down, just like borrowing from relatives and friends, it is difficult to judge where the borrowed money came from, or borrow money for what purpose." Centaline Dawei, chief analyst He said some wrapped in different names for the down payment lending products, does not exclude the possibility of secret operations, but there are some difficulties to find and identify, especially some of the borrowed funds through loans and other consumer products, capital flows, which can not be traced may still flow to the property market, the down payment from a regulatory level, it is difficult to prime a "one size fits all" control.

Money Laundering Through China

AP: How con man used China to launder millions
Criminals around the world have discovered that a good way to liberate their dirty money is to send it to China, which is emerging as an international hub for money laundering, an AP investigation has found. Gangs from Israel and Spain, North African cannabis dealers and cartels from Mexico and Colombia are among those using China as a haven where they can safely hide money, clean it, and pump it back into the global financial system, according to police officials, European and U.S. court records and intelligence documents reviewed by the AP.

China's central bank and police refused repeated requests for comment.

In a regular briefing with reporters Monday, Chinese Foreign Ministry spokesman Hong Lei said the government "places great emphasis" on fighting crimes such as money laundering and is working to expand international cooperation. "China is not, has not been, nor will be in the future a center of global money laundering," he said.
A long and detailed account of various scams follows.

Xinhua Warns First-Tier Housing Frenzy Could Spread to Second-Tier

Xinhua published an article today warning the efforts to slow home price increases in first-tier and top second-tier cities could lead to price rises in other cities as speculators move on to greener pastures.

Xinhua: 一线城市出招稳定楼市 警惕“虚火”向二线城市传导
 Since the spillover effects of funds, there is a lot of capital into the signs of first-tier cities and the surrounding hot second-tier cities. The first weekend after the Shanghai and new policies, and its surrounding property market rapid warming. 500 suites source in Kunshan near Shanghai, China Vanke launched robbed a space, off 70% from the purchase of Shanghai; Shenzhen, near Pine Lake Country Garden opening day that is to melt 8 percent, won gold 2.5 billion. Country Garden, told reporters, the Shenzhen property market policy tightening, just to be clear crowding-out effect, as a deep heat Songshan Lake District, Shenzhen, just to be highly favored.

Concerns about the industry, at the threshold of first-tier cities gradually, tightening the background, surplus funds may flow to the periphery, and a large amount of these economies, the supply and demand tight second-tier cities as a "safe haven." Local governments should be alert to first-tier cities "virtual fire" conduction to neighboring and other second-tier cities.

Dongbei Steel Defaults, Bohai Steel Workout

Bloomberg: Steelmaker Becomes Latest Chinese Company to Miss Bond Payment
A state-owned Chinese steelmaker failed to make a 852 million yuan ($131 million) bond payment and expressed uncertainty about meeting a larger bill next week as the slowing economy weighs on debt-laden producers.
Dongbei Special Steel Group Co., based in the northeastern city of Dalian, said it failed to repay the sum of interest and principal due Monday, according to a statement posted on the Chinamoney website. The company said in a separate statement that it also might not be able to repay 1 billion yuan due April 3 on a 90-day bill because of tight liquidity.

...Dongbei Special Steel’s missed payment comes just four days after the company disclosed that its former chairman, Yang Hua, was found dead by hanging at his home. The company said the death was under investigation by the relevant authority.

Other Chinese steelmakers are also facing rising debt pressures. The northern city of Tianjin plans to set up a committee of creditors to help Bohai Steel Group Co. “get out of trouble,” Caixin reported March 18.
Earlier: Dongbei Steel 800M In Bonds Due, CEO Commits Suicide

As for Bohai Steel: China’s Steel Sector Struggles to Service its Debts
Bohai Steel Group, a steelmaker based in Tianjin northeast China, may be unable to make full repayment on $29.61 billion (192 billion RMB) of debt, according to the online financial magazine Caixin.

The city government of Tianjin, which owns the firm, has set up a committee of creditors to help resolve the problem, including the Bank of Beijing Co. Ltd. and 105 other financial institutions, including several trust companies. Trust companies are part of China’s shadow banking sector and Caixin is quoted as saying payments due on some of the related trust products may have already been affected.

