2016-09-30

Buying Restriction Surge: New Home Prices Rocket 2.8pc in September

Hopefully the spike in new home prices was driven by panicked buyers rushing ahead of new restrictions.

According to CREIS, New home prices advanced 2.83 percent nationally in September. The top 10 cities saw a month-on-month increase of 3.41 percent, a nearly 50 percent annualized pace.

Zhengzhou prices increased 6.92 percent (a 123 percent annualized pace)
Wuxi 6.83 percent
Changzhou 6.60 percent

Of the top ten cities, Hangzhou led with a 5.10 percent increase.
For existing homes, Wuhan led with an increase of 5.41 percent.

CREIS 100 City Survey 2016年9月百城价格指数
Google Translated: September 2016 100 City Index

Fan Gang: Yuan Will Weaken

Early September, Blooomberg: PBOC Adviser Says Yuan Should Weaken as Dollar Set to Strengthen
People’s Bank of China’s adviser Fan Gang said a gradual devaluation of the yuan should be allowed as the U.S. dollar is set to strengthen, and that moves to loosen the nation’s capital borders should continue despite outflows.
China’s economy may not pick up, but has bottomed out with housing and manufacturing improving, Fan said in a Bloomberg Television interview in Shanghai. The government should use "moderate control to allow gradual yuan devaluation," said Fan, who is also director of the National Economic Research Institute.
He repeated it again in Tokyo this week. PBOC Tightens Onshore Yuan Liquidity, Unusual before Holiday
- People’s Bank of China’s adviser Fan Gang said that in early years, a large amount of capital flew into China and caused Yuan’s surges at that time; Yuan’s devaluation in recent years is a correction. Also, as the Yuan tracks against a basket of currencies, when currencies in the basket devalue, the Yuan should move lower as well.

Mr. Fang also commented on recent declines in the growth of private investment. He said that production cuts in the private sector may have contributed to the drops but is not the direct reason. The economic cycle may weight more on private investment. As a result, he emphasized the importance of maintaining a moderate economic growth while the country is spending lots of efforts on reforms.

Mr. Fang is a member of the PBOC’s Monetary Policy Committee, which is a consultative body for the Central Bank.

Deflationary Depression: Ordos Stops Paying for Relocation, Issues Housing Tickets

A sign of the deflationary depression in Ordos comes from the relocation market. Normally in China, if the government takes a property they compensate with money. Ordos found some people take the money and run, leaving the housing inventory problem unsolved. The solution: give people land vouchers good for another property in the city.
"In the past, we shantytowns, in a way more for the site to move back + monetary compensation. In practice, we found that the site fetches do not involve the housing inventory, with destocking is unrelated. Monetary compensation can not ensure that all cash compensation will flow into the housing inventory." Deputy director of Erdos City Dongsheng District Housing and land management redeemed vouchers settlement Center (hereinafter referred to as the clearing house), said room ticket system introduced, not only improves the speed of the demolition, but also the effect on housing inventory is also very significant.
iFeng: 楼市泡沫破裂后的鬼城鄂尔多斯:房票制去库存

China Discusses The Bubble

Shanghaist: Chinese real estate market is the 'biggest bubble in history,' warns China's richest man Wang Jianlin
On Wednesday, in an exclusive interview with CNNMoney, Wang Jianlin said that China's treasured real estate market is spiraling out of control. The billionaire owner of the Dalian Wanda Group, China's largest real estate developer, stressed that the "biggest bubble in history" is the product of a disparity in housing prices between top-tier cities and lower-tier cities across the country.

SCMP: Growing property bubble is China economy’s biggest risk, warns Bank of China economist
Bank of China economists wrote in its quarterly economic outlook that a red-hot property market would complicate policy decisions for Beijing, which is already struggling to pursue objectives that range from defending a stable yuan exchange rate to keeping growth on track at home.

“Macro policies are in urgent need to strike a balance between stabilising growth and curbing asset bubbles,” according to the bank, the country’s largest foreign exchange dealing bank.

SCMP: Growing calls for Beijing to step in, as mainland house prices continue skyrocketing
“Home prices are going crazy, and governments should have stepped in earlier,” said Alan Jin, a property analyst at Mizuho Securities.

Jin said many local governments had “run out of cards”, adding the runaway market “was a problem that can only be solved by Beijing”.

“Liquidity must be tightened – policies may have some impact, but they will not reverse the situation.”
Fundamentally, the problem is two fold within China. First, central planning has distorted the economy. Second, there's excessive credit growth. To the extent there was still a free lunch for China, it involved supply-side reform (the real thing, not Chinese so-called supply side). Reform didn't happen.

China's economy is slowing (as is the global economy) and there is no place for credit to flow except into speculative assets. The rise in home prices over the past year is severe: the CPI is barely running at 1 percent and would be near 0 percent were it not for a one-month Chinese New Year spike in prices. Yet home prices in some cities are climbing 30 percent or more year-on-year, and many cities are seeing increases of more than 1 percent per month.

China will not choose deflation. Everything they do is inflationary, down to restricting creditors rights and keeping zombie companies in operation. As Mises put it:
There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.
As soon as Chinese planners see the pain brought by voluntary abandonment of credit expansion, they increase credit growth.
M2 slowed to just under 10 percent annual growth in early 2015 and the government panicked. Rolling 12-month credit growth then accelerated to almost 14 percent by the start of 2016, and was down to 11.4 percent in August. The slowdown in credit growth into August was before new buying restrictions on real estate took their bite, and come simultaneously with signs of organic slowing of credit growth. They also come at the same time as Deutsche Bank circles the drain and tight liquidity in Saudi Arabia rattles markets. Where this ends is anyone's guess, but right now the trajectory is deflationary and bearish.

Bloomberg: PBOC Seen Switching to Monetary Tightening as Soon as 2017

Overnight SHIBOR:

Estimating China's Housing Bubble

There are lots of measures of China's housing bubble. One is the high price of land sales according to research from Deutsche Bank.

Bloomberg: Here's the Smoking Gun That China Has a Huge Housing Bubble
If property prices simply tread water from here, the Deutsche Bank economist reckons that buyers accounting for more than half of land sales values in these auctions would lose money.
The property bubble has been fueled by the rise in broad credit growth, according to the economist, which has recently moderated and may continue to decelerate. In addition, Zhang expects Beijing try to slow price inflation by introducing targeted measures to cool select markets.

But a moderation of the real estate market as 2017 kicks off will likely elicit a rate cut from the People's Bank of China in the second quarter of the year in order to avoid a hard landing, he believes.
There's a lot of moving pieces, but for now, rate cuts in China weaken the yuan...

2016-09-29

Housing Leverage Double Stock Market, Local Govt Borrowing Exceeds 2015

In addition, the property market is still the heat diminished, if we compare the property and stock markets, a rough estimate is the current property market leverage ratio is close to 2 times last year's stock market high, implies a greater risk implied. Furthermore, as of the end of August, local debt issuance reached 4.8 trillion, more than the 3.8 trillion for all of 2015.
The leverage ratio is based on property values:
China's property leverage is more than 2015 stock market leverage. To observe the property market leverage, we do a simple estimation: 2015 China's urban population of 770 million people, assuming three people per household, per household housing area of ​​80 square meters per unit area of ​​commercial housing sales price of 6793 yuan / square m (in 2015 the national average), thereby calculating the market value of real estate is about 140 trillion ((770 million person / 3) × 80 sq m × 6793 yuan / square meter). The end of June, individual purchase loans 15.4 trillion, development loan balance of 5.9 trillion. It can be seen, the real estate leverage ratio of about 15.25% ((15.4 trillion +5.9 trillion) / 140 trillion). 2015 stock market leveraged funds up when 4 trillion, corresponding to the market value of about 50 trillion, the leverage ratio of about 8%. Visible, the property market has reached nearly 2-fold leverage stock market highs, so residents and mortgage rates are high growth state hard long lasting, systemic risks implied urgently resolved.
iFeng: 楼市杠杆率有多高? 媒体:已超2015年股市高点时近2倍

2016-09-28

Making Hay While the Sun Shines: Real Estate Trust Issuance Soars

Since August, along with the property market "burst" high fever, the sudden increase in the real estate trust. Trust with interest the latest statistics show that in August a total of 63 real estate collective trust product release, the total 23.78 billion yuan, compared with 15.81 billion yuan a year earlier, the scale rose 50.4%, compared with 19.59 billion yuan in July rose 21.4%. Meanwhile, after the "Ming shares real debt" ban has long been thrown to the winds body, the housing prices "equity investment" trust industry once again become the "meat and potatoes."
Regulators are planning to tighten the rules on debt issuance by developers. Similar to the buying surge seen ahead of buying restrictions, the potential for credit restrictions is leading to a burst of lending and credit issuance.

