2017-08-17

More Logic of Strategy

American Prospect: Steve Bannon, Unrepentant
Far from dressing me down for comparing Trump to Kim, he began, “It’s a great honor to finally track you down. I’ve followed your writing for years and I think you and I are in the same boat when it comes to China. You absolutely nailed it.”

“We’re at economic war with China,” he added. “It’s in all their literature. They’re not shy about saying what they’re doing. One of us is going to be a hegemon in 25 or 30 years and it’s gonna be them if we go down this path. On Korea, they’re just tapping us along. It’s just a sideshow.”

Bannon said he might consider a deal in which China got North Korea to freeze its nuclear buildup with verifiable inspections and the United States removed its troops from the peninsula, but such a deal seemed remote. Given that China is not likely to do much more on North Korea, and that the logic of mutually assured destruction was its own source of restraint, Bannon saw no reason not to proceed with tough trade sanctions against China.

Contrary to Trump’s threat of fire and fury, Bannon said: “There’s no military solution [to North Korea’s nuclear threats], forget it. Until somebody solves the part of the equation that shows me that ten million people in Seoul don’t die in the first 30 minutes from conventional weapons, I don’t know what you’re talking about, there’s no military solution here, they got us.” Bannon went on to describe his battle inside the administration to take a harder line on China trade, and not to fall into a trap of wishful thinking in which complaints against China’s trade practices now had to take a backseat to the hope that China, as honest broker, would help restrain Kim.

“To me,” Bannon said, “the economic war with China is everything. And we have to be maniacally focused on that. If we continue to lose it, we're five years away, I think, ten years at the most, of hitting an inflection point from which we'll never be able to recover.”

Bannon’s plan of attack includes: a complaint under Section 301 of the 1974 Trade Act against Chinese coercion of technology transfers from American corporations doing business there, and follow-up complaints against steel and aluminum dumping. “We’re going to run the tables on these guys. We’ve come to the conclusion that they’re in an economic war and they’re crushing us.”

But what about his internal adversaries, at the departments of State and Defense, who think the United States can enlist Beijing’s aid on the North Korean standoff, and at Treasury and the National Economic Council who don’t want to mess with the trading system?

“Oh, they’re wetting themselves,” he said, explaining that the Section 301 complaint, which was put on hold when the war of threats with North Korea broke out, was shelved only temporarily, and will be revived in three weeks. As for other cabinet departments, Bannon has big plans to marginalize their influence.

“I’m changing out people at East Asian Defense; I’m getting hawks in. I’m getting Susan Thornton [acting head of East Asian and Pacific Affairs] out at State.”

But can Bannon really win that fight internally?

“That’s a fight I fight every day here,” he said. “We’re still fighting. There’s Treasury and [National Economic Council chair] Gary Cohn and Goldman Sachs lobbying.”

“We gotta do this. The president’s default position is to do it, but the apparatus is going crazy. Don’t get me wrong. It’s like, every day.”
More than three years ago I wrote The Logic of Strategy: Yuan Devaluation and the Road to Trade War
The protectionists are ever so slowly gaining the upper hand thanks in part to negative social mood. 2008-2009 will probably mark the peak moment for Wall Street and the Treasury Department, even though there is as yet no sign of it in Washington. Changes can be seen in the form of issues such as immigration, which has turned the grassroots of the conservative movement against the Chamber of Commerce and large corporations (due to an attack initiated by the latter against the former). This has pushed the Overton window of acceptable debate among conservatives who can now take shots at big business. There is also the growing libertarian faction pulled together by Ron Paul that supports his son, Rand Paul, that consistently attacks the Federal Reserve and Wall Street. Put it together and it is not hard to envision an anti-Wall Street, pro-manufacturing political consensus emerging. This will cut across party lines, with manufacturing unions pulling in Democratic support if there are specific bills to vote on.
I also wrote:
Whichever path is chosen, the economic and geostrategic paths will line up. An economic crisis in China will add the economic component to the emerging geostrategic China policy. A geostrategic decision to confront China economically would set in motion an economic crisis that would propel the strategy forward since China would respond in kind.
Escalating tensions over North Korea is one way to increase support for Chinese sanctions.

2017-08-15

M2 Falls in July

M2 fell 0.14 percent in July, reducing the 12-month growth rate to 9.2 percent.

The 3-month annualized rate of M2 growth rose to 8.4 percent. The downtrend is clear.

Reuters: China's July new loans fall to 8-month low as curbs bite
"This shows that banks are giving more support to the real economy as loans go back to the normal channel - in line with the direction of financial regulations", said Wen Bin, senior analyst at Minsheng Bank in Beijing.

July lending is traditionally weak but last month's level was still 49 billion yuan higher than the average of July figures between 2014 and 2016, according to Reuters calculations based on central bank data.

Broad M2 money supply (M2) in July grew 9.2 percent from a year earlier - the slowest since records began in 1996, central bank data showed, missing forecasts for an expansion of 9.4 percent and compared with June's 9.4 percent.

China's central bank has said that the slowing M2 growth could be a "new normal" due to the stepped-up crackdown on risky shadow lending activities.

Household loans, mostly mortgages, fell to 561.6 billion yuan in July from 738.4 billion yuan in June, according to Reuters calculations based on the central bank's data.

Household loans accounted for 68 percent of total new loans last month, up from 48 percent in June.
An improvement from last year's more than 100 percent.

2017-08-14

Want a Mortgage? Prepare to Wait

iFeng: 房贷额度紧张排队放款蔓延至全国 利率未集中调整
21st century economic reporter Reporters also found that the recent tight line lending has been gradually spread from the purchase of the city to the country, and waiting time is also getting longer.

...In addition to interest rates go up, the number of banks loan account managers for the 21st century Business Herald reporter said that the loan queuing time the basic needs of more than three months. China Merchants Bank, a branch account manager, told reporters that the current situation to see if the formalities are now ready to start by the end do not necessarily get loans.
The loan process can take up to four months at some banks. It will go a little quicker if the borrower accepts a higher interest rate.
"I have paid a deposit of 1 million, can not get a loan if before the end, which one million will be spoiled. In order to be able to get loans on time, I intend to take the initiative to floating interest rates, as soon as possible to get a loan." A home buyers Wei Ms. told reporters in the 21st century Business Herald.

FAI Breakdown

SOEs still propping up fixed asset investment. Private investment growth in the industrial sector slowed sharply to 1.9 percent in July.

Private Fixed Asset Investment Slows to 5.2pc in July

Private FAI growth was 6.9 percent YTD in July, down from 7.2 percent in June. July growth was 5.2 percent.

Fixed Asset Investment Slows to 6.7pc in July

Fixed asset investment up 8.3 percent YTD down from 8.6 percent in June. FAI increased 6.7 percent in July.

Real Estate Investment Slows to 4.8pc Growth in July

Real estate investment growth 7.9 percent YTD in July, down from 8.5 percent in June. One month growth was 4.8 percent.

2017-08-13

Mortgage Rates Rising as Sales Fall

iFeng: 热点城市房贷价升量跌料延续 刚需忧心被误伤
Experts believe that policies to curb housing prices still tight, especially on larger personal loans policy on the market. The central bank in the second quarter monetary policy report makes clear, strict implementation of differentiated credit policy, credit flows to limit speculative investment.

Chinese Speculators Trade 6 Months of Steel Production in 1 Day

iFeng: 螺纹钢疯了!一天成交量超过上半年全国产量
August 11, is a rebar futures crazy day, this day, turnover of 10.73 million hand, the transaction volume has reached 417.785 billion yuan. According to a hand 10 tons conversion, turnover of about 100 million tons, more than the first half of this year's national rebar production (99.59 million tons).