Bohai is likely the tip of the iceberg.
Steel producers, such as the 18th largest in the world Bohai, will receive government aid to avoid economic contagion and mass unemployment. Although they did not receive aid, it's worth recalling the earlier steel trading debts which blew up and then clogged the courts years later.

From 2014: Steel Trade Lawsuits Explode; Banks' Unceasing Nightmare; Defendants Flee
In 2013, banks had lent about ¥200 billion to the steel trading industry. About ¥70 billion of it is in default, another big chunk of it is not due until next year, but is expected to default.

Many banks lent to dealers who have relationships with the steel mills. If the dealer can't sell the product, many mills agree to buy it back, thus the banks are going after the mills. This spreads the credit risk from the dealers right to the top of the steel industry. Already there are rumors of private steel mills going bankrupt......

There's yet more. A lot of steel trading firms did not use loans for steel trading. They used 10-20% of proceeds to make high interest loans, another big chunk was used to speculate in real estate and land. This diversion of loan proceeds is common, in fact these steel trading firms have become empty shells, simply a financing platform. One business is steel trading, the other is finance.
It is not surprising to hear of 106 financial institutions coming together to deal with Bohai steel, and that number doesn't include firms with secondary and tertiary exposure in case of a disorderly default. A trust or credit guarantee firms with too much Bohai exposure could set off its own daisy chain of defaults.

US and Chinese Insiders Selling the Rally

iFeng: 外国知道内线的人都在抛售股票? 看完你就明白了
In addition, Barclays strategist Jonathan Glionna it believes that the current number of companies to buy back shares is financed by issuing bonds, if credit conditions tightened, companies will be unable to obtain sufficient funds. This phenomenon after the rate hike from the Fed indeed occur. Merrill Lynch also said that customers do not believe that this wave of stock market rally, continued to sell stocks. In this bear market rally, "one insider funds" record seven weeks to sell the stock.
More on this below.

In fact, China A-shares also have this phenomenon, this week a number ofA-share listed companies, including powerful new material, Hingsen science and technology, as well as to the share price increase rapidly Qtone Education, have announced insider selling, and the amount of the sales are all more than 100 million yuan.

In 2015, Qtone Education's (300359.SZ) share price increased five-fold from 50 yuan up to 250 yuan, becoming the first high-priced A-share. The notice says insider Ze Jiameng held more than 5% of shares, but between February 18, 2016 and March 21, he sold 5.5 million shares, representing 2.17% of total share capital, at an average price of 72.24 yuan, a cash value of 397 million yuan.

...China is striving to create a positive environment for stock market investment, but one after another, insiders cash out at current prices, another rise in A-shares is in doubt.

Barron's: Barclays: Wider Credit Spreads Could Portend End of Buyback Era
We believe a widespread reduction in share repurchase activity is one of the factors that allow corrections to turn into routs.

Young People Watch Dreams Die as Housing Prices Soar

 Location Beijing

  Li Na (oral), Generation Y, the SOE employee

  Renting: first encountered black intermediary

  I graduate in 2012 after graduation to work in Beijing, the North Fourth Ring Road in the oil industry of central enterprises, consider looking for an apartment in the vicinity of the company.

  Then five or six thousand a month's wages, a two-bedroom rent is almost over 4000, we can only consider sharing. Election room is shared standards in the master bedroom, the price is around 2000, the distance from the company's 3 stops.

  Followed by the agency to see the house, most of them are old houses, renovated poor people sharing is also more complex, all the houses are made of living room partition, a door is a room, not in public areas, corridors narrow and pitiful.

  First see is a duplex suite master bedroom with separate bathroom, great room there are more than 30 square meters, has a bay window, decoration is also very good. Most importantly, there is a small living room, so did not feel cramped. Although the price beyond the budget, to 2700 yuan, I was cruel to rent down.

  Later discovered that this is a black agency, I came back out of a difference, between the living room is now being transformed into the same cage partition are also rented out. This house lived a dozen people, is very complex, not long after I moved out, deposit and one month's rent should not come back.

  More than three years, I moved house four or five times, time to live up to one year, a minimum of 3 months.