Caijing: 前8月房地产信托规模1549亿元 明股实债成楼市躁动推手

2016-09-27

Baltic Breakout?

A sign the commodities rally is for real.

Official Panic on Housing Begins

On September 19, Hangzhou announced buying restrictions:
The city authorities said that, effective from Sept 19, homebuyers without household registration in the city-known in Chinese as hukou-are not allowed to buy a second home in the city's central districts, in a bid to curb rapidly rising house prices, curb speculative buying and prevent risks.
These restrictions were tightened again on September 26, with total ban on non-resident buying, touching off a housing frenzy in Hangzhou.

More buying restrictions were added today. FT: China cities move to halt housing market frenzy
Hangzhou, host of this months’s G20 summit, on Tuesday introduced rules requiring buyers at auction of high-priced land to pay the full amount within a month, a move aimed at reining in China’s infamous “land kings”, developers prepared to pay above the market rate during pricing booms.
According to iFeng, the city will also no longer issue residence permits to home buyers, as well as hike down payments to 50 percent for buyers who already own a home. 再出重拳!杭州宣布暂停购房入户政策

Caixin: Hangzhou Puts Lid on Bids for Land
Authorities in Hangzhou, the capital of Zhejiang province, said Monday that parcels of land in 10 out of the city's 12 districts cannot be sold for more than 150 percent over their initial bidding prices. Once the bids for a plot reach the maximum price, the plot will go to the developer who promises to build the most number of elderly-care facilities on the land, according to the new rule, which went into effect Tuesday.
The moves come in the wake of People's Daily editorial calling for sanity in the housing market: Commentary in China’s mouthpiece media seeks to calm property speculation, draws online derision instead
An opinion piece carried by the website of the communist party media flagship on Monday night said hard work is more meaningful than profiting from property deals.
That's an unfortunate line because it came around the same time as this article: 见证楼市疯狂:房价1年涨幅顶家庭10年收入. The headline says the past 1 year of home price increase is equivalent to 10 years of household income. It discussed people closing their factories to flip houses. It isn't a fictional story, it's a reality repeated all over China.

The source of the devaluation is not the home prices though, it is currency devaluation. Inflation has greatly reduced the value of the yuan and it is expressing itself in soaring property prices. Every credit fueled bubble is the same, with people abandoning real work in order to trade the speculative asset du jour.
“When hard work is deemed inferior to property speculation, it can lead to a wrong direction and values,” the author Li Zhen wrote. “If the public spend too much time on short-term benefits from speculating on properties, it will squeeze out the desire to fight for long-term goals.”
It's called malinvestment. The market is sending the wrong signals because central planners have completely destroyed market signals across the world. China is destroying its economy, consuming wealthy in order to produce an extra 1 to 2 percent of GDP in order to avoid the painful, but necessary, recession that will clean out the bad investments.
One popular comment that was liked by close to 1,000 readers said, “Didn’t People’s Daily get it the wrong way round? It is ridiculous that home prices make our hard work meaningless.” Another widely shared comment said, “These words sounds good to the ears, but those who say them are not good people. Most people spend their lives working hard but eventually lose their earnings to high taxes and rocketing home prices. Policymakers don’t try to reduce the tax. What’s the point of talking about all this trash? ”
The official panic has begun, as have the stringent buying restrictions and credit restrictions that will lead to the next crisis.




Market Says Hillary Won the Debate

If scoring as a traditional debate, Clinton clearly won the latter half of the debate. Trump was chasing topics of little interest to voters and failed to tee off on softball issues such as cyber security. The markets agreed, with heavier buying of Clinton pushing up her odds back above 70 percent.

Judging on the relative metrics of expectations, it appears Trump did better than many were expecting.

The final verdict will be here at the end of the week, when polling data includes the debate performance. Trump has been rising in the state polls and holding within 1 to 2 percent of Clinton in national polls. If the trend stops or reverses, Clinton clearly will have won the debate in the only way that matters. If Trump continues to climb, it signals a stronger trend is underway, one that a poor debate performance didn't affect.

Rising Home Prices Will Stall RMB Internationalization

RMB internationalization will stall due to high prices and the risk of a collapse/outflows. Chinese goods are really expensive and Chinese buy many products from overseas because the RMB is way overvalued. It isn't expressed in an excessively high exchange rate, rather bank accounts are swollen with a sea of credit money coursing through the economy. When this tidal wave of currency can freely flow overseas, the yuan will depreciate out of necessity. The fleeing yuan to this point is the front running of a much larger trade. Right now, most Chinese don't have options and so the money pours into real estate, after being chased out of real estate once before, stocks, bonds and various collectibles.
China and the world money stock, real estate, most of the water to absorb the money, the flow of new loans are also here. Since the Chinese currency is substantially closed operation, the People's Bank currency issued in circulation are circled, China's current total of broad money M2 is added together the United States and Japan.

In terms of purchasing power parity, or other indicators, the RMB was significantly overvalued, overseas shopping has become routine. Once the internationalization of the RMB, the yuan can circulate freely, with the International Monetary confluence overvalued renminbi will depreciate. As the largest carrier yuan, real estate depreciation is a constant.
The end is already in sight because the State Council has planned for Shanghai to become an international financial center in 2020, which requires a convertible currency:
March 2009 decision of the State Council executive meeting, 2020 Shanghai will become an international financial center. For Shanghai to build an international financial center, the biggest problem is the internationalization of the RMB. At the latest by 2020, more than three years time, the internationalization of the RMB is bound to happen. Whether the price inflection point for housing is before the internationalization of the RMB, after, or simultaneously, is no longer important.
iFeng: 学者:人民币国际化 高房价拐点来了

Saudi Bleeding Dollars

Be it China or Saudi Arabia or Deutsche Bank. they are all running into problems that can trace back to the U.S. dollar.

Jeffrey Snider at Alhambra: The Dollar Perspective Matters
The Kingdom’s problem is withdrawal, as in dollars not riyals. The Interbank Offered Rate surged to its highest in seven years last week, as the government prepares to borrow under extraordinary circumstances. The placement of that debt offering is telling; it is to be a $10 billion or so Eurobond flotation. In the mainstream, Saudi Arabia’s problems are pitched as oil prices, and thus quite understandable as being their own.

When the TIC figures were updated for July, even the media began to notice that central banks including Saudi Arabia had been selling consistently for some time. In this Bloomberg article, the authors cite this trend as a risk to UST prices as perhaps another sign that “rates have nowhere to go but up”; a cliché that has been constantly deployed since 2011 and has yet to be done so appropriately.
Selling is happening in a buyers market as demand for low risk assets is high. Rates will have nowhere to go but up once the cycle bottoms and investors have better opportunities.
The same can be said of Saudi Arabia, China, and the primary dealers who are not holding bonds as their sacred American duty but hoarding collateral in a repo system that is increasingly unstable. The mainstream is going to great lengths to avoid putting the words “dollar” and “shortage” together because orthodox ideology means that cannot possibly be the case. Therefore, every financial problem around the world that can be otherwise easily distilled by just recognizing the “dollar shortage” is instead chopped up and isolated as if individual anomalies of idiosyncratic circumstances.