...It is understood that since June 14 to August 11, rebar main contract RB1801 cumulative up 30.82%, hot volume main contract HC1801 rose more than rebar, the same period rose 33.78%.

Rebar futures prices rose sharply, but also attracted the attention of regulators. Following the China Steel Association made a clear statement, the last time again on the rebar fees, margin to make adjustments, the intention is very clear to the current hot steel city cooling.

...Rebar futures prices rose rapidly, not only caused the concern of the market, but also caused the Development and Reform Commission, Ministry of Industry and China Steel Association of the high degree of concern.

Recently, China Steel Association said that the current sharp rise in steel futures prices is not driven by market demand or reduced supply of the market due to the recent steel prices is a speculation. Due to the excessive interpretation of the expected reduction in production, not the demand to promote the price rise.

...A number of steel price monitoring platform data show that the current steel prices since May 2012 the highest level, steel prices hit a five-year high. To the country's largest steel production base in Tangshan, for example, the August 8 rebar price of 4060 yuan per ton, compared with the beginning of the level of 3100 yuan per ton, up about 35%. Billet prices than the beginning of 2700 yuan per ton, up 36%.

With the iron and steel prices continued to rise rapidly, the industry said that the high risk of operation is gradually accumulating. Wang Guoqing said that in late August not callback, it is expected in September will callback.

In the current market conditions, not only the China Steel Association and industry experts repeatedly prompted the risk, steel listed companies have begun to prompt the risk.
Where do they get all the money for this rampant speculation?

Car Sharing Comes to China

This article talks about it in the context of shared parking spaces as well, recommending home buyers not pay a lot of money for a space.

iFeng: 别买停车位!又一场巨变已经来临
2016-2017, sharing rapid economic rise, the rapid expansion of coverage. Today, shared bicycles, sharing an umbrella, share charge treasure, sharing basketball and other shared economic settled, greatly convenient in our daily lives.

Car sharing refers to a person or persons using the car, while driving a vehicle only has the right to use and share the car can be booked directly through the telephone or mobile phone APP, very convenient.

Recently, there has been a large number of shared luxury car near the Beijing CBD.

This is a car-sharing company's new models, the company said: "This year there will be 2000-3000 Audi market use."

Focus: What are the charges?

Users need to pay 1,000 yuan deposit fee when the length of the vehicle, the first 30 minutes $ 15, after more than 30 minutes 0.5 yuan / minute.

For example: If you drive 50 minutes, the fees charged is 15 + 0.5x20 = 25 yuan, much lower than the cost of an ordinary taxi.

Car-sharing appears to change the way we travel, which for traditional car rental industry, and even drops a taxi company, will form a very, very big impact! Car sharing have come to share parking spaces still far away?

2017-08-11

PBoC Reiterates M2 Growth Will Slow

iFeng: 央行:需全面客观认识当前 M2 增速低于过往
The central bank said that the current M2 growth rate lower than in the past, the need for comprehensive and objective understanding. First, the growth rate of M2 in the past is higher than the nominal GDP growth more closely related to housing and other monetization, and the current housing commercialization rate has been high, the corresponding increase in demand for money. Second, in recent years, the rapid growth of M2 is also related to financial deepening, mainly for the same industry, financial and other business development faster, but the financial deepening process is not linear, in order to benefit from the disadvantages will have a certain ups and downs, the recent M2 growth Reduce is to strengthen financial regulation, shorten the chain of funds, reduce the nest of a reasonable reflection. It is expected that with the deepening of leverage and the further return of finance to the real economy, the M2 growth rate lower than in the past may become a new norm. At the same time, with the deepening of the market and financial innovation, the factors influencing the money supply are more complicated. The measurability, controllability and economic relevance of M2 are also declining, and the change can not be overly concerned.

BGI Genomics Limit Down on Friday

华大基因 (300676)

2017-08-10

Beijing Lifts Unspoken Price Limit Sparking Talk of Easing

Beijing has an unspoken rule that a development with a starting price above 80,000 yuan per sqm will not receive pre-sale permits. This week a property with a 95,000 yuan price was approved, sparking speculation that real estate controls are easing. However, this property is located in an area where the average prices is around 100,000 yuan per sqm. The article goes through several other reasons why controls are not being lifted.
It is said that this year Beijing issued a pre-sale permit, there is an unwritten rule, commodity residential pre-sale price of not more than 80,000 yuan per square meter, higher than this price will not send pre-sale permit.

And now Beijing Construction Committee issued three more than 80,000 projects, specifically for Fengtai China Xi residential pre-sale price of up to 96023 yuan / ㎡, Jinmao House residential pre-sale price of 95,000 yuan / ㎡, Kunlun domain residential pre-sale price Up to 95,705 yuan / ㎡.

Because of this, resulting in a lot of people panic, that the government to relax regulation, housing prices have to rise, and then follow the other cities with the help of the same straw, hype local regulation is about to relax.

Cherry small house worried that we were misled, so just like the real estate circles in Beijing to understand the situation, to listen to.
iFeng: 北京8万以上楼盘放行取消限价?圈内人说出了真实内幕

Developers Say Silver Age Over, Copper Age of Real Estate Begins

Caijing: 地产商们的展望:中国楼市进“铜铁”时代 大象起舞
With the full depth of the lever, there are real estate developers even think that the real estate industry, "gold" and "silver" era have passed, and into the "copper and iron" era.

When the real estate dividend period gradually subsided, "copper and iron era" showing a new industry characteristics: real estate for more than ten years of play and logic is broken, purchase, limit and so become normal; real estate business development business survival space Difficult, profit margins have been repeatedly squeezed; market concentration continued to strengthen, elephants dance, mergers and acquisitions frequently. In addition to the traditional development of business, to seek innovative breakthrough, as many small and medium-sized developers forced to choose.

Socionomics Alert: Europeans Hate Tourists, Let Alone Migrants

Euro rally? Stock market rally? Establishment political wins? All temporary as social mood remains in a negative trend.

Guardian: First Venice and Barcelona: now anti-tourism marches spread across Europe
With the continent sweltering under a heatwave nicknamed Lucifer, tempers have been boiling over, too, as a wave of anti-tourism protests take place in some of Europe’s most popular destinations. Yet, as “tourism-phobia” becomes a feature of the summer, the World Tourism Organisation (UNWTO) has defended the sector, calling on local authorities to do more to manage growth in a sustainable manner.

...Arran, the youth wing of the radical CUP (Popular Unity Candidacy), have been filmed slashing the tyres of rental bicycles and a tour bus. An Arran spokesperson told the BBC: “Today’s model of tourism expels people from their neighbourhoods and harms the environment.”

...Last month in Venice – which sees more than 20 million visitors a year and has just 55,000 residents – 2,000 locals marched through the city, voicing anger at rising rents and the impact of huge cruise ships and the pollution they cause to the city’s delicate environment.

...Italy has also been cracking down on anti-social behaviour in other tourist hotspots. In Rome, this means a ban on people eating or paddling in the city’s fountains and drinking on the street at night. Similar measures have been put into place in Milan – which introduced a summer ban on everything from food trucks to selfie sticks in the Darsena neighbourhood.

In Dubrovnik, another city where cruise ships unload thousands of visitors at a time, the mayor has introduced cameras to monitor the number of visitors in its Unesco-listed old town, so that the flow of people entering can be slowed – or even stopped – once a certain number is reached. Meanwhile, the mayor ofpopular Croatian party island Hvar has pledged to put an end to debauchery by mostly British tourists by slapping them with huge fines.
One of the themes here is the end of globalization simply due to the amount of capital and population interested in visiting or residing in the West. To some extent, the 2008 financial crisis was the result of China and other nations hold too much capital in the United States. This is also why I believe the U.S. dollar will lose its sole status as reserve currency: it cannot support the next major growth wave in China and India. Or if it tries, the end of that wave will break the dollar.