  Moving reason speaking, the first two because of shared roommate. A three-bedroom has four rooms, roommates highly mobile. Even when you just rent a good house, feeling good roommate, but after a few days or a few months, will be replaced next door who do not know.

  Struggle: have a nice day, full of fighting spirit

  At that time think, it is the face of reality, few feel wronged, because peers are living this life. I have not thought about leaving Beijing, I love Beijing, like a young man pressure, like the feeling of struggle, probably determined character - that is, fighting desire, and live each day full of fighting spirit.

  At that time I wanted to hurry up to live a good life some time and effort spent in making money on. Later, wages rose to seven or eight thousand, a part-time shop there are about 10,000 yuan a month income, on a person rented a one-bedroom suite 4,000 yuan, residential environment is also very good. Rely on their own efforts to live better, I think this is the significance of the struggle in a big city. By their own hands to build a life, especially interesting, particularly practical.

  Buy: buy a set of more than 200 million two-bedroom only to the suburbs

  I am considering to buy a house after marriage, first, because two people together, with the ability to buy a house; the second is due to be married, both parents want to buy a house soon settle down.

  Taking into account Soon to have children, we intend to buy a set of more than 200 million two-bedroom. The size and price, can only choose ten to twenty kilometers from the outskirts of the company. We had to make a down payment of about one million, half of whom are parents, and half of us money.

  Since only the suburbs to buy a house, we chose the Shahe. First, because a car easy, I do not care about a dozen twenty kilometers away, and second, because the unit in the future to build a base there, a few years later might move in the past.

  Showings particularly simple process, we were looking for a home saw several sets of second-hand housing agency, finally bought a set of 95 square meters of small three-bedroom houses, more than 240 million. Down a third of the remaining several hundred thousand dollars as a decoration section.

  Life: plummeted

  Mortgage just started when my husband and I had a fight fiercely. Because we are so wages are not high, they do not want to use the fund, so the mortgage and rent expenses also rely on daily wages. One day I finally broke down and did not understand what is the meaning so desperately alive. Irrational us not even discuss the submitted sold the house.

  Later he bought a house, dusty day, the day of reckoning, did not at all romantic. 8,500 yuan a month mortgage, plus a set of monthly house rent before 4,500 yuan, we had to restrain consumption.

  My spare time writing, selling things doing part-time work to do on the passenger drivers to ride her husband. Even so, the standard of living or plummeted. I used Dior skincare from Avene; iPhone6 ​​into the phone from Huawei; for a long time do not wear clothes turned out to ironing the wear, not willing to lose. No longer work dinner with friends gossiping, but come home to buy vegetables to make dinner, entertainment becomes a reading and writing. I became self-discipline, and more willing to take responsibility.

  After the move to the suburbs to live, there is a change in their daily lives - working day need to get up early. In order to avoid the morning rush hour congestion, I usually go out at 6 o'clock, so the 5:30 alarm sounds, people have jumped from the bed, no room for hesitation, really can be used to describe the daytime. One morning, I walk to work along the North Fourth Ring Road, Yu Ji sunny day. Roadside shops not open the door, the Fourth Ring Road traffic and busy but orderly flow of people. Sunny weather for the past come with a nice farewell; and future, fate just put aside the veil.

  Location Shenzhen

  Gold Satsuki (a pseudonym), Generation Y, public sector employee

  800,000 to buy a house to sell 1.6 million

  Satsuki gold in Shenzhen, has spent eight years in her words, "I am a very traditional Chinese people, very demanding of home, rent an apartment is no feeling of home." At the time, arrived in Shenzhen 1 year her to the home to the first phase, in Shekou for a set of about 50 square meters of a small room, the total price of 800,000 yuan.

  But now, her own original decision was deeply remorseful, "If I had vision, in order to buy a house now would not worry about." Last year, Kim married Satsuki and her husband to discuss changing a big house. Years, they have a property inspection program, watched housing prices kept increasing, finalize buy still spent a full six months.

  Meanwhile, it is fortunate that in 2009 she purchased a small house, and ultimately to 1.6 million yuan successfully sold. "Just sell easy to buy a house difficult road to visit more sad ah." Kim Satsuki exclaimed.