It’s Not Really About Deutsche Bank

As has been the typical mainstream reaction, Deutsche Bank is being written about right now in a vacuum as if the actions and behavior (and losses) of last year were left only to last year. When global illiquidity first popped up (again) in the second half of 2014, it was regarded in the same way – a series of purportedly random, unrelated events. They had to be strung together in a benign chain of distinct actions because convention still holds QE to be money printing. Ditching that convention has the effect of connecting all these dots as a logical and ongoing progression of a “rising dollar” that is really a euphemism for “dollar shortage.”

And it really doesn’t take too many dots to connect. This isn’t to say that Deutsche Bank is in danger of a wholesale liquidity run, only that the bank is perhaps far closer to it than anyone in the mainstream will ever admit. As I wrote last year, it really isn’t even about Deutsche Bank.

2016-09-26

Ping Pong Policy: Bubble to Crash to Bubble

Only four years ago China was worried about overheating housing markets. Then it was worried about a crash. Now it's back to overheating.

China Daily: Nanjing further tightens control on property market
Nanjing, capital of East China's Jiangsu province, adopted new rules restricting home purchases in a bid to cool the red-hot housing market on Sunday, according to a report by Shanghai Securities Daily.

The rules, effective on Monday, symbolize a restart of restrictive policies that were scrapped two years ago.

...Nanjing adopted the most stringent regulations on the property market in February 19, 2011, restraining local residents from buying more than two houses and allowing non-local residents with one full-year social security and tax payment to buy only one house.

Home sales and prices plummeted following the initial adoption of the regulations, but picked up later as people found ways, such as fake divorces or forging social security certificates, to bypass the restraints. In mid-2014, housing prices fell again as banks tightened mortgage loans. The local government then removed regulations on September 22, 2014. Since then, the property market has warmed up and the frenzy has continued.
Early 2014 credit slows and mortgages tightened. Months later buying restrictions lifted as the government panics amid housing slowdown. Two years later the bubble is is back and so are the buying restrictions...
Caijing: 时隔两年 南京楼市重启限购措施

Financial Markets in One Minute

Debate Night: State of the Race

The market shifted in favor of Clinton and Republican House/Democrat Senate ahead of tonight's debate.

2016-09-25

Zhengzhou Housing Title Transfer Backlog

Zhengzhou has only processed 42 titles in the past 28 days, creating a backlog of 5174 sales. Existing home buyers are in a state of panic. Some buyers made high interest loans in the expectation of having a mortgage-able property and are struck paying high interest:
"Real estate is now completely 'frozen', and do the real estate titles stuck, and I now have to repay nearly 50,000 yuan in high-interest monthly." Zhengzhou Ms Zhou said, since the seller was urgent need of money, she borrowed high-interest loans to pay the full amount of 1.8 million yuan, the thought that after the completion of the transaction she can mortgage the house, with a bank loan to repay high-interest loans, but now they could not complete the registration of real estate, cannot get title to the real estate, banks are not lending. "I signed a contract in May, in August changed residence, the Housing Authority has deeded, before you could get the title in seven days band get a mortgage. But now two months, the title isn't done, I am almost frantic." Zhou said.
iFeng: 某城市28天仅发42份产权证 引发购房者恐慌

Shenzhen Birdcage Apartments Sell in Half a Day

"Birdcage" apartments with an area of 6 square meters sold for 150,000 yuan per square meter this weekend. The rooms are in a building built as a hotel on Shahe East Road, in the Nanshan District. A common kitchen area and bathroom is available.

iFeng: 深圳9套6m²“鸽笼房”半日售罄 均价每平15万(图)

Hangzhou Housing Frenzy

Surveillance camera caught the shocking moment a new real estate in east China's Hangzhou city open for sale on September 24. The spree was prompted by the new restrictions on Monday which prevent people born outside Hangzhou from buying more than one property.

The said real estate was sold out in a mere couple of hours, according to reports from local media.
People's Daily: Chinese housing market frenzy: shocking scene at the opening of a new real estate in Hangzhou

2016-09-24

China Merchants Branch in Shanghai Launches Home Equity Loans

A branch of China Merchants Bank in Shanghai has launched a product characterized as similar to "American subprime" by critics: home equity loans for consumer or business uses. Homeowners need not have paid off their existing mortgage to qualify for a home equity loan. The largest and longest terms for the loan is 20 million yuan for 20 years, clearly marking it as a product aimed at office workers and small property owners.

Similar products may not spread across China due to local regulation. Beijing passed a law in 2014 restricting consumer loans to 1 million yuan over 10 years.

iFeng: 招行分行推 “有房就贷”产品 专家:似美国次贷危机

Market Tossup on Congressional Control

This is a winner take all market. The rise of Other along with Republican House-Republican Senate reflects the narrowing of the race. Other pays out if the neither party controls at least 51 seats or 50 seats plus the Vice President. The trend in the market is the rising odds of Republicans holding the Senate. There's a divergence with the Presidential WTA market, where Clinton has widened her lead on Trump over the past couple of days.

2016-09-23

China Raising Coal Output to Stem Price Rise

FT: Chinese miners to lift thermal coal output
China’s state-owned miners have agreed to increase thermal coal output in an oblique attempt to mitigate a sharp rise in the coking coal price that is punishing the nation’s steel mills.

The price of the coking coal, also known as metallurgical coal, has doubled in the past six weeks, catching the Chinese industry by surprise and offering a rare spot of cheer to producers in Australia and elsewhere.

The rise prompted a protest from the China Iron and Steel Association, which represents large state-owned steel mills.

In an emergency meeting on Friday, the nation’s largest state-owned coal miners agreed to increase output.

That comes after months of production cuts by beleaguered miners as Beijing attempts to rectify extreme overcapacity in the coal industry and permanently shut debt-ridden mines whose deposits have been tapped out.

“We misjudged — we didn’t think the production limits would be so effective,” said Henry Liu, research director at CEBM in Shanghai.
The simpler explanation is central planning doesn't work.

Anti-Corruption Campaign Aimed At Corruption, Not Enemies

A new paper finds the corruption crackdown is mainly aimed at corrupt officials. Corruption is a breeding ground for political factions and a loss of control. By reducing corruption, the Party increases unity and restores order. Rather than targeting specific factions, the Party is draining the swamp.