Most countries also cannot allow the rising middle classes in China, India and other emerging markets into their nations. They cannot handle the influx of visitors, to say nothing of immigrants. Europe's people are marching for tourism cuts and instead, their governments are flooding their nations with migrants! Total insanity.

Many of the West's wealthy and political leaders live in gated communities, but they treat their nations like empty lots. They tore down protections such as strict immigration and border walls that were the gates for the poor and middle class. Very few seem to be waking up to reality, most double-down and attack their own citizens as evil (racist, xenophobic, etc.) for wanting the state to provide similar protections. (Think of Trump's wall like Medicaid. The poor cannot afford to live in a gated community, just as they cannot afford healthcare.)

The very existence of the nation depends on its people. Italy filled with Germans is Germany, not Italy. Those who continue to treat their nations as empty lots, who tear down all the protections for their people, will eventually find themselves on the wrong end of a populist mob. Nations such as Poland and Hungary will coast smoothly through the coming turmoil. Those who end up with a populist leader such as a Trump or a result such as Brexit should mitigate or even reverse the problem. In nations where there is no brake, such as Germany, parts of Scandinavia and possibly Southern Europe, political volatility will eventually go off the charts.

Prior articles on the topic:

How Globalization Ends in the West
The Anglosphere Tightens Visa Rules (the U.S. recently announced a reform similar to Canada and Australia's point system for immigration)
Migration to New Zealand Drives Homes Prices
Palau Moves to Limit Chinese Tourism

2017-08-09

BGI Genomics Limit Up Streak Ends

BGI Genomics didn't open limit up today. Shares are up 0.5 percent at the moment. Volume was 27 million on Wednesday. Current volume is 10 million shares. Shares could rally and finish limit up today, but it looks like the streak ends at an impressive 18 days, not counting the IPO day which saw shares jump more than 10 percent.

Chinese PPI Up 0.2pc on Commodity Bounce

CPI could fall below 1 percent yoy by September as September 2016 jump drops out of calculations. PPI bounced with commodities in July.
NBS: 2017年7月份工业生产者出厂价格同比上涨5.5%

NBS: 2017年7月份居民消费价格同比上涨1.4%

2017-08-07

Marginal Borrower's Household Debt to Income Exceeds 100pc

Balding's World: Reconciling Chinese Household Debt Statistics
So after my Bloomberg View piece came out citing a self generated statistic that Chinese household debt to household income was above 100%, I had a number of eagle eyed reader send me a piece from the South China Morning Post from the same day. In the SCMP piece, they present a graph that shows Chinese household debt to household disposable income at just above 50%. Readers were wondering how could I explain the enormous discrepancy between my self generated number and the number that was cited in the SCMP.
The Bloomberg piece he references: China Shuffles Its Debt Around. The heart of the issue:
In other words, China is spreading the debt burden from corporations to households. Although this might forestall a domino effect should one of China's big companies start teetering, it's far from a long-term solution.
But which households? SCMP: How China’s young people became addicted to debt

Think about Chinese household debt in terms of demographics and the marginal borrower. Aunties aren't loading up on debt in their 50s. Retired people aren't borrowing to buy new cars. It's the Chinese Millennials (80后,90后) who are loading up on debt. If you're looking at debt in terms of the Chinese population and comparing it to a developed market, it's not apples to apples because the older generations in China have far less debt. Thus, while it would be statistically correct in the aggregate to say,
The consumer market has the capacity to service higher debt. Household debt-to-disposable income is 56 per cent, which is also among the lowest in the world. For context, the US peaked at 123 per cent, and Australia is now at a worrying 168 per cent.

China could double its household debt ratios and still be “average” in a global context. Admittedly, this is a multi-year process, but with an US$11 trillion economy, this implies an additional US$4 trillion in purchasing power in today’s terms.
the marginal borrower will exhaust themselves long before this peak is achieved.

A day ago I posted another SCMP article showing the deflationary impact of high debt levels is already hitting some consumers: Housing Bubble Turns Chinese Into Debtors
Cao and her husband are rich on paper: their flat is now worth more than 5 million yuan, but they still live in a frugal life. They’ve let the flat out 6,000 yuan a month and she lived with her husband at his army quarters. To make sure they can repay their debts and make ends meet, she has minimised discretionary spending on restaurant meals, clothing and travel.
Finally, from that article is this key point:
total outstanding deposits minus total outstanding loans, have stagnated or even begun to fall
The marginal borrower is exhausted. Deflationary/disinflationary forces are building.

Bear Take: Reserve and Currency Rebound Weak

Reuters: China July FX reserves unexpectedly hit 9-month high on boost from weak dollar
ZH: China's Reserves Continue To Decline As Capital Outflows Accelerate, "Outbound Travel Spending" Surges
using a separate gauge compiled by China's SAFE which tracks onshore FX settlement as well as cross-border RMB flows, shows something vastly different: as calculated by Goldman, China has not had a single month of FX inflows since its mid-2015 Yuan devaluation
The U.S. Dollar fell 10 percent from its recent high in December 2016, it fell for 5 consecutive months into July. Chinese FX reserves have rebounded 3 percent from the January low, CNYUSD rebounded 3 percent from its December 2016 low. The yuan exhibits very mild strength amid a very weak period for the U.S. dollar. If I am correct and the U.S. Dollar Index still has a new high ahead of it, the past seven months of yuan appreciation and reserve growth will offset one month of losses during the next bear move.

People's Daily Discusses Decline of Western Democracy, It's All About Credit

Global Times: Democratic rights and freedoms in West on decline
A commentary in the People's Daily, the flagship newspaper of the Communist Party of China, said that the democratic rights and citizens' freedom in Western countries have witnessed a continuous declination, in a bid to prove the superiority of socialism over capitalism.

Luo Wendong, a scholar from the Chinese Academy of Social Sciences, wrote in the People's Daily on Sunday that the political dilemma and retrogression of democracy in Western countries are no coincidence but a sign that the crises of modern capitalism have spread from economic fields to politics.

Luo wrote in the article that the co-existence of both manipulation and rejection of populism has brought democracy in Western nations to a dead end. He noted that the multi-party system - with rotation in power, their fights over benefits and their attacks on one another - has caused continuous political instability.

"From the perspective of the system of government, party competition often leads to political infighting. The separation of powers has transformed into a system of political impediments. 'Veto politics' repeatedly takes center stage, hampering governments' ability to respond to major economic and social problems in a timely manner, or even causing government dysfunction," Luo wrote.

He further stated that the principle of "all men are equal before the law" has become a castle in the air, and that the despotism and rule of men with big capital in Western countries is dominating the democratic systems.

"The chaos in the West strongly contrasts the order in China. The socialist system has revealed great advantages in comparison with capitalism," he wrote.
The more detailed piece is in Chinese at the People's Daily: 西方国家民主权利和公民自由连续退步(人民观察)

There are a lot of criticisms to level at Western governments and Western elites. Their "operating system" is in the midst of a critical failure and they refuse to change course, doubling down on their failed policies. However, the difference between China and the West in regard to the current economic and political situation is much simpler at heart. China is still experiencing rapid credit growth. Thanks to a high savings rate, China could force feed trillions of dollars of credit into its economy. The long-term trend in Western credit growth ended in 2008. Depending on your measure, the Western/developed global financial system has been in deflation since 2011 at the latest, 2007 at the earliest.

Any system looks good when credit growth is high and or rising.

2017-08-06

Housing Bubble Turns Chinese Into Debtors

No worries though, because mainstream economists say debt doesn't matter! It's someone else's asset. Besides, home price appreciation offsets the debt.