  On the road every weekend showings

  Ever since the plan to buy a house, the couple of times they were all weekend showings occupied, Luohu, Futian, Nanshan, Yantian District ...... almost each area of ​​the house read over and over. Many houses just read yesterday, the next day to go has gone, so the couple in such hesitation and tangled in a time of new homes and miss.

  In Shekou DEGREES house price to 10 yuan / square meter, but also without seven million per square degree, Bedroom will nearly 7 million yuan a. "In Shekou, millions Sanshiyiting can not be called luxury, can only say that just need the room." Satsuki said Kim.

  So they choose to their new homes in Bao'an District, "from the work place close, prices are relatively high, the quality of life will not drop too much." However, it should be 47,000 yuan per square meter suite.

  Hesitated for a night house prices rose 100,000

  Buy this experience twists and turns. This year Chinese New Year eve, the couple decided to buy a set of Bao'an District, with only Bedroom ordinary degree, construction area of ​​63 square meters, the owners asking price 2.9 million yuan.

  "We decided to go home to consider a night, to discuss the final result is 2.9 million to 2.9 million." Kim recalls Satsuki, the next day, the agency told them, the owners said to be 3.15 million sold. Satsuki gold this time did not dare to consider, on the spot so that the agency call the owner to bargain, Haoshuodaishuo under 3 million deal. "We almost did not hesitate to sign up, if you think about yesterday, do not hesitate, we earn equal to 100,000, a kind of feeling of regret Green intestines."

  Like buying a house is like buying bonds can hedge

  Pay nearly a million down payment, the gold Satsuki and her husband need to burden 11,000 yuan for the month, what has become life constraints. Gold Satsuki think this is worth it, "Shenzhen is now a month to rent a two-bedroom at least 5,000 yuan, pay more money, at least the house is their own, at ease. I feel like buying bonds to buy a house, like, absolutely can hedge."

  However, after the birth of a child, etc., two is not enough room to live, and that time have to face the problem wards.

  "Why not bite the bullet and step, direct another three bedrooms?"

  "Not only the down payment is not enough to buy a three-bedroom, for the month could not afford."
iFeng: 房子压力下的年轻人:犹豫一晚房价涨10万

Real Estate Agents in Beijing See Unstable Income, Turn to Burglary

Real estate prices are jumping, but some real estate agents aren't getting a big enough slice of the pie. They're turning to burglary instead.
Two suspects confessed that they have been doing real estate agency in Beijing after the income is not stable. Since I usually bring customers to visit Ms. Lan living cells, we are very familiar with the environment here and know that this is an old district, preventive measures is relatively weak, so the two will discuss the use of rest time "a fortune." This year at 14:00 on January 25, the two came to the cell, choosing a family, after making sure no one inside, began committing the crime: burglary Luomou responsible, forever standing in the corridor of a lookout. Luo will pry open the door into the house, we found that there are six rooms, one of which did not lock the door, then go directly to the house and stole computers and Apple iPad. Then again Chuaimen or breaking the way, several other room and stole three laptop computers, and then never take a black car left the scene. Luo also confessed, before the cell's two burglaries and tied to his own. At present, the police have verified the participation of relevant cases Luomou 5 cases, involving more than 40,000 yuan.

Currently, Luomou, never has been a suspicion of theft, Haidian Branch of criminal detention, the case is under further investigation.
iFeng: 房产中介嫌收入不稳定 入室盗窃5起被抓


Did Central Bankers Intervene to Prop Up CNY By Devaluing USD?

In the following weeks, everything seemed to change when European Central Bank Governor Mario Draghi and Bank of Japan Governor Haruhiko Kuroda did something entirely out of character. Rather than pushing down on their currencies and driving the dollar higher, they appeared to intentionally disappoint foreign exchange markets and allow their currencies to strengthen.

When Janet Yellen and her colleagues at the Federal Reserve could have taken advantage of a golden opportunity to hike the federal funds rate (according to their policy models), they held steady, reduced their 2016 tightening projections from four rate hikes to two, and expressed continued concern for global economic and financial stability.