Rescuing Autocracy from Itself: China's Anti-Corruption Campaign
Abstract: In order to maintain popular support or at least acquiescence, autocrats must control the rapacious tendencies of other members of the governing elite. At the same time, the support of this elite is at least as important as the support of the broader population. This creates difficult tradeoffs and limits the autocrat's ability to enforce discipline. We explore this issue in the context of Chinese leader Xi Jinping's ongoing anti-corruption campaign. There have been two schools of thought about this campaign. One holds that it is nothing but a cover for intra-elite struggle and a purge of Xi's opponents, while the other finds more credibility in the CCP's claim that the movement is sincere. In this article, we demonstrate three facts, using a new dataset we have created. First, we use the political connections revealed by legal documents and media reports to visualize the corruption network. We demonstrate that although many of the corrupt officials are connected, Xi's most prominent political opponent, Bo Xilai, is less central by any network measure than other officials who were not viewed as challenging Xi's leadership. Second, we use a recursive selection model to analyze who the campaign has targeted, providing evidence that even personal ties to top leaders provided little protection. Finally, using another comprehensive dataset on the prefectural-city level, we show that the provinces later targeted by the corruption campaign differed from the rest in important ways. In particular, it appears that promotion patterns departed from the growth-oriented meritocratic selection procedures evidence in other provinces. Overall, our findings contradict the factional purge view and are more consistent with the view that the campaign is indeed primarily an attempt to root out systemic corruption problems.
On Bo Xilai:
People commonly believed that the crackdown on Bo was a real fight against the challenge to the CCP top leadership (Broadhurst and Wang, 2014). Actually, the corruption network in Figure 1 shows that fewer investigations of Bos followers have been announced by the CDIC. For example, the number of downfall cases linked to Bo Xilai is less than Shen Weichen, Jiang Jiemin and Bai Enpei who have the same administrative rank. Furthermore, it is also less than a couple of officials of lower administrative ranks, such as Wan Qiangliang, Li Chuncheng and Zhu Mingguo. If the anticorruption campaign aimed to crack down political rebellions, we should have seen more factional members of Bo Xilai in the network, not Su Rong12 who has never been regarded as a qualified rebel. According to the news and reports we’ve read, all investigated high-ranking leaders in Jiangxi
province were reported to have offered bribes to Su and his wife. Su even made a statement of confession in jail, pleading guilty for taking bribes from more than 40 different subordinates. As Figure 2 shows, Su Rong stands out of the downfall cases. He is recognized as one of the three centers of the network. The comparison between Bo Xilai and Su Rong indicates that the network doesn’t cluster to every center with the consideration of political sense. Corruption is more likely to be the way that how the network has extended.
I'm not sure this refutes the political argument with regards to Bo Xilai because it's unclear to me why the Party would seek to punish low level members who aren't corrupt. The political crackdown began before the anti-corruption campaign. The network linked to Bo Xilai was systematically taken apart, through the oil companies (a source of patronage jobs and path to advancement for the faction), all the way to Zhou Yongkang, and it's still going: Top Chinese general linked to disgraced security tsar Zhou Yongkang arrested for corruption.

The conclusion of the paper:
This article provides a couple of perspectives in studying the anti-corruption campaign launched by Xi and his colleagues. First of all, we recognize the corrupt network by collecting the political connections reported by media. Using data analysis and visualization, we are able to identify the main targets of the anti-corruption campaign, i.e. the three “Big Tigers”. Secondly, on provincial level, we confirm that those individually connected with the “Big Tigers” are more prone to getting investigated. However, there is no evidence that suggests the incumbent top leaders are providing shelters for their factional members. In other words, most factions within CCP are taking the same side as Xi Jinping in the anti-corruption campaign and hence the intra-elite struggle in the top CCP has been limited. According to previous literature (Nathan, 1973; Tsou 1976), this phenomenon occurs only when the whole authoritarian regime is under a great threat. So what exactly is the threat? In this article we propose that the way some specific factions selected and cultivated members has threatened the stability of the Party’s autocracy, which is the real reason why Xi’s anti-corruption campaign can obtain support from others in the top leadership.
Members such as Bo Xilai, who scared even ordinary Chinese citizens with his revival of Maoist era culture.

More broadly, the threat to stability and reform comes from thousands of party members ignoring central government diktats, pursuing private agendas ranging from simple graft to forming personal political empires. Xi Jinping is increasing his control over the party through anti-corruption efforts, but also the control of all the leadership. On that they can all agree.

Gold in Canadian Dollars

Dongbei Steel Goes Bankrupt

Victory for the creditors?

Caixin: Dongbei Special Steel Group Forced Into Bankruptcy
China's largest specialty steel producer was finally driven into bankruptcy after the company defaulted on 3.6 billion yuan ($540 million) in debt, missing eight payments since March, according to a creditor document circulated online.

The Liaoning provincial government "has confirmed that Dongbei Special Steel Group will enter bankruptcy proceedings, and the bankruptcy plan is expected to come out by the end of September, and the provincial government demands the implementation of the plan to be completed in October," says a creditor meeting summary that began circulating online Wednesday morning.
Creditors are curious:
Earlier last month, the steelmaker resisted pressure from its bondholders to file for bankruptcy. The about-face raised questions among investors about the amount of assets that the company still had.
Back in July, creditors were ready to shut down Liaoning province over Dongbei Steel and the government's refusal to follow market rules.

A-Shares Companies Invest 600 Billion Yuan in Property Market

Banks and insurance companies are the invisible big shots in the Chinese property market, with Ping An Insurance (601318) leading the way with 33 billion yuan in property investments.
Wind data show that at the end of Q2, there are 1305 A-share listed companies investing in real estate, the total reached 595.1 billion yuan. Among them, 12 companies have invested more than 10 billion yuan, the highest is not a property firm, but China Ping An.
More than one company far afield from real estate has sold or plans to sell property valued at many times their annual income.

Caijing: A股上市公司投5951亿元炒楼 银行保险成隐形房产大佬

Chinese Mortgage Debt Hitting US, Japan Peaks

For comparison, the USA up until 2007:
At growth rates of 25 to 30 percent, the ratio of disposable income to mortgages in China will hit the U.S. peak by 2019.
Overall household debt levels are relatively high:
Microeconomic survey data show that Chinese residents leverage ratio is not low. Chinese family financial investigation of Southwest University of Finance and Economics is more authoritative microscopic household surveys, according to its findings, in 2013 Chinese household debt / disposable income of about 170%, urban residents reached 190%, higher than the major developed countries according to OECD Household Survey. And since 2013, there's been rapid loan growth, the current leverage ratio should be significantly higher.
Mortgages are contributing more than 100% of GDP growth in 2016:
New loans to GDP ratio risk a major economic bubble. Japan even in the worst of the housing bubble in 1989, new residential mortgages accounted for no more than 3.0% of GDP, before the US financial crisis the new mortgage / GDP reached 8.0% at the peak in 2005. In 2015,r Chinese new purchase commercial loans + fund loans accounted for 4.9% of GDP, reached 7.7% in the first half of this year, not only greatly enhance, but also with the United States is very close to a record high, indicating that the real estate bubble risk in nearly right close.
WallSt.cn: 真的不低了!——再论中国居民房贷杠杆

2016-09-22

Chinese Toll Roads Have 4.5 Trillion Yuan Debt, No Profits

Chinese toll roads owe 4.45 trillion yuan in debt.

The road are not profitable, with expenses almost 80% higher than revenues.

And 80% of revenue goes to debt service and repayment.

The Ministry of Transportation issued the "2015 National Turnpike Statistical Bulletin" (hereinafter referred to as "Bulletin"), at the end of 2015, the national toll road mileage 164,400 km (excluding toll roads that have been canceled), representing 3.6% of total mileage. In 2015, the national toll road toll revenue was 409.78 billion yuan, expenditures 728.51 billion yuan, a deficit of 318.73 billion yuan, the national toll road debt balance increased to 4.44937 trillion yuan.
We go to our understatement of the day:
In response, Beijing Jiaotong University, Professor Zhao Jian told the "Daily Economic News" reporter, said, large debt balance of toll roads, and the size of the expansion, there is a certain debt risk, future toll road policy or facing adjustment.
The rest of the numbers:
According to the Ministry of Transportation introduced in our existing road network, more than 98% of the highway, 61% highway and 42% of secondary roads are built to rely on toll road policy.
 
By the end of 2015, the national toll road mileage of 164,400 kilometers, accounting for total highway mileage of 4.5773 million kilometers 3.6%. Among them, 117,000 km highways, 23,400 km highway, 22,900 kilometers of secondary roads, independent bridges and tunnels 1168 kilometers, accounting for 71.2% of total mileage charges, respectively, 14.2%, 13.9% and 0.7%
 
In construction investment, by the end of 2015, the national toll road construction cumulative total investment of 6.94885 trillion yuan, an increase of 13.1%. Among them, the capital investment of 2.18197 trillion yuan, borrowing debt principal 4.76688 trillion yuan, respectively accounting for 31.4% and 68.6%.
 