SCMP: How China’s billion savers embarked on a household debt binge
The studio flat in downtown Beijing emptied the couple’s 400,000 yuan (US$59,000) life savings and they also incurred a debt of 1.35 million yuan to parents, colleagues and classmates to muster the remainder of the 35 per cent down payment. The rest of the purchase was financed by bank loans, with monthly mortgage repayments of about 20,000 yuan for 30 years.

“Home prices rose so scarily in the past year that we are afraid we could never afford a unit in Beijing,” the 30-year-old said, explaining their decision to take on so much debt.

...The net savings of Chinese households, defined as total outstanding deposits minus total outstanding loans, have stagnated or even begun to fall, showing that Chinese people are saving less and borrowing more.
High debt creates deflationary forces:
Cao and her husband are rich on paper: their flat is now worth more than 5 million yuan, but they still live in a frugal life. They’ve let the flat out 6,000 yuan a month and she lived with her husband at his army quarters. To make sure they can repay their debts and make ends meet, she has minimised discretionary spending on restaurant meals, clothing and travel.

2017-08-04

Pop Culture Turns Dark

Update: I forgot the remake of 1974's Death Wish.

Super Dark Times takes the cake with its title.

Marketwatch: ‘The Sinner’ signals USA Network’s move to the dark side
Sub header: USA now emphasizes dark clouds rather than blue skies

Hollywood Reporter: 'Detroit' Marketing Leans Into Horror

Beijing Existing Housing Market Cools, Tongzhou Down 13pc from April

Average transaction prices at real estate brokers are down 9 percent in Haidian, 11 percent in Xicheng, 13 percent in Tongzhou. These data points always tend to be more volatile than the NBS 70 city survey, but the 70 city survey for July should come in much weaker.
According to the Beijing Municipal Housing Construction Committee website data show that in July this year, the city's second-hand housing in Beijing signed a total of 7158 sets of residential. The figure fell 19.7 percent from June, down 68 percent from last July. Throughout the data is not difficult to find, since the "3.17" after the introduction of the New Deal, this is already Beijing second - hand housing network for four consecutive months down.

Volume decline has changed the market supply and demand and market expectations, the impact is directly reflected in the average transaction price. Chain home research institute data show that since the implementation of the New Deal from April to July in four months, the Beijing administrative region of the chain stores the average price of housing prices have declined in varying degrees. Among them, compared to April, July Tongzhou District second - hand housing transaction price to 12.68% decline in the first place. In addition, Xicheng, Haidian, Daxing, respectively, 11.45%, 9.01%, 8.92% decline in the subsequent.
iFeng: 北京二手房大范围降温:7月通州跌12.68%居首位
Caijing: 最严调控下北京房价降2万 银行说房贷利率还会上调

Never Go Full Socialist

2017-08-03

Housing Market Sentiment Turns Bearish

Home sales fell broadly in July according to initial reports. The top 100 developers saw sales drop 39 percent from June.

iFeng: 7月份房企销售业绩普遍下降

Guangzhou sales rise 10 percent

iFeng: 7月网贷成交量环比上涨超10%

29 first-, second- and third-tier cities see sales fall 26 percent yoy. Sales area fell 9 percent, almost 60 percent of cities declined.

iFeng: 7月中国29城楼市成交同比降26% 一二三线城市均下滑

E-House warns real estate valuation distortions at 70 percent of Japanese 1990 peak

iFeng: 易居报告:一线房产泡沫相当于1990年日本都市圈的70%

House flippers start dumping property, eating 500,000 yuan losses as focus becomes return OF capital

iFeng: 房价真的会跌回一年前?部分炒房者亏50万抛售

2017-08-02

First Mortgage Yields Rising, Home Prices Will Tumble in Q1 2018

iFeng: 逾20城首套房贷利率上浮 放款时间普遍延长(名单)
The 21st century economic report survey shows that the current hot city mortgage is not only the lend time is generally extended, the mortgage interest rate, especially the first set of mortgage interest rates are also significantly floating, many cities not only cancel the mortgage interest rate concessions, but also in the benchmark interest rate of 4.9% has risen.

Behind changes in mortgage rates, the property market regulation and monetary and credit policies together results.

...According to the reporter incomplete statistics, in July the first mortgage interest rates above benchmark phenomenon of the city a total of 20, including four first-tier cities and some second-tier cities, such as Hefei, Xiamen, Nanjing, Hangzhou, Wuhan, Suzhou and so on. Wuhu, Lianyungang, Huizhou, Zhongshan and other third-tier cities also have the first set of mortgage interest rates on the basis of the base to enhance the 5% -10% range.

...jing Normal University, director of the Center for Financial Research Zhong Wei judge, when the M2 increase of less than 10%, usually 2-3 quarters later, that is, around the time of Spring Festival new house prices will have a significant decline.

Shanghai Housing Market "Dormant" In Last Two Week of July

Caijing: 上海楼市新盘陷“休眠”状态 连续两周无楼可售
Strict introduction of regulatory policy, so that the original market has cooled down almost dormant. Shanghai Municipal Housing Construction Commission official website shows that since July 18, Shanghai has two consecutive weeks without a new house to obtain residential pre - sale permit. In the case of shrinking supply, Shanghai new commercial housing inventory has fallen below 6 million square meters. Online real estate data show that as of August 1 at 16 o'clock, Shanghai can sell a total area of ​​585.5 million square meters of residential area, according to June new house transaction area of ​​686,000 square meters to calculate, probably can sell 8 months.

In the price approval, pre-sale permit issued under the policy of control, this year's new housing supply in Shanghai shrunk significantly. In the first half of the year, the number of newly built commercial residential buildings decreased by more than 40% year on year. Even the largest supply of goods in June, compared with the same period last year also decreased by nearly 10%.

Guangzhou Severely Restricts Properties Not Conforming to Govt Price Rules

iFeng: 广州楼市调控加码:不接受政府价格指导一律不办网签
From the specific policy content, the policy is clear if the real estate project does not accept the government price guide, then do not allow the issuance of pre-sale permit or for web signature, this provision also reflects the severity of such market control. In general, the pre-sale permit is not issued by the policy deterrent force is relatively small, and net sign given restrictions, it will make a lot of housing prices in the capital return pressure. So similar to the follow-up policy for the regulation of housing prices is a positive role.

2017-07-31

U.S. Dollar Index Approaches the Event Horizon

I'm looking for a rebound in DXY given the prior cycles, but the most important component is breaking out of its trading range. Either the dollar is about to experience a meaningful breakdown, or a lot of dollar bears, euro longs, yuan longs, etc. are about to be caught wrong footed. Either way, volatility is coming.

MSCI Warns on Share Halts, BGI Limit Up Again

Companies that halt shares for 50 days or more will be removed from the MSCI Emerging Markets Index for at least 12 months.

CNBC: MSCI warns Chinese companies with suspended shares they could get dropped from the emerging markets index

BGI was limit up again on Monday giving it a valuation of $3 billion. As a "castle in the sky" stock it is still very under "valued."

2017-07-27

BGI Genomics Limit Up Nine Consecutive Days

Still has a ways to go before it catches Baofeng's streak of 28 days. Baofeng would resume it's limit-up run, ending at 35 of 36 days before being halted. Shares are down more than 80 percent from their 2015 peak.

华大基因 (300676)

2017-07-26

Support for Democracy Collapsing

Immigrants from undemocratic countries/cultures have lower support for democratic systems and the ancient rights/traditions of native cultures.