Perhaps Beijing threatened to free-float the RMB and unleash hell if major central banks continued to drive the US dollar higher. Perhaps they pleaded for an opportunity to avoid the unthinkable. But in all three cases, the European Central Bank, the Bank of Japan, and the Federal Reserve began to act in a way that weakened the US dollar, made it easier for China to manage its capital outflow dilemma, and supported a reflation in global commodity prices.

...Again, we’re watching closely for signs of more lasting intervention. But should this weak US dollar environment persist, we believe it may be favorable for equities, politically stable emerging markets, commodity producers, and midstream master limited partnerships (MLPs) in particular. If, however, policymakers are unable or unwilling to do what it takes to change the US dollar’s long-term upward trajectory, then all these pressures will likely return as the Fed hikes interest rates more aggressively in the face of growing inflation pressures. Until we see more signs of confirmation, we intend to move slowly and cautiously...
I remain long-term bullish on USD and bearish on yuan, but if global central banks successfully coordinate a devaluation of the U.S. dollar in order to avoid a large CNYUSD depreciation, this is a major step towards dislodging the U.S. dollar as global reserve currency because it signals the subordination of Federal Reserve policy to global forces, specifically China.

If central bankers have indeed enacted this strategy (skepticism is warranted for now), I expect the Fed will be panicking by autumn. Crude oil year-on-year comparisons start looking very inflationary starting in July, should crude prices climb into the $50 range or higher.

Whatever the case, right now I prefer to be long gold miners and short various assets. If the dollar weakens, the gains in gold mining shares should do as well as other natural resource producers (though it would pay to rotate out of Canadian and Australian miners and into U.S. miners). If the bear market resumes, the shorts will hopefully pay off and, if lucky, gold prices will hold up in foreign currency terms or even rise in USD as investors price in central bank intervention.

Langfang Preparing Real Estate Controls

Langfang, Hebei (right outside of Beijing) is studying ways to limit housing price increases. Several policies will be announced soon.

iFeng: 河北廊坊出台措施稳控价格 方案即将公布

Hugh Hendry, I Would Recommend You Panic

Even if China doesn't devalue, a euro breakup, drop in trade and passport restrictions are more likely than not given the current trajectory of social mood. If a 20% yuan devaluation is enough to blow everything up overnight, however, then I would recommend Mr. Hendry take his own advice and panic.

ZeroHedge: Hugh Hendry: "If China Devalues By 20% The World Is Over, Everything Hits A Wall"
Tomorrow we wake up and China has devalued 20%, the world is over. The world is over. Euro breaks up. The world is over. The euro breaks up. Everything hits a wall. There's no euro in that scenario. The US economy, I mean everything hits a wall! Everything hits a wall!

The dollar strength that you imagined is devastation because you just eliminated dollars. They're a scarce commodity. You've wiped them out. And China is a pariah state.

It's a 'Mad Max' movie, right. OK, China gets to be the king in 'Mad Max' world. How appealing is that? There is no world after the tomorrow where China devalues by 20%. There is no world. Yeah, it's looney tunes to believe that, people say, 'oh wow, they needed to catch a break.'

Their share of world trade has never been higher. They're facing no pressure, immense terms of trade improvement, and you would destroy world trade. World trade is down 25%. You would probably have passport restrictions, the world is over.

Rural Land Mortgages Raises Concern: How Can Peasants Pay the Mortgage?

iFeng: 中国试点农村土地抵押贷款 农民偿贷能力引担忧
  Hong Kong media said that China will for the first time allow farmers to their land as collateral for bank loans, which could make China more than 600 million rural residents have the ability to access to credit markets. This is to relax restrictions on land use and financing of part of the effort.

...eople's Bank of China central government move is considered an effort to help reduce the small cities of unsold housing stock. Hai Tong Securities chief economist Li Xunlei said: "Because the income of farmers is very limited, so that the loan is a problem they may use the loan to buy a very expensive city apartment, but then how they repay it.?"

  Li Xunlei said that if the government did not help farmers increase income and strengthen social protection method is found, then this policy may be "defective."

  According to World Bank data, about 46% of China's population live in rural areas.

  Meanwhile, others say the bank will need some time to learn how to handle the new business.