Borrowing debt investments is to further expand the scale of toll road debt, "Bulletin" shows that as of the end of 2015, the national toll road debt amounted to 4.44937 trillion yuan. Among them, the highway 4.14601 trillion yuan, accounting for 93.2%. Compared with 2014, the national toll road debt balance net 604.23 billion yuan, an increase of 15.7%.
The key is the widening operating deficits:
2015, the national toll road tolls total revenue of 409.78 billion yuan, an increase of 4.6%. But the total expenditure, compared to 728.51 billion yuan, an increase of 32.8%, whereby the annual deficit of 318.73 billion yuan, an increase of 102.9%. In recent years, the deficits from 2011 to 2014 was 32.33 billion yuan, 56.57 billion yuan, 66.05 billion yuan and 157.11 billion yuan, can be found in the gap was gradually widening.
The government wants to build roads, but doesn't have the capital:
Ministry of Transportation Highway Department Deputy Direction Sun Yonghong said the current focus on accelerating China's highway construction is still in the stage into a network of national financial investment can not meet demand. By borrowing new debt to build new toll roads, the debt level will expand for a period of time, debt service costs will see rapid growth.
Sohu: 全国收费公路欠债达4.45万亿 收入八成用于还债

CNBC Harasses Bill Fleckenstein Again, Are We Near A Top?


ZH: Bill Fleckenstein Slams CNBC "Jerk" - "Don't Get In My Face Because I Won't Join Your Party"

Single Bedroom Apartment Rents Soaring in Top-Tier

Demand is far outstripping supply in the top-tier cities:
Since bedroom housing units accounted for a quarter of homes in Beijing, while demand accounted for 34%; Shenzhen, single-bedroom listings amount to 36%, account for 56% of demand.
Beijing rents average nearly 4300 yuan/month.

iFeng: 8月份北京房租止涨 一线城市一居室最受热捧

Latest Ranking of Major Chinese Cities By China Urban Forum

All major Chinese cities ranked below. Cities are also in some cases ranked by their position within a province.
iFeng: 一二三四线城市排名出炉你家排第几?

 First-Tier Cities 5
Beijing
The political, cultural and educational center
Shanghai
National economic center
Canton
Economic development, China's third largest city
Shenzhen
Economic development, the SAR city
Tianjin
Important economic Chittagong

More after the jump.

Multicultural West Collapsing

Earlier this year there was trouble in Italy: Italian Police Beat Chinese Illegal Immigrants Who Beat African Migrants Who Robbed Them

Now France: ‘Je suis Chaolin’: why the Chinese in France are speaking up about violence and racism
Nearly everyone complaining of aggression towards the Chinese had a stereotype of who the perpetrators were- Arabs and blacks, they would say in a hushed tone, adding that these petty criminals were probably jobless or out-of-school.

As Europe battles a migrant crisis that right-wing politicians have capitalised on by instilling fear and stoking nationalist sentiments, the question of how best to assimilate foreign cultures becomes ever more vexing.
France has historically opened its doors to migration, but its formula for integrating outsiders is to make them as French as possible. Residency is incumbent on learning the language and history.

But migrants from China remain strongly rooted to Chinese culture, not the least the language, passing it on to the younger generations.

Beraha has posed this question: “When one is a child of the world’s top economic power, does he really feel like fully assimilating in France? There are many French people living in China. Do we ask them to assimilate into the Chinese society and to become Chinese?”

Yang was winding down at 7 p.m. on a Saturday, to go home to his baby daughter, for whom he would want a two-sided upbringing.

“When I was young, I was French. As I’ve grown older, I’m Chinese,” he said.

Chinese Company Sells Beijing Apartments to Avoid Delisting

One company, Nanjing Putian Telecom (200468)is looking to save itself by selling two properties in Beijing.
Nanjing Putian Telecommunications Co., a state-owned manufacturer of computer wires and videoconferencing equipment, announced in a filing with the Shenzhen Stock Exchange last night that it is selling two apartments it owns in central Beijing. The company gave no reasons for the move, other than describing it as an “asset sale.”

To some analysts, however, the sale is likely an attempt by Nanjing Putian to hold on to its listing on the Shenzhen exchange.

Nanjing Putian has been bleeding, suffering two years of consecutive losses. A third year of red ink would be grounds for suspending its listing, under securities regulations. A fourth year would see it delisted.

Nanjing Putian acquired the two second-floor, 141-square-meter flats in 2004 for 2.15 million yuan ($322,634), as a dormitory for some of its marketing and sales staffers working in Beijing. Twelve years on, the apartments are now valued at 22.72 million yuan, according to the company. That amount, the company said, is more than 16 times higher than their current book value of 1.29 million yuan that factors in asset depreciation.

The company’s current estimated market price is larger than the net loss of 21.11 million that the telecom-equipment maker reported for the first half of the year. The company reported net losses of 16.59 million yuan for 2015 and 18.98 million yuan for 2014.
According to the Economic Observer, there are 617 listed companies in China who earned less than 22 million in the first half of the year.

Location, Location: Two Apartments May Save a Chinese Firm’s Stock Listing
EO: Link

2016-09-21

Chinese Shipbuilders Going Bust

China: Shipbuilding in the doldrums
A growing number of shipbuilders in China have gone bankrupt in recent years, plagued by a severe recession in the global shipping industry and capital shortages, industry experts noted.

More than 20 Chinese medium-sized and large shipyards, including Jiangsu Eastern Heavy Industry Co and Sinopacific Shipbuilding Group, have closed since the beginning of 2015, Beijing-based newspaper the Economic Observer reported on Sunday.

...But what’s worse is the capital drain that has hit many shipbuilders, as “shipbuilding is a capital-intensive industry with a cost averaging tens of millions of yuan,” experts noted.
“A shipowner’s down payment for an order has dropped from the previous 20 percent to 30 percent to less than 10 percent this year,” Wu explained, noting that this put strains on shipbuilders’ capital, as they need to pay in advance.

Lenders are gloomy on the prospects of the shipping industry, which makes it difficult for shipbuilders to secure finance through loans. They are left with no option but to undergo bankruptcy, the Economic Observer reported, citing industry players.
EO Link.

Nanjing Online Land Auction Fails to Cool Market

"I will participate in the lottery, gamble." Zhu Rui Jingrui estate investment manager, the day after the end of the online auction, which said in an interview with reporters. The developer's land auction, a total of 42 competitors lottery, the winning probability of 2.5%.

...20, Nanjing Land and Resources Bureau to come up with seven residential plots, all suffered berserk. A place to hang out in just 3-5 minutes, there are one hundred bids quickly "explode top", which means, in the auction "fuse" wait Yaohao the same time, this piece of land had already requested the existing home sales.

Had "Instinct" people buy lottery grab housing developers, it is now reduced to a lottery to buy the helpless fate even more tragic. For developers, only to drop heavily to buy land at present, the future financial pressure to sell existing homes are also much larger than sell Forward House, almost regardless of cost crazy "land grab."

"On one hand, the supply of land in Nanjing this year is relatively small;.. On the other hand, the housing market boom in Nanjing, making the country's developers and the influx of hot money have attempted a share demand exceeds supply, the price will certainly Xiabu Qu" as in April this year only "desperate" to get access to the market in the field of housing prices in Nanjing, Zhu Rui said Jingrui now "every inch" and similar ideas for new developers are not a minority.
The article concludes that Nanjing may need to introduce strict buying restrictions if it wants to cool the market.

Huanqiu: 南京土地"网拍"全部冲破最高价 开发商将摇号抢地

SCMP has coverage: Nanjing ‘land lottery’ a first for China’s soaring property market

To Hit GDP Target, Henan Gives Banks Lending Target

SCMP: Lend at least 450 billion yuan, banks told by China province as slowdown deepens
The banking regulator of the central Chinese province of Henan has told lenders to grant at least 450 billion yuan (HK$523 billion) in new loans this year to help shore up the local economy, a rare edict that has raised concerns the local government is becoming increasingly intrusive in influencing bank business decision-making amid the economic slowdown.
The jig is up.