Natives in the West, particularly Anglo-Saxons, prefer liberty to democracy. Democracy was favored because it was seen as the best system for protecting rights. When the population is homogeneous, there are two political parties that both agree on the fundamental rights, traditions and culture of a nation. As diversity increases, there is no consensus. The Anglo-Saxon nations have the highest level of individualism, but as democracy replaces liberty, effectively the only rights you have are what you win in democratic debate. Hence the rapid increase in identity politics as the Venn diagram of "people who support liberty" increasingly overlaps with race and ethnicity.

There are two trends at play. One is non-Western (and non-Anglo-Saxon people in the Anglo countries) who come from collectivist, undemocratic and/or authoritarian cultures. They may openly oppose the native system (Muslims who want Sharia being the latest example) or they will favor policies that benefit the group, even if it erodes the native system. Current progressive politics is openly opposed to traditional Western culture and politics, labeling it things such as "white privilege." Essentially, they are correct: when a nation is overwhelmingly one race or ethnic group, it's system by definition is designed for itself. As diversity increases, so does the number of people who don't "fit" into the system.

The other trend is natives who value liberty/tradition above democracy. People who don't think of their system/culture/tradition as an ethnic/racial system, but as "the way things are." Democracy is seen as illegitimate if it revokes rights or reverses tradition. If this group is losing support for democracy, we should see support for liberty hold up. And that's what the data shows:
Taking the pooled data from Europe and the United States, we find that attitudes toward liberal institutions do not differ radically among different generations. But a liberal conception of democracy is somewhat less entrenched among millenials (born since the 1980s) than their baby-boomer parents (born during the first two decades after the Second World War).
Millennials are a very diverse generation. The decline in liberalism is likely a result of increasingly non-Western people in that cohort, rather than a decline in support among natives.

The American Revolution and Civil War (and earlier civil wars in England) were fought among Anglo-Saxons. The current demographics in the Anglo-Saxon nations argues for a far more combustible situation. Both sides in a conflict may be opposed to democracy.

In a society made up of a growing cohort that opposes liberty and doesn't oppose authoritarian rule (willingly submits to it or isn't motivated enough to oppose it), and another growing cohort that wants to preserve liberty even if it means dumping democracy, one stable point is authoritarian government that protects liberty. Pinochet, Kemalists, the King of England.

Based on the timeline, it appears a nation needs to have the dominant identity group above 80 percent of the population. The nation in worst shape is the United States, headed for below 50 percent for the largest ethnic/racial group.
Even if subsequent research should show that democratic deconsolidation really is underway, this would not mean that any particular democracy would soon collapse. Nor is it obvious that the democracy that had deconsolidated the most would be the first to fail. Regime change is always a matter of accident as well as intention, of historical circumstances as well as structural preconditions. But if democratic deconsolidation were Roberto Stefan Foa and Yascha Mounk 17 proven to be in progress, it would mean that what was once unthinkable should no longer be considered outside the realm of possibility. As democracies deconsolidate, the prospect of democratic breakdown becomes increasingly likely—even in parts of the world that have long been spared such instability. If political scientists are to avoid being blindsided by the demise of established democracies in the coming decades, as they were by the fall of communism a few decades ago, they need to find out whether democratic deconsolidation is happening; to explain the possible causes of this development; to delineate its likely consequences (present and future); and to ponder the potential remedies.
The quickest and easiest way for a democracy to "deconsolidate" is via political breakup: secession. The United States is well suited for a breakup because much of the political conflict overlaps with geography: the left is concentrated in a few state and urban areas. And as the nation drifts into authoritarianism, support for secession grows on both sides of the political spectrum.

LA Times: Backers of another shot at a 'Calexit' ballot measure can now gather signatures
On Tuesday afternoon, Atty. Gen. Xavier Becerra's office released an official title and summary for the initiative, now called the "California Autonomy From Federal Government" initiative.

The proposal, scaled back from an initially more aggressive version, would direct California's governor to negotiate more autonomy from the federal government, including potentially putting forward a ballot measure to declare independence.

The initiative wouldn't necessarily result in California exiting the country, but could allow the state to be a “fully functioning sovereign and autonomous nation” within the U.S.

Backers of the plan, known informally as "Calexit" have 180 days to collect nearly 600,000 valid signatures for the initiative to go on the 2018 ballot.
A long-term decline in social mood will push these trends to the extreme. The odds of a major political reformation in North America and Europe is growing, but even if there's no major akin to the collapse of the Soviet Union, there will be increasing political volatility. The Western nations most likely to avoid chaotic transitions and political volatility are those who oppose migration, have very homogeneous populations and are already being accused of authoritarianism: the nations of Eastern Europe.

Rental Policy Outcome: Land Prices Collapse 90pc in Shanghai

No, the market isn't collapsing (yet?), but reality is setting in. Shanghai sold land rights valued at less than 6,000 yuan per sqm this month. The buyers are state-owned enterprises that will rent and lease the property rather than sell it. Whether this has any long-term effects on the market, it clearly shows how wildly overvalued Chinese real estate is compared to the underlying cash flows. Different parcels of land aren't directly comparable, but Shanghai was selling land with values above 50,000 yuan per sqm in 2016. The "rental only" value of the land substantially lower, possibly as much as 90 percent if the plots are comparable.

This must have a psychological effect on the market even if the government tightens controls. Talk of overvalued property is no longer idle speculation, or shown with non-market examples such as various P/E measures such as home price to average annual income. This is a concrete example of how much a developer is willing to pay if renting is the only option.

Shanghai Daily: Winning plots meant for rental homes
The two blocks of the transaction, one located in Pudong New Area Zhangjiang South, the land area of ​​about 6.5 hectares, can be built construction area of ​​about 130,000 square meters, from Shanghai Zhangjiang (Group) Co., Ltd. race, the transaction price of 724 million Yuan, the transaction floor price of 5569 yuan / square meter; a Jiading District Jiading Metro, the land area of ​​about 2.85 hectares, can be built construction area of ​​7.13 million square meters, from Shanghai Jiading New Town Development Co., Ltd., the transaction price of 4.24 Billion, the transaction floor price of 5950 yuan / square meter. The two plots of the competition, are state-owned enterprises.
An article in iFeng breaks down the numbers, finding the total cost for the developers will be about 12,000 yuan per sqm, at that price they will generate 4.5 percent returns at current rental/lease rates.
From the results of the transaction, it can be described, both in reason, but also unexpected!

Reasonable understanding of the level, because after the two pieces of land has been announced (July 4) to take the only rent not to sell the model, so after the transaction, the two land is mainly used for leasing purposes, which is beyond reproach The

Previously, so that everyone is full of doubt, what will Shanghai how to operate "only rent not sell" mode. If the market in full accordance with the operation, then the real estate developers is difficult only through rental income, cover costs, profit, cash flow level will be affected.

However, today's auction results tell us that we have to worry about (at least storm brother to worry about).

According to reports on the news, we can easily find that the last two auctions of land prices are: Zhangjiang plots, the transaction floor price of 5569 yuan / square meter; Jiading plots: the transaction floor unit price For 5950 yuan / square meter

Maybe a friend would say it was wrong? Is it less a zero? According to the data provided by the news (storm brother count several times), the final floor price is indeed less than 6000.

6,000 yuan floor price, the final developer of the cost of how much?

From the price formula we can roughly calculate it.

According to the price formula: house price = land cost (30%) + development costs (10%) + Jian'an cost (20%) + tax (15%) + profit (25%).

The formula is the real estate developers when selling the formula, and now only rent does not sell mode, has not applicable, especially the profit level was cleared, the tax may also have concessions.

In other words, the new rent only mode, the cost of housing should be: land cost + development costs + Jian'an cost + tax (specifically there will be reduced, tentatively counted as 10%).

The floor price 6000 into the new housing cost formula, then the cost will be about 12,000.

How much is the rental rate?

At present, in Jiading plots around, renting a set of 90 square meters about 4100.