  Jinzeng Xiang said: "The bank will be much willingness for these assets loans it this is a new business, once the loans become bad debts, mortgage housing bank is difficult to cash?."

  He also said that because of the quality of rural housing vary widely, impartial assessment of the value of housing in rural areas will be a challenge. Also unclear whether banks have enough professionals to carry out this business.

Dongbei Steel 800M In Bonds Due, CEO Commits Suicide

Tragedy hits the steel sector.

Reuters: China's Dongbei Special Steel says it may be unable to make bond payment
Dongbei Special Steel Group Co Ltd may be unable to repay 852 million yuan ($131 million) of principal and interest on short-term commercial paper maturing Sunday, the unlisted firm said on Friday in a statement posted on the website of one of China's main bond clearing houses.

Netease: 东北特钢8亿元债券明日到期 或面临违约
At 13:20 on the 24th, the Dalian City Public Security Bureau received a report, found that the chairman Dongbei Special Steel Group Co., Ltd., party secretary Yang Hua (male, 53 years old) Death by hanging at his residence. At present, the authorities are conducting investigations.


Ha Jiming: China Real Estate World's Biggest Bubble

iFeng: 哈继铭:中国楼市泡沫世界最大 房价本可跌不让跌
ANCHOR: Welcome to the live room is located in Boao, today we are very pleased to invite Vice-Chairman of Goldman Sachs Investment Management Department of China, Mr. Ha Jiming came to our studio, Mr. Hardy Hello.

Ha Jiming: Hello.

Anchor: Right, so today we have to talk about, we are very concerned about three issues, one is RMB property and stock markets, first of all to say about the RMB, the yuan actually last year after the "8.11 exchange rate reform.", And the beginning of the year have the case of a devaluation, the future development of the RMB you how to see it?

1, the RMB exchange rate to maintain stability in a reasonable and balanced level

Ha Jiming: I think the short term, the yuan will still maintain a against the dollar stable, China on the one hand it has a relatively large foreign exchange reserves , can withstand the pressure of devaluation, on the other hand, we also see some foreign exchange controls strengthen, so I think the loss of short term foreign exchange reserves and exchange rate depreciation will get some control; but in the medium and long term, the possibility of devaluation is still great, because now you want to China's export growth is actually very weak February exports were down 25%, then more importantly, from the point of view, China's money growth too fast, China's currency in January (M2) increased by 14%, you are so fast growth rate if the exchange rate does not depreciate , according to this logic pushed down in a few years, China can buy assets all over the world, this is absurd thing, this impossible thing, so you either money growth declined, but the decline in money growth may steady growth negatively, or you have to devalue, they must take one between the two.

Anchor: So we know, is actually a devaluation is expected of it, but do you think is going to kind of how a degree will tend to stabilize it?

Ha Jiming: I think so, if the economy does not appear significant credit crisis, then this may be a relatively moderate devaluation of gradual devaluation; if that is the devaluation when not derogatory, international experience It shows that many countries do not depreciate in the devaluation of the time, when the devaluation of the future may be stormy depreciation, so the devaluation of our future is what kind of situation to complete, the key is to depend on our own is not the economy during this period have capable of stable development, so that the financial risk can be a certain degree of resolve, if the financial risk in the period of sharp words continued to depreciate that time may not be so few percent a slight devaluation.

2, plus leveraged buy only increase the financial risk

Anchor: It is that we re-look at the property market is the problem, you know this is the beginning of real estate investment and sales data have also began to pick up signs, but we also see as some front-line cities, like Shenzhen that on several March may have risen 60/500, but in the second and third tier cities of view, that is not up with, how do you see the future development of China real estate? Polarization is not the case will be more severe, or how to do?