2016-09-20

Guangxi Nonferrous Metals Goes Bust, For Real

SCMP: Guangxi Nonferrous Metals is China’s first interbank bankruptcy
“It seems [Guangxi Nonferrous] has been excluded from ‘protection’ as its profit has been negative,” said Iris Pang, analyst with Natixis Hong Kong.

Bubblicious: Land Revenues Soar

From the specific point of view the city, according to Centaline Property Research Center statistics, the first eight months, the number of cities with land transfer revenue of more than 10 billion reached 39, many cities saw revenues double. Among them, Hangzhou land transfer payments rose 3 times, Suzhou, Nanjing, Hefei, Wuhan, Zhengzhou, Shenzhen, Ningbo and other cities all doubled.

...Despite the city did not disclose the full details, but the reporter through the relevant research institutions to provide the data, using the convention of land calculated financial dependence (dependence = urban land finance land transfer / City general revenue × 100%) found land transfer prices depend city index rose sharply.

Suzhou, for example, land-dependent exponential first eight months up to 82.6%, while in 2015 this index was 40.58%. Centaline Property Research Center data show that, Suzhou land transfer for the first eight months of 96.67 billion yuan, the land market alive.

The current land Wuxi in August to sell over ten billion land-dependent index of 22.5%, compared to 6.91 percent in 2015 to improve a lot. In addition, Hangzhou, Hefei, Nanjing and other cities dependent index of more than 50%.
Due to reliance on land finance, governments don't want prices to drop:
"Reliance on land finance, makes it hard for first- and second-tier cities high prices to fall." Ren Zeping said to analysts.
As with other reforms, China was supposed to be moving beyond land finance and the real estate slowdown in 2014 made it clear local governments cannot afford investment without land revenue. Yet here we are heading into 2017 and the situation is worse than before...

iFeng: 各地土地财政依赖度:苏州翻倍 杭州合肥南京超50%

Buying Restrictions Adding Fuel to Leveraged Land Bubble

The spike in August home prices and sales was driven by the introduction of buying restrictions and rumors of buying restrictions. Future demand is being cannibalized and eventually the government will tighten too much, setting off the next downturn...
Every restriction order, almost turned into panic buying continues to rise and the starting gun, this year the introduction of restriction the city, almost all the case. From the first-tier cities Shanghai and Shenzhen purchase in March, and later, Xiamen, Wuhan and other second-tier cities to join outside of the purchase of interpretation it seems to agree: must rush ahead of buying restriction and grab a house. From the National Bureau of Statistics released on the 19th of August, 70 cities housing data to see, indeed.
Teh speculative fervor is having no long-term positive impact on the economy. The pricier cities are seeing extreme price distortions, while the third- and fourth-tier, the cities that need to reduce inventory, are still cold:
This year the real estate market and real estate policy fiery performance periodically changing fast, caught a lot of people by surprise. As we all know, the theme of real estate this year is "reduce the inventory", but the current real estate market's performance has been a complete departure from the theme, the inventory in third- and fourth-tier cities hasn't seen much improvement, first- and second-tier cities with no inventory issues cities have seen prices rise, the a rapid advance beyond the imagination of many people, causing panic in the market.
Where buying restrictions or credit restrictions are launched, a contrarian surge in prices follows:
...while hot cities resorted to the government policy to reduce the temperature, whether the purchase limit or credit limit, have become a contrarian indicator interpretation of future trends. Purchase and credit limits triggered rising prices and panic buying, is indeed worthy of study. From the reasons to see this year, housing prices, in addition to the theme of reduce inventory and real estate policy stimulus, and monetary policy, this year's global economic cycle, global economic recovery is still weak, the external market continued expansion policy of negative interest rates triggered asset shortage is mainly due to large capital into the real estate, not only Chinese funds, global funds are looking for safe assets. Thus, in the case of the domestic manufacturing industry still faces difficulties, first- and second-tier cities real estate become the first choice of large capital inflows. July interesting financial data is a case in point: RMB loans increased 463.6 billion yuan a single month, but residents on long-term loans increased by 477.3 billion yuan, the vast majority of residents of the new long-term loans is the mortgage.
I covered this here: Residential Mortgages Account for 102pc of Lending Growth, Rate Cut Coming

The author of this piece, Ma Guangyuan of Kung Fu Finance, blames the land market and rising leverage for the failure of buying restrictions to this point:
In the case of both living and investment demand expansion, re-took initiatives such restriction would like to cool the property market, in the short term with little effect. Due to the rapid expansion of residential and investment demand, increasing supply of hot urban real estate market has become imperative. The key supply is land supply, avoiding high leverage and get to some local governments to engage in starvation marketing. The reason why this year, the land market "King"is frequent, lower land supply is the fundamental reason. Shanghai first seven months of land supply only completed 30% of the plan, Beijing has been three consecutive months there is no piece of residential land supply, in hot cities there are land supply issues.

Aside from local governments artificially controlling the supply of land and engaging in starvation marketing, real estate companies are using high leveraged to push up land prices. In Shanghai the most expensive "King" Rongxin, for example, its 2015 sales revenue of 29.5 billion yuan, however, but this year the total amount of land acquisition is more than 34.5 billion yuan, high leverage is astounding. The biggest bubble today isn't a housing bubble, but a land market bubble. Without tackling land supply and deleveraging efforts, lazy buying restrictions and other measures to cool the property market, let alone cure it, will fail.
He warns governments: increase land supply and attack leverage, because buying restrictions historically take 6 months to have the desired effect. If governments do not act swiftly, they could see prices soar for another six months and risk a bursting bubble when the turn in prices arrives.

iFeng: 马光远:6个月后,中国房地产市场可能变天

Clinton-Trump 65-35

2016-09-19

Next 8 Cities Targeted for Speculative Housing Bubble

Bloomberg: China’s Failing Property Curbs Risk Bubble That May Hurt Economy
Ma Jun, chief economist of the People’s Bank of China’s research bureau, has warned about unsustainable valuations in the real estate market and the potential consequences. "Measures should be taken to put a brake on the excessive bubble expansion in the property sector, and we should curb excessive financing into the real estate sector," Ma said in an interview with China Business News last week.

Risks aside, property has given the economy a boost that’s helped the expansion continue prove doubters wrong and offset weakness in exports and other areas. Gross domestic product rose 6.7 percent in the second quarter from a year earlier, beating estimates and dimming expectations that the PBOC would unleash new stimulus after holding the benchmark rate at a record low since October.
Cities are expected to tighten buying restrictions, with Hangzhou adding restrictions at the start of this week. A reflection of current sentiment is this article from iFeng: 下一波暴涨轮到这8城 楼市调控大招在后面, which alerts speculators to the next 8 cities likely to boom once the credit firehouse is diverted from currently booming cities:
1, Chongqing

The main city of the expansion and relocation of indigenous peoples, construction moved north, satellite towns are Chongqing for the new super reserve forces of demand. Traffic artery through the final Chongqing will build even more powerful.

2, Jinan

Springs real estate landscape seems weaker than the reconstruction and transplantation and has been tepid. The only reason is that she is optimistic about the capital city of Shandong, and Weihai, Qingdao and other cities waterfront home handling foreign investment increasingly saturated.