So the calculation, the developers through the rent to recover the cost only need: 21 years! Annual rate of return is about 4.5%.

This rate of return has been able to make developers live very comfortably.
iFeng: 楼市传来大消息!楼面价破6千 炒房客彻底傻眼

New Normal: Chinese Cities Won't Loosen Real Estate Restrictions

The Politburo met on July 24 and discussed stabilizing real estate. Shanghai is the first city to comment policy in its wake.

On July 24, the Politburo meeting proposed "to stabilize the real estate market, adhere to policy continuity and stability, and speed up the establishment of long-term mechanism." The market a number of people in this industry interpreted as, in the real estate long-term mechanism is not introduced before the real estate policy will not loose. And after two days, the first city of Shanghai position, we must strengthen the real estate market regulation unwavering, do not relax, we can see the property market regulation in the second half or the whole will not relax.

Xinhua News Agency, Shanghai, July 26 (Xinhua Guo Jingdan) Shanghai Municipal Committee of the Standing Committee of the thirty-ninth meeting (expansion), said Shanghai strict control of high home prices and high land prices is not a stop-gap measure to reduce economic growth, and lowering finance revenues from the real estate industry is not an expedient measure, we must be unwavering in strengthening real estate market regulation unwavering, will not relax.


...Yi Ju Research Director Yan Yue Jin Comments: policy from the tight is the probability, and irregular behavior zero tolerance

From the Shanghai point of view, fully explain the current property market to control the overall situation, which is the necessary means of real estate stability, for the stability of the market expectations and consolidate the past policy is a positive role. Of course, in fact, Shanghai has also been out of the policy, for similar parking spaces and other acts of regulation and control, which also shows that some market participants still do not follow the original policy. So a similar statement also shows that the policy is tight from the probability, and the violation is zero tolerance.

From the recent policy trends, mainly reflected in the stability of the guide, for the stability of housing prices is a positive effect. And the concept of falling house prices, in fact, relatively inadequate, because the market transactions in the second quarter has been weak. The current price decline for an important force is to see whether the housing prices to get to get, if you take the urgency, it will continue to cut prices.

Huatai Securities chief macro researcher Li Chao Comments: the supply side does not effectively play a role before the demand side, including the purchase limit loans, improve the down payment than these measures or the need for a continuous process

First of all, real estate long-term mechanism mechanisms include: the introduction of real estate tax, to provide rental housing and other important initiatives, the most effective solution to the real estate problem or housing construction and land and resources before the release of the document - real estate inventory and land supply linked, which can The supply side can effectively solve the real estate problem, before these policies are not effective play, the demand side includes the purchase limit loan, improve the down payment than these measures may also need a continuous process.
iFeng: 上海表态:加强房地产市场调控不动摇、不放松(解读)

2017-07-24

Immigration Restriction is Very Popular

Sixty percent of Americans want immigration cut to zero. And social mood hasn't even bottomed.

LSE: Is tribalism racist? Antiracism norms and immigration
Other work suggests norms not only lead people to frown on voting for the far right, but even prompt them to hide their views on immigration. Using a ‘list experiment’ that measures average sentiment but permits individuals to conceal their answers, Alexander Janus discovered that 60% of White Americans supported cutting immigration to zero when their identities were concealed, compared to 39% when their identities were known to the researcher. Self-censorship was especially pronounced among the university-educated.

Similarly, a recent experiment by Leonardo Bursztyn and colleagues found that 54% of Americans were prepared to donate to an anti-immigration organisation associated with maintaining a white majority if their anonymity was assured. This dropped to 34% among those told that researchers might contact them in a follow-up. Soon after Trump’s victory, however, the difference between the two conditions fell away, suggesting Trump’s win had altered social norms, making it more respectable to express ethnonationalist anti-immigration attitudes.

Free Homes, Money: Second-Tier Cities Fighting for Talent

iFeng: 二线城市发起人才争夺战 给钱给房给户口还不够
Recently, the provincial capital of Henan Province, Zhengzhou, "on the further deepening of the implementation of the reform of the household registration system," the proposed migrant workers in the city to participate in urban social insurance for two years, I and immediate family members can be settled in Zhengzhou City Center, College graduates, skilled workers, graduates of vocational colleges, returned overseas students and migrant workers into the town of rural demobilized soldiers settled restrictions.

In addition to Zhengzhou, after that, including Chengdu, Wuhan, Xi'an, Changsha, including the second-tier core cities, including the introduction of a generous talent policy, these second-tier cities like the agreement is like, focused on the "talent battle."

...Wuhan, "settled in the New Deal" is in the implementation of May 22, to stay in Wuhan entrepreneurial employment of college students, graduated within 3 years without the need to buy a house can apply for settled status, masters and PhD graduates can be directly settled; a month later put forward "support million College students stay in China employment. "

Changsha will be released on June 29, "Talent New Deal 22", the next five years will invest more than 10 billion yuan of funds to attract reserves of 1 million talent; to settle down and work doctorate, master, undergraduate, two years each year, Ranging from rental and living subsidies.

Chengdu on July 2 proposed "Rong bleaching plan", the implementation of "first settled after employment", the implementation of full-time undergraduate and above graduates with graduation certificate settled system; on all types of urgent need to pay talent "Rongcheng talent green card" and so on.

Within a few months, there are including Jinan, Nanjing, Hangzhou, Zhengzhou, Qingdao, Xiamen, Tianjin, Chongqing and other second-tier cities, also joined the "talent battle."

2017-07-23

Dollar Analog Goes to the Wall

The dollar analog is approaching uncharted territory. The DXY has seldom fallen 5-months in a row outside of a bear market. The line in the sand is the support level for the 28-month trading range: 92.62 is the closing low and 91.88 the intraday low.

A breakdown would have major implications for the yuan, since it would greatly alleviate, if not eliminate, depreciation pressure.

2017-07-21

The Decline of the University

From the Socionomics Institute:


Overgrown Ivory Towers


There’s a sense of growing unease in academia: University infrastructure is taking a hit.

“U.S. universities have been putting precious money toward financial aid, academic programs and gleaming buildings that might attract new students—neglecting aging electrical systems and leaky roofs. As a result, schools are staring down a deferred maintenance backlog that has topped $40 billion.” (WSJ)

To add insult to injury, many schools are beginning to miss annual enrollment goals, which have declined each school year since 2011. Meanwhile the annual earnings differential between a high-school graduate vs. a college graduate has been shrinking since 2000. In other words, the cost of college attendance ($1.3 trillion in collective student loan debt) is rising as the financial benefits of a degree are falling.

In his prescient study — published long before the recent spate of coverage regarding higher education’s potential demise — socionomist Alan Hall forecast a massive shift in society’s positive attitude toward higher education and the eventual collapse of the credit-fueled, government-supported education bubble. Hall’s analysis goes beyond linear economics to reveal what’s really behind the problems in universities today.

Learn more

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Poland Moves to End Communist Judicial System

Good luck finding an mainstream article that explains why Poland is reforming its judiciary. Almost every article is a one-sided condemnation of the Polish ruling party, labeling the move as an authoritarian power grab. What is the media trying to hide?

USAToday: Poland steps away from democracy, EU in judiciary reforms
However, many Poles support the current powers and actually say these reforms are a divorce from old communist judicial systems.

Tomasz Sakiewicz, the editor-in-chief of right-wing newspaper Gazeta Polska and a supporter of drastic judicial reforms, says these changes aren’t about controlling the judiciary.

“We want to change it, to reform because it comes from communist times,” he says. “It’s completely broken by corruption — a mafia system.”

Sakiewicz says most Poles think the courts need reform. An opinion poll in May found 63 percent of Polish citizens think the judiciary needs to make some serious changes.
The Poles are in the process of decommunization, following in Hungary's path.