Ha Jiming: real estate situation and the exchange rate is very similar, that is, so in fact China's housing prices should have reached the stage of decline, and the reason there is no decline in our policy continues to drive it , including the promotion of public opinion, including local government Some of the policy, including the relaxation of monetary policy in an effort to make more people can come to buy a house, of course, very direct purpose is to steady growth, stabilizing the financial system, but I think these measures are likely to focus on short-term transition the interests of short-term stability, it may be based on longer-term instability for the price. Because we know that China is in fact the price is expensive, everyone says your house in Hong Kong, the Hong Kong price is expensive, but Hong Kong's price earnings ratio in the world to see it is in addition to the continent it is the highest, it is 15.6 times then New York and London are almost 10 times, 12 times, Tokyo, Japan, is only 8 times, you know , Shenzhen China is how much it 28 times, Shanghai and Beijing are also more than in Hong Kong, so there are a lot of people say that Hong Kong is the world's biggest bubble, I do not think, is a real estate Chinese real estate bubble in China is the largest, is far greater than in Hong Kong, far greater than the world.

It Begins: Shanghai, Nanjing, Wujan and Shenzhen Launch Policies to Slow Real Estate Market

All of these policies were unveiled on March 25. These are not likely to be the last policies, merely a first step.

Shanghai: now requires 5 continuous years of paying income social security taxes. Second homes: mortgage interest rates increased 10%, down payment increased to 50% to 70%

CRI English: Shanghai Authority Adopts Tougher Restriction to Cool Housing Market

Shenzhen: Residents limited to owning two homes; non-residents one. Must have at least 3 years payment of income or social security taxes. Down payments hiked to 40% for people who have previously had a mortgage

Wuhan: Cut the maximum loan from the public housing fund by 100,000 yuan, to 500,000 yuan. For a second home, the maximum loan amount is 500,000 yuan less any funds previously borrowed.

Nanjing: Jiangsu province has ordered banks to strictly investigate down payment ratios and the source of down payment funds, in addition to credit worthiness of borrowers and property.

iFeng: 房价大涨城市全部沦陷:调控政策相继出台

Chinese Tourism Still Going Strong

BI: Chinese tourists are blowing record amounts of money despite the slowdown
Mainland Chinese tourists splashed out a record US$215 billion on their holidays abroad last year despite slowing economic growth and stock market turmoil at home, an industry report said.

The figure was 53 per cent higher than the 2014 total, adding greatly to the growth in global spending on travel and tourism, according to a World Travel and Tourism Council report released on Monday.

The report also put China ahead of the United States and other developed countries as the top global source of tourists, in both number of trips made and money spent on overseas trips.
That doesn't include suitcases of cash deposited at foreign banks.

Chinese Buy One-Third of Vancouver Homes

China needs more Hong Kongs.

Bloomberg: Chinese Buy One-Third of Vancouver Homes: National Bank Estimate
Buyers from China comprised about one-third of purchases of Vancouver’s hot housing market in 2015, according to "back of the envelope calculations" by National Bank of Canada.

Chinese investors spent about C$12.7 billion ($9.6 billion) on real estate in the western Canadian city in 2015, or 33 percent of its C$38.5 billion in total sales, according to a note by financial analyst Peter Routledge on Wednesday. In Toronto, they made up 14 percent of purchases, or about C$9 billion of the C$63 billion in deals. Routledge compiled the data by extrapolating from a Financial Times survey of 77 high-end buyers and data from the U.S. National Association of Realtors.
ZeroHedge posted this comparison:

PBoC Warns Fed: Hike and We Devalue

If the Fed hikes rates, more capital will drain from China, so the PBoC preemptively signaled following hawkish talk from Fed officials this week, doing the largest devaluation of the yuan since the start of the year.
With the dollar index is experiencing its longest ever upward trend, a number of Fed officials to begin marketing the Fed should raise interest rates in April idea (market everyone wrong understanding of Yellen's dovish stance) but China's central bank was on the Federal Reserve may raise interest rates in April warned.

China's central bank warned that if the Fed to raise interest rates in April, the Chinese central bank will raise interest rates the Fed's action to make the appropriate measures. In recent months, the RMB devaluation surprise to the market a huge shock. China's central bank in January 7th sharply down the RMB exchange rate, China to the United States in order to convey a clear message: China does not want the Fed to raise interest rates in order to bring a new round of China's capital flight situation.