3, Wuhan

Yunmeng Ze air swallowing. North-south thoroughfare of nine provinces, said something to rely on the throat, east and west traffic skeleton has been a foregone conclusion. New Metro Economic Development Zone Development Zone in Wuhan, Hubei city group in the construction process to eliminate its chronic, complete rebirth. Wuhan nine surrounding counties throughput power, attractiveness, economic pulling power and radiation effects other cities can not match. Wuhan restricting the development of the soft environment is an important reason for current economic connotation does not quite strong. But still optimistic about the enormous potential of the central city of Wuhan as the central city real estate. System developed waterfront area, the official investment to build the central business circle, three-zone plan substantive start a virtuous circle of education industry, both will make the brain drain happen in Wuhan, satellite city reconstruction, economic renewal base.

4, Mianyang

More than a rainbow, and the entire western Sichuan. When a domestic consumer Chengdu city, the Mianyang tomorrow already on the spectrum. Mianyang has also included because of the special industrial, special climatic conditions, caused special talent needs to obtain a large real estate development.

5, Weihai

One thousand yuan price rose the most shortest of the city, Weihai has its name; urban sanitation often list; three lines of the marina, naval air traffic convenience; focus on the development of the west coast; Yantai caged transportation construction; Weihai to abroad attractive, all real estate will make a qualitative change in Weihai.

6, Zhongshan

Guangzhou Zhongshan step footsteps could imagine their real estate tomorrow. Moreover, the economic base in Zhongshan, investment environment, policy efforts, the existing base of economic development, overseas Chinese overseas funds thick potential, worse than the year in Guangzhou.

7, Yichang

As eradication campaign Gui as a strategy to achieve the President of "gorges" long-cherished wish, as an "experience of life" but "Gorges", as the leading northwest Hubei Province, as both civil and military-type area, it has been in hot pursuit of Wuhan, Yichang, Wuhan Yichang today is tomorrow! Patience to give her three years.

8, Xi'an

Red Feizixiao a ride, nobody knows is to litchi. A consumption of blood lines of communication so that salty (male) West (an) Bao (chicken) even as one of the best of both worlds and Xi'an. Xi'an will usher in the spring on the basis of its real estate funds have continued to flow on. Confined to the northern part of the impact of water quality problems, the development will be Xi'an Xianyang aspect. Land use restrictions have been restricted to the Xi'an international metropolis development. But as extremes meet, which also spawned a new round of large-scale development of Xi'an real estate, and the flames of war in Qujiang region.

Entirely Predictable Tesla Autopilot Fail in China

NYTimes: Autopilot Cited in Death of Chinese Tesla Driver

I don't even ride a bike in major Chinese cities because there are no road rules. Tesla would have to design a completely different set of rules to have autopilot in China.

My suggestion is to have only one overriding rule: F=MA. Assume all other rules will be broken.

Future of China Urbanization: If Your City Wins, Mine Loses

I've covered the limits of urbanization before, in posts such as:
Migrant Population Falls, First Time in More Than 30 Years; Urbanization Strategy Highly Limited
Urbanize This: Migrant Worker Population Ages, Growth Slows, Low Wages
Urbanization Logic: Must Prevent People From Moving to First-Tier
5 Urbanization Winners
and most recently in:
More On Peasants Refusing to Move to Cities

A new Chinese report discusses the issue in depth, calling the battle for population a "life and death struggle" in which one city wins and the other dies.

iFeng: 中国人口大迁移:一场你死我活的城市战争

China enjoyed the demographic dividend from 1980 until 2014. Population increased by 324 million, or 38 percent, and the 18 to 64 age group saw 12 years of continuous growth. This helped fuel urbanization as every city could enjoy population growth.

Now, the one-child policy is reaping its dividends. The age cohort for family formation has stabilized and the rising cohorts are smaller. Even without delayed or lowered rates of marriage and childbirth, there would be a decline in household formation in the coming decade as the population falls.

Population density already started to fall in some cities:
In fact, even though the demographic dividend was positive in the early part of the 21st Century, the population war between cities has already begun. According to Beijing BCL research, the average population density of 39,007 townships in China is 873 people / km. By 2010, it climbed to 977 people / sq km as population growth trends continue, but over this 10 years, 33% of cities saw population density decline, while only 9% of cities saw sharp growth.
Some provinces have seen more movement than others. Of every 100 people moving, 12.76 were from Sichuan province, 9.93 people from Hunan, 9.14 people from Anhui, 8.25 people from Jiangxi, 7.24 people from Henan.
Overall, Shanghai, Beijing, Guangdong has become a net emigration area to a minimum number, and the total net migration rate was the highest of the three main centers to absorb. Tianjin, Zhejiang, Fujian, Xinjiang moderate net immigration rate type. Anhui, Jiangxi, Hubei, Hunan, Guangxi, Chongqing, Sichuan, Heilongjiang, Henan, Guizhou high net emigration rate area; Shaanxi, Gansu, Qinghai, Hebei, Inner Mongolia, Jilin low net emigration rate provinces, aside from Hebei the rest are all in the middle and west.
The report also notes that cities such as Beijing still have lots of physical room for development. It could drain surrounding regions of population for years to come. For cities in the middle and west of China, they have to find a way to stop emigration and keep population within their borders.

Provinces also see migration within their borders. Zhengzhou attracts 40 percent of Henan migrants, while 60 percent leave the province. The rest of cities in Henan experience a drain.

Finally, the report concludes that migration would follow Zipf's Law were it not for restrictions on development. Even with restrictions, the authors expect first- and second-tier populations will grow. They suggest developers ignore concerns about population limits and continue building in first- and second-tier cities.

Hangzhou Existing Home Prices Exceed New Homes, Buying Restrictions Arrive

Developed cities such as Beijing have higher existing home price because new construction is far outside of the city center, but the crunch in Hangzhou is blamed on a supply/demand imbalance. Post-G20 many outside investors showed up to buy:
Centaline Property Research Center statistics show that in the first eight months of 2016, Hangzhou housing the total sales volume of 133,562 units, surpassing the 2015 annual 125,217 sets; Hangzhou commercial housing inventory of 124,957 units by the end of August, back to May 2014 inventory levels. Among them, the main city residential sale listings 21,582 homes.

President of the Academy of Hangzhou transparent houses Fang Zhang then that this year, Hangzhou real estate market there have been many positive changes, but the rapid growth of foreign buyers groups, the proportion of non-resident buyers has reached 33.8% in August; one week after the G20, outsiders later the proportion of 39.3%, foreign buyers source further expansion.

Stock reflected in the price on the emergency began. Hangzhou city's average transaction price of 18,298 yuan in August / square meter, compared to last year in August rose 19%.
iFeng: 杭州购房潮调查:这一波投资客与十年前完全不同

Hangzhou is planning buying restriction too: 楼市重磅政策来了!前一夜这里的人都在抢房. Non-residents with 1 or more properties can no longer purchase homes within the city as of September 19. Sales on September 18 hit a record at 3265 homes. Existing home sales also hit a daily record of 1840 homes.

Trump Rising: Digging into the Iowa Electronic Market

Iowa Now: Buying into the election
This year’s five election markets opened in November 2014, and more than 2,100 traders have executed about 600,000 trades so far. The traders come from 18 countries and have invested about $267,000 in the markets.
The Winner-Take-All market (WTA) currently has $91,279 in play.

Both a Clinton and a Trump contract trade in the same market, one will expire at $1 and one will expire at $0, based on which candidate wins more popular votes. Al Gore contracts were paid in 2000.

There are a two ways to trade in the market. You can buy and sell a contract from other traders (no short-selling or margin is allowed), or you can buy bundles from the exchange for a fixed price of $1 (and sell them back for $1). Depending on how the market is pricing each contract, it can make sense to buy a bundle as opposed to trading directly for a contract. As an exaggerated example, if someone is bidding 70 cents to buy a Clinton contract and someone else is asking 40 cents to sell you a Trump contract, you can buy a bundle for $1, sell the Clinton contract for 70 cents, and hold the Trump contract at a cost of 30 cents.

You don't know how deep the bid/ask go. Sometimes it is 1 contract, sometimes 100 or more.

This chart below compares the dollar volume of Clinton to Trump. The market is starting to trade both contracts more than back in June, but it's easier to buy Trump in size by taking a bundle and selling the Clinton contracts, indicating the bid for Clinton is stronger than for Trump. Clinton has been priced 2 and 3 times as much as Trump, a reflection of the market's perception of her better chances. The gap is also larger due to the payouts of $1 and $0. I expect volume and prices will quickly shift in Trump's favor if the race tightens inside of 60-40 because Clinton holders might start selling. If Trump were to drop off in the polls or screw up in the debates, his contracts could quickly dive into the teens or even single-digits since the end value is zero if he loses. Unless things swing decisively in Trump's favor, I anticipate a ceiling the the 40 cents range because while no one supporting Trump thinks Clinton has no shot, a segment of the electorate believes Trump's odds of winning are zero.
Based on the average volume and average price, the average Hillary contract holder who bought the contract (not from a bundle) has a cost of 72.7 cents. The average Trump holder has a cost of 29.6 cents. Right now the average Hillary contract holder has a small loss, the average Trump holder a similarly sized monetary gain, but a higher percentage gain at about 15 percent.

Beijing Migrant Worker Priced Out of Second-Tier City

After abandon the suburbs back to the city center, I will be locked in a range of buyers Zhengzhou South Second Ring a new building, went to several showings in the process met investors from other major cities up north and local buyers, I probably a bit estimate: 5 of 10 people are from Henan, and the remaining five are here to invest. In addition, the reason for listing appear in short supply, because there are developers took the opportunity hoarding, for example, I want to buy a house, a total of 1000 suite, but released 3000 tickets, tantamount to an average of three people to grab a house, the formation of a housing shortage situation, coupled with the addition of real estate speculators, it would be strange if it wasn't busy. It is also popular at this time other second-tier cities such as Nanjing, Hefei and other cities taking over, become real estate investors "meat and potatoes" when I think other places certainly have a similar phenomenon. Money can not buy a house - this is the status of many of the popular second-tier cities home buyers.

Not only houses, "scarce", prices did not break, I saw this at the house, from a single 5 - August rose to the equivalent of the past several years, rising faster called "amazing," said the salesman May 13,000 yuan / square meter, the end of August when it rose to 15,000 yuan / square meter, I reluctantly target from three-bedroom apartment into a two-bedroom, purchase budget has more than 1 million. But even this is not to buy can buy, the house is still Yaohao, can not buy is still a problem. Really, when I heard the mood just after the price increase just go to the cemetery grave-like finish, mood swings to the bottom, tears in the eyes spin son.
iFeng: 北漂男拿100万回老家 楼市的变化让他崩溃

2016-09-18

Leveraged Housing Blowout: New Home Prices Rise 1.2pc in August


Home price increases are spreading, with 64 cities seeing increased new home prices in August. The cities that had been leading the price rise, the first-tier cities and the hot second tier cities, saw their share of the national price increase slide to about 47 percent. They make up 65 percent of the year-on-year increase of 7.3 percent. The largest increase was in Zhengzhou, 5.5 percent in August.

Existing home prices increased 0.9 percent. Zhengzhou was the leader, up 4.5 percent. 57 cities saw rising prices in August, 4 were flat, 9 down.

NBS: 2016年8月份70个大中城市宅销售价格变动情况

Is this the blow off top or a sudden acceleration in the trend?

China's Debt Levels Are 3X Trouble

Bloomberg: Warning Indicator for China Banking Stress Climbs to Record
China’s credit-to-gross domestic product “gap” stood at 30.1 percent, the highest for the nation in data stretching back to 1995, according to the Basel-based Bank for International Settlements. Readings above 10 percent signal elevated risks of banking strains, according to the BIS, which released the latest data on Sunday.

The gap is the difference between the credit-to-GDP ratio and its long-term trend. A blow-out in the number can signal that credit growth is excessive and a financial bust may be looming.

...While the BIS says that credit-to-GDP gaps have exceeded 10 percent in the three years preceding most financial crises, China has remained above that threshold for most of the period since mid-2009, with no crisis so far.
Another deteriorating statistic.

Yuan Devaluation Debate...As USDCNY Blasts Past 6.70

If the rise in LIBOR and the TED spread are not due to changing money market rules, the yuan is going to be under pressure once the entry into the SDR basket is complete. At some point the possibility of Trump victory, or post-Election Day reality, will also be a factor.

Update: USDCNY opens above 6.73. Bad data! USDCNY stayed at 6.67.

iFeng: 人民币周报:空头们怕了吗?离岸人民币又有大动作!
German commercial banks: offshore renminbi financing costs soar China's central bank show an increase in the cost of short yuan, in order to reduce devaluation pressure. But for the short-term stability of the RMB exchange rate, the central bank's policy will not only undermine confidence in the market, frequent interventions will make the market that the yuan Zoubian is inevitable, leading to capital outflows intensified.

Goldman Sachs: the probability of rate hikes at least once a year the Fed is very large, but the market is still unwilling to face the possibility that the upstream end of the dollar means entering space increases. It is time to establish the yuan short positions, because the strength of the dollar for China is still a stumbling block.

Standard Chartered: Expected end of this year dollar / yuan exchange rate will remain 6.67 to 6.7, mainly because the United States is expected before the end of this year can not afford to raise interest rates, is expected to be the fastest or 2018 will raise interest rates, the market interest rate is expected to weaken against emerging market currencies dollar support.

Hang Seng Bank: Before the end of September FOMC rate decision, offshore renminbi liquidity will remain tight situation; In addition, in the past offshore renminbi liquidity easing, market participants in the long-term market borrowing tends to short end, lend long end, market participants now see the short end of the interest rate is difficult to fall, the market is long-term operation of a flat disk.

Citigroup: China's economic growth is expected in the second half is still facing greater uncertainty, estimated this year or will the central bank cut the deposit reserve ratio, short-term bearish yuan. But because of the sharp depreciation of the yuan in August last year caused by the financial market turmoil, or the central bank is expected to be slow and orderly control of the yuan devaluation.

Not to devalue the renminbi devaluation? Three government think-tank position are differences

The central bank monetary policy committee member Fan Gang: The current rate hike cycle in the United States, long-term bullish dollar, the RMB should not follow the US dollar rose, but should be followed by other weaker currencies; Chinese government will appropriately control the exchange rate, allows a slow devaluation.

Institute of Finance, the State Council Development Research Center Director Blending : RMB internationalization process was not always smooth, slowed down last year after 8.11, but the international trend intact. RMB internationalization may be wavy, sometimes fast, sometimes slow. RMB stable and rising momentum in the short term is difficult to reproduce.

Monetary affairs committee Yiping Huang: the future of the RMB exchange rate will fluctuate, but the risk of facing persistent downward pressure is not great. Devaluation of the renminbi is expected partly because of market prospects for China's economic growth prospects relatively pessimistic, corporate leverage and high rate of bad debts caused by concerns about pressure on the yuan exchange rate to capital outflows, and the impact of the major developed countries monetary policy differentiation. However, even if the yuan relatively weak dollar, but also possible for the euro , the yen strengthened, against a basket of currencies still remain stable.

Leverage and Land Prices Raising Chinese Home Prices

EO: 谁在制造中国房价泡沫?

Another Electoral Blow to German Establishment

Angela Merkel's party suffers slump in Berlin election
After voting booths closed at 6pm CET, first projections put the centre-left Social Democrats (SPD) on 23.2%, ahead of the centre-right Christian Democratic Union (CDU) on 17.9%. The Green party and leftwing Die Linke are vying for third place, with 16.7% and 16.2% of the vote respectively.

Anti-immigration populists Alternative für Deutschland are set to enter the German capital’s state parliament for the first time, with a projected 11.8%.