Communism (progressivism) is the ruling ideology in the West though. Even the capitalists are against them.

FT: The EU has a moral obligation to act against Poland

WaPo is aghast: This is what the gradual erosion of rule of law looks like in Poland
During the 2015 campaign for parliamentary seats, PiS argued that failing to purge the judiciary of former communists and collaborators is a caricature of justice — and that the court system is precisely where communism remains entrenched.

PiS says it plans to “end Poland’s post-communist era” by transforming the court system. Poland’s court system is a complex four-level hierarchy with regional, district, appellate and the highest court. The Constitutional Tribunal stands separate from this hierarchy, evaluating the government’s legislation.
Poland's government is implementing a policy favored by the majority of the public. It is reforming an undemocratic institution filled with communist ideologues, replacing it with a more democratic system.

There is no real moral argument to be made. If Poland was progressive and reforming a judiciary stuffed with orthodox Catholics, the world media would be cheering the democratic reform, Poland stepping out of its past and into the present. Since it is communists on the losing end, and Catholics on the winning side, it is painted as authoritarianism.

All of this is taking place within the context of deteriorating social mood. The EU's response is to push Poland (and likely all of Eastern Europe) out of the union.

Guardian: Poland may be stripped of EU voting rights over judicial independence
The EU is on the brink of taking the nuclear option of stripping Poland of its voting rights in Brussels in response to plans by its rightwing government to “abolish” the independence of the country’s judiciary.

Frans Timmermans, the first vice-president of the European commission, accused Warsaw of seeking to put judges under full political control as he warned that the EU was “very close” to triggering article 7, a never-before-used sanction in the treaties that allows a member state’s voting rights in the council of ministers to be suspended.

Poland’s ruling rightwing Law and Justice party (PiS) has been in almost constant conflict with the European commission since it was elected. In recent weeks the Polish government has proposed a series of reforms that would give ministers power over the appointment of judges and members of the country’s supreme court.
The EU is still heading for a breakup.

2017-07-20

One in Three Bavarians Want Independence

The Local.de: One in three Bavarians want independence from Germany, poll shows
While many stereotypes that foreigners hold of Germany - such as Lederhosen and Oktoberfest - actually come exclusively from Bavaria - local residents will note that the southern, alpine state often feels a world away from the rest of the country.

The state with its own dialect and cultural traditions even has its own independence movement party - the Bavarian Party - albeit less influential than separatist groups in places like Spain or Scotland.

But a new survey looks to bolster the Bavarian Party’s hopes for a true Free State of Bavaria (the state’s official title). A YouGov poll with Bild tabloid, published online on Sunday, showed that one-third of Bavarian respondents agreed that “my state should be independent from Germany”.

Turkey Still Stirring Up Trouble

ZH: Germany Warns Its Citizens: They Risk Arrest If Traveling To Turkey
Foreign Minister Sigmar Gabriel said Germany had revised its travel advice in the wake of the recent arrests of several human rights activists, including German national Peter Steudtner.

Steudtner “was no Turkey expert – he never wrote about Turkey, he had no contacts in the political establishment … and never appeared as a critic,” Gabriel told reporters.

He added that this meant that any German national travelling to Turkey could suffer the same fate.
ZH: Greek President Blasts Erdogan After Turkish Harassment: "Provocations Are Sign Of Weakness, Come & Get It!"
While Pavlopoulos’ helicopter was heading to islet Panagia, pilots received warning calls and threats from the Turkish armed forces. The Turks claimed the Greeks that they were flying in Turkish Flight Information Region. The Greek delegation ignored the Turkish warnings and the President landed safe in Panagia.

A day earlier, the Turkish armed forces called the Greek helicopters nearing the island of Rhodes to leave the area as “they were flying in a demilitarized zone” where such flights are forbidden. The Greek pilots did not respond to the callings from the Turkish side.

A little later, the Turkish side called on the pilots of Shinook to leave the area as they were flying inside “the Turkish FIR.” On board were President Pavlopoulos, Defense Minister Panos Kammenos as well as the military leadership of the country.

In one incident, the military helicopters transporting Pavlopoulos suffered radio interference from Turkey.

Wednesday morning, a pair of Turkish F4 fighter jets entered the Athens Flight Information Region at 10 a.m. between Lesvos and Lemnos and flew over the Fournoi islets at 8,900 feet.

2017-07-19

China Ramps Up Central Planning

Bloomberg: Xi's Risk-Off Push Ripples Through China as Transition Nears
On Tuesday, Bloomberg reported that the banking regulator had told lenders to lower interest rates on wealth-management products, a popular vehicle for domestic savers, after yields in the $4 trillion industry jumped in past months. Officials also extended their campaign against risky overseas acquisitions, with conglomerate Dalian Wanda Group Co. coming under scrutiny after a deals spree.

...Some Chinese lenders received an order from the China Banking Regulatory Commission earlier this month to lower their rates on WMPs, according to people familiar with the matter. The requirement applies to on-balance sheet WMPs, which account for only about a fifth of the total market, according to one of the people, who asked not to be identified as the matter isn’t public.

...An editorial in the Communist Party’s People Daily newspaper on Monday pointed to the seriousness of the campaign, warning of potential "gray rhinos" -- a variation on the black swan events popularized during the global financial crisis, with the difference that the danger from a charging rhino is more immediate and the animals are less rare.

2017-07-17

NBS Spins June Home Price Rise: At Least the YoY Number Declined

China's NBS had to spin the 0.67 percent national increase in home prices in June by showing the year-on-year increase for May 2017 was higher than June 2017. June's one-month rise was only slightly behind May's 0.74 percent increase.

Buying restrictions in the top-tier are working: the total price increase for the four an Xiamen was 0.06 percent of the national total. The seven second-tier "hot" cities from 2016 only accounted for 3.6 percent of the total.

New home prices in Harbin rose 1.6 percent, Chongqing 1.5 percent, Xiangyang 1.9 percent, Beihai 2.1 percent.

Existing home prices climbed 0.59 percent nationally. The top tier cities saw net prices declines, while the hot second-tier cities only accounted for 6 percent of the national increase. Beijing saw the largest decline, 1.2 percent.


NBS: 2017年6月份70个大中城市住宅销售价格变动情况

American Mood Sours

BI: Americans are less happy than they were 10 years ago — and money alone can't fix it
Americans were first asked that question in 2006, and in 2007 the US had the third-highest happiness results of 23 OECD countries. Today, that response is at its lowest point yet, ranking 19th of 34 OECD countries.

"America's crisis is, in short, a social crisis, not an economic crisis,"economist and Columbia University professor Jeffrey D. Sach wrote in a chapter of the report called "Restoring American Happiness."

Sachs mentions that while per capita GDP — an indicator used to gauge the economic health of a country — is rising, happiness is falling.

"The United States can and should raise happiness by addressing America's multi-faceted social crisis—rising inequality, corruption, isolation, and distrust—rather than focusing exclusively or even mainly on economic growth, especially since the concrete proposals along these lines would exacerbate rather than ameliorate the deepening social crisis," he wrote.
The scale of crisis is far greater than any time at least since the 1930s. Correcting these problems requires a decline in social mood because people don't reform until mood turns negative. Rising mood will increase the very problems that need to be fixed because diversity and immigration increase isolation, distrust, corruption and inequality. Social mood is in a bear market and the low lies in the future.

Chinext Falls 5.1pc on Regulatory Fears

China is deleveraging and trying to tighten. The Fed will start shrinking its balance sheet by December, maybe September. The ECB might start tapering. Japan is the ever-present fireworks factory in search of a match.

2017-07-16

Fixed Asset Investment Rises 8.8pc in June

Fixed asset investment growth was 8.8 percent in June, enough to keep the YTD growth rate steady at 8.6 percent. Private fixed asset investment increased 7.2 percent YTD and 8.3 percent in June.


NBS: 2017年1-6月份全国固定资产投资(不含农户)增长8.6%
NBS: 2017年1-6月份民间固定资产投资增长7.2%

China Real Estate Investment Below Trend in June

Real estate investment ticked up from 7.4 percent to 7.9 percent growth in June, but this still slowed the YTD total growth rate to 8.5 percent.

Home sales (in yuan and area) and land sales both ticked up.


NBS: 2017年1-6月份全国房地产开发投资和销售情况

Chinext Plunges to New Bear Market Low

Price as of Monday morning.
CBBC: China reports 6.9% second-quarter GDP growth on year, topping expectations

2017-07-14

Chinese Cities to Link Residential Land Supply With Population

iFeng: 楼市调控思路重大变化:“人地挂钩”加快一二线供地
Centaline real estate chief market analyst Zhang Dawei said that the past few years on the big cities are proposed to strictly control the border, reduce land supply, but now is to adapt to changes in population movements, increase the supply of land in large cities, "This idea is a major change in property market regulation."
What's the big idea? Linking land supply to population changes.
In the past for a long time, China's implementation of "control the size of large cities, and actively develop medium-sized cities and small cities," the small and medium-sized urbanization strategy, land supply to the three or four lines of cities tilt, and the population to the metropolitan area gathered trend divergence. As a result of this supply and demand mismatch, part of a second-tier urban land supply is insufficient, housing prices bubble serious, and three or four lines of urban land supply serious surplus, land waste, efficiency is very serious.

Therefore, the implementation of "people to hook" in order to communicate with the population of the situation and the actual needs of the match.

Held in December last year, the central economic work conference clearly to implement the people linked to the policy, according to the distribution of population distribution of land use indicators. To implement the responsibility of the local government, the real estate prices rose the pressure of the city to a reasonable increase in land supply, increase the proportion of residential land, make up the city idle and inefficient use.

Chinext Slides as Credit Growth Slows

And herein lies the rub: as we said one month ago, "fundamentally a ponzi scheme, this works without a glitch during rising markets but falling prices especially among small and mid-cap companies, have eroded the value of that collateral, raising the specter of forced liquidation - where lenders, often Chinese brokerages, make borrowers sell the pledged shares. Selling the stock adds more pressures on share prices, triggering a downward spiral."

But wait, there's more: while most Chinese companies pledged "only" their own shares to get loans, a handful of companies also used shares of the acquired companies as pledged collateral.

This is precisely what HNA Group did, which now faces not only growing regulatory scrutiny from Beijing that threatens to spook bond investors and raise HNA’s financing costs, but also send its shares plunging as holders are forced to liquidate even as most of the shares pledged to fund its buying spree are already declining, accelerating its demise. And, in an scenario that can only be dubbed as a "reverse rollup from hell" - on steroids and margin - one that would make even Valeant blush and snicker, if the value of its collateral, i.e. stock price, falls enough, HNA will soon be forced to sell its holdings to repay debt, thereby resulting in the disintegration of the company.
ZH: "A Reverse Rollup From Hell": China's "Boldest Dealmaker" Faces Margin Call Disintegration

2017-07-12

Mortgages Down, Short-Term Corporate and Household Lending Up in June

Corporate borrowing (SOEs?) offset the drop in household borrowing in June. Mortgages fell to 31 percent of total lending, down from 41 percent in June 2016. July will be interesting. Last year, mortgage lending was more than 100 percent of total bank lending in July.
ZH: China Creates A Quarter Trillion In New Loans But Analysts Are Worried: "It's Not Enough"
Looking at the breakdown, corporate loans rebounded to CNY695bn from CNY609bn a year ago, with long-term corporate loans coming in at CNY578bn (year ago: CNY411bn) and short-term loans rising to CNY274bn (year ago: CNY198bn). Household loans remained strong in June, registering CNY738bn, compared with CNY712bn a year ago, of which short-term household loans rose to CNY261bn (year ago: CNY138bn). We note long-term household loans (mostly mortgage loans) slowed to CNY483bn, from CNY564bn a year ago. We continue to expect long-term household loans to soften given the PBoC's further guidance to commercial banks to raise mortgage rates and lower loan-to-value ratios recently.

M2 Slows Slightly in June, TSF Jumps

Headlines focused on the 12-month M2 growth rate of 9.4 percent, made possible by the June increase of 1.87 percent being below the June 2016 increase of 1.97 percent. The 3-month annualized M2 growth of 8.2 percent looks much slower, well below the year-ago 12.7 percent.
The increase in M2 wasn't offset by a rise in reserves. China's FX reserves account for 12.7 percent of M2.
Total social financing hit a new rolling 12-month high of 19.1 trillion yuan.

Reuters: China's June new yuan loans rise to 1.54 trln yuan, above f'cast
Chinese banks extended 1.54 trillion yuan ($226.9 billion) in net new yuan loans in June, well above analysts' expectations.

Analysts polled by Reuters had predicted new yuan loans of 1.2 trillion yuan, up from 1.11 trillion in May.
Reuters: China June total social financing rises to 1.78 trln yuan
iFeng: 中国6月末M2余额同比增9.4% 再创历史新低

2017-07-11

Chinese Cities Boosting Land Supply: To Stabilize Home Prices or Raise Money?

Last time housing turned down, land sales collapsed. Top-tier cities want to boost land sales this time around, under the guise of stabilizing prices. But are they more interested in boosting revenues in case land sales collapse again? Also consider cities such as Beijing are limiting population growth and even relocating population into the surrounding province.

iFeng: 中国大城市开启大规模供地计划 有利于平抑房价
Shanghai, Beijing, Shenzhen, Fuzhou and other large cities in China recently developed a large-scale land supply plan. In the real estate regulation from the "subtraction" to "add" in the process, the Chinese city will open a new round of large-scale supply to the times?

Shanghai plans to supply 5500 hectares of residential land during the period of "13th Five-Year Plan" (2016 - 2020), which will provide about 1.7 million units of housing, according to the "Shanghai Housing Development" "Twelve Five" period increased by about 60%.

Beijing also significantly raised the supply plan for residential land in the next few years. Beijing officials last month revealed that Beijing will build 1.5 million new homes in the next five years. This is in line with the five-year land supply plan released earlier in Beijing. In this plan, Beijing plans to supply residential land in the next five years, 6,000 hectares.

Shenzhen City, Shenzhen City, the recent housing construction plan in 2017 annual implementation plan, Shenzhen this year will arrange the supply of commercial housing 168 hectares of land, plans to build new construction of 80,000 sets of commercial housing, construction area of ​​7.2 million square meters. Last year, Shenzhen new commodity housing sales of about 40,000 units.

Fuzhou this year to determine the residential land supply plan compared to last year more than doubled, two years after the plan also continued to increase the trend; Guangzhou City 2017 construction land supply plan shows that this year, Guangzhou new residential land of about 5.7 square kilometers, year on year An increase of 19.1%.
Furthermore, some of the cities limited land sales to support home prices in the past:
Large cities, especially Beijing, Shanghai and other large cities to increase the supply of land is undoubtedly conducive to stabilize housing prices. But most of these cities are scarce land resources, lack of capacity for the city. For example, in recent years, Beijing has gradually reduced the supply of land, for many years failed to complete the annual land for the plan. In 2016, the actual supply of residential land in Beijing fell to 469 hectares, less than 40% of the planned completion.
Another possibility: these cities are planning more redevelopment, pushing residents out into the hinterlands to make way for commercial development.