Over the past four days in RMB devaluation of close to 1% per day, Thursday depreciation in the biggest decline in more than two months.
One of the reasons I predicted a deep depreciation of the yuan was the divergence of American and Chinese monetary policy. The two countries are on different trajectories. Plus, with the presidential election there's a new layer of complexity. There's already talk of the Fed not hiking to help Clinton and the PBoC has to calculate the political impact of devaluation as well.

I expect markets will not cooperate either. The monetary break up of the Fed and PBoC begins.

iFeng: 中国正赶在美联储4月加息前偷偷干一件大事


Tech Companies Lease Office Space as Growth Slows

Bloomberg: Tech Slowdown Seen in San Francisco's Commercial-Property Market
San Francisco’s commercial real estate market may be foretelling a slowdown in the city’s heated technology-driven economy.

Office subleasing, an early indicator of past downturns, is at the highest level since 2010. The amount of available space from subleases in the city jumped to 1.9 million square feet (176,500 square meters) last month, a 46 percent increase from the end of the third quarter, according to a report from Cushman & Wakefield Inc. Twitter Inc., Intuit Inc., and Zenefits are among tech companies putting excess space on the market.

“It’s the beginning of the change,” said Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the Haas School of Business at the University of California, Berkeley. “We’re very early in the correction process. It’s going to take several years to play out, and we don’t know how deep it will be.”

Central Bank Planning to Let Peasants Mortgage Farms

The plan for absorbing third- and fourth-tier inventory is to move rural residents into the cities, but as covered in several posts, there are obstacles.
Urbanization Stall: Peasants Refuse to Give Up Land Rights
Urbanization Plan Meets Reality: Cities Lack Policies, Enthusiasm; Rural Support Policies Counteract
Urbanization Logic: Must Prevent People From Moving to First-Tier
China Chooses Urbanization to Fill Empty Homes

Those obstacles include more opportunity in top-tier cities. Rural support policies make staying home attractive. Workers save cash and build a house in their hometown, where yuan go much further. It is also difficult to monetize land and rural residents don't want to sell.

The latter problem is being addressed.

iFeng: 重磅!农村土地经营权、房屋财产可抵押贷款了

Today, China's central bank released the rural "two powers" mortgage loans to pilot approaches from borrowers, loan management, risk compensation, supporting measures to support the pilot monitoring and evaluation and other aspects of financial institutions, the pilot regions and relevant departments to promote the implementation of the "two rights "mortgage pilot identified policy requirements.

"Two rights" for the right to operate the housing and property rights of rural farmers contracted land.

Approach emphasizes, banking sector financial institutions should independently determine the reasonable mortgage rates, amount, term, interest rate, simplify loan procedures, strengthen credit risk control. Require the borrower to obtain the "two powers" mortgages should be mainly used for agricultural production management and other legitimate uses of approved lenders.

...The first specification is legally secure property rights to rural migrant housing mortgage loans to pilot, effectively increase financial support for the "three rural" to protect the legitimate rights and interests of the parties lending, according to the "State Council regarding the development of rural land contract management rights and property rights of peasant housing mortgage loan pilot guidance "(Guo Fa [2015] No. 45) and the" National people's Congress Standing Committee on authorizing the State Council in Beijing's Daxing District, and other 232 pilot counties (cities, districts), Tianjin, North China and other 59 pilot counties ( city, district) administrative regions were temporarily adjust the implementation of relevant laws and regulations of the decision "and other policies to develop this approach.

The second term of the property rights of farmers housing mortgage loan means lower without changing the nature of the ownership of the homestead premise, farmers housing ownership and use rights as collateral homestead occupied by banking institutions (hereinafter referred to as the lender ) to eligible farmers homeowners (hereinafter referred to as the borrower) issued within the agreed period of repayment of the loan.

The third term of the pilot area is referred to as "the Standing Committee of the National People's Congress on Authorizing the State Council in Beijing's Daxing District, and other 232 pilot counties (cities, districts), Tianjin, North China and other 59 pilot counties (cities, districts) administrative regions are temporarily adjust the implementation of relevant laws and regulations of the decision "clearly mandated farmers housing property mortgages pilot counties (cities, districts).

List of pilot areas for housing mortgages. Some of these are counties or districts that are part of larger urban areas.

List of pilot areas for land mortgages: