2018-10-20

Chinese Home Prices Rise 1 pc in September

While there were some cases of real estate rage in late September and early October as developers took advantage of holidays, the topping process is still producing rising prices. New home prices rose 1 percent nationally in September. Only three cities saw falling prices: Shanghai, Shenzhen and Jinhua. Shenzhen saw the largest drop of 0.2 percent. On the other side. Xi'an led with a price increase of 6.2 percent.

Existing home prices showed a larger decline with only 59 cities rising and 7 declining. The average increase was 0.9 percent.

2018-10-19

Federal Reserve Tiny Balance Sheet Reduction Last Week

The Fed's balance sheet declined $1.4 billion last week, none of it treasuries. The Fed hasn't reduced anything in October yet. It still has $50 billion total and $30 billion in treasuries to go. It's already behind the curve, needing to reduce $39 billion in treasuries to catch-up. It will fall behind again this month because only $23 billion in treasuries mature.

Liu He Wants to Help SMEs Too

Liu He joins Li Keqiang in his support for SMEs.

21st Century: 刘鹤:采取精准有效措施 大力支持中小微企业发展
According to the Chinese government network, the second meeting of the State Council Leading Group for Promoting the Development of Small and Medium Enterprises was held in Beijing on October 17. Liu He, member of the Political Bureau of the CPC Central Committee, Vice Premier of the State Council, and leader of the State Council's Leading Group for Promoting SME Development, presided over the meeting and delivered a speech. Previously, the leadership team made adjustments in June this year and held its first meeting on August 20.

"In less than two months, the leading group held another meeting, which not only has important economic significance, but also has important political and social significance." Liu Junhai, director of the Institute of Commercial Law of Renmin University of China, said.

"On the one hand, the conference promotes the high-quality development of small and medium-sized enterprises' prescriptions; on the other hand, under the turmoil of capital market and the pressure of international trade, the conference released policies to optimize the business environment for SMEs and the private economy. Signal." Liu Junhai told the 21st Century Business Herald reporter.

The meeting stressed that it is necessary to adhere to the basic economic system and give full play to the important role of small, medium and micro enterprises and private economy in China's economic and social development. We must attach great importance to the outstanding difficulties faced by small and medium-sized enterprises, and adopt precise and effective measures to support the development of small and medium-sized enterprises.
Social security and financing costs are top of the list.
"At present, the more pressing and prominent problem is how to deal with the unified collection of social security fees. The State Council executive meeting stressed that before the reform of social security collection agencies is in place, all localities must maintain the existing collection policy unchanged, which requires a study on the appropriate reduction of social security rates. To ensure that the overall burden is not increased," Wen Bin, chief researcher of China Minsheng Bank, told the 21st Century Business Herald.

“At the meeting, entrepreneurs’ representatives reported some common problems in the development of SMEs. I personally think that it is more difficult to raise financing difficulties.” Yang Lin said.

The meeting stressed that it is necessary to further deepen the research and study of policies and measures to support the development of small and medium-sized enterprises in reducing the burden of taxes and fees, solving financing problems, improving environmental protection, improving scientific and technological innovation capabilities, and strengthening international cooperation, and promoting the high-quality development of small and medium-sized enterprises.
Zhang Wenhong introduced that at the end of September 2018, the balance of small-scale micro-loans (including small and micro-enterprise loans and individual industrial and commercial households and small and micro-enterprise main operating loans) with a single-person credit of less than 5 million yuan was 7.73 trillion yuan, and the balance increased year-on-year. 18.1%, the growth rate is 8.3 percentage points higher than the end of the previous year. In September 2018, the average loan interest rate of newly issued small and micro enterprises was less than 6.25%, which was 0.17 percentage points lower than the first half.
Maybe one day there will be a policy to help SMEs. Maybe.

2018-10-18

September Investment Data on Cruise Control

A-Shares Bear Casualty: First Delisting for Trading Below 1 Yuan Imminent

If a stock trades below par value for 20 consecutive days, it will be delisted from the Shenzhen Stock Exchange. Zhonghong (000979) has traded below 1 yuan for 19 days cannot climb back above 1 yuan per share because of the daily limit of 10 percent.
21st Century: A股首例:中弘股份“脱仙”无望退市几成定局
If there is no accident, Zhonghong shares (000979.SZ) will be a big probability in the near future to become the first A-share listed company that has been delisted because its share price continues to be lower than 1 yuan/share (ie “penny stock”). the company.

On October 17th, Zhonghong shares, which was once hoped to be "protected by the shell", were suddenly seen to collapse at the end of the day and closed at 0.82 yuan per share. According to statistics, this is the 19th consecutive trading day of Zhonghong’s share price lasting below 1 yuan/share.

At the same time, this also means that even if on October 18, Zhonghong shares closed limit up, its stock price would still be only 0.9 yuan/share, which is still a “penny stock”. According to the relevant regulations of the Shenzhen Stock Exchange, Zhonghong shares may be terminated.

...According to the relevant regulations of the Shenzhen Stock Exchange, the closing price of the listed company's stock for 20 consecutive trading days (excluding the trading day in which the company's stock is suspended throughout the day) is lower than the stock's face value, and the Shenzhen Stock Exchange terminates the company's stock listing and trading. In August and September, Zhonghong’s share price also lasted below the face value of 1 yuan, but the closing price of the 16th trading day briefly rebounded to 1 yuan/share, thus temporarily defusing the risk of delisting.

2018-10-17

China TSF Adjustment: Local Govt Debt Added

In the prior post on the latest credit and money supply data, I noted there was a big jump in total outstanding TSF, one likely accounted for by adjustments.

The PBoC added local government debt into the figures. The revision comes a month after a similarly large revision.

ZeroHedge: China Changes Definition Of Aggregate Financing To Disguise Sharp Credit Slowdown
However, this being China, there was as usual a big footnote with this latest credit data: starting this month, the PBoC further adjusted its definition of aggregate financing by including net financing through local government special bond issuance - just two months after it added asset-backed securities (ABS) and non-performing loan write-offs into this measure - and the same LGFV source of debt which yesterday S&P said could contain as much as $5.8 trillion in off balance sheet debt.
I haven't seen revised numbers yet, so here's the chart with only the September number revised to show the magnitude of the change.

M2 Growth Faster Than Expected in Sept

Reuters: China Sept new loans rise to 1.38 trln yuan, above forecasts
Chinese banks extended 1.38 trillion yuan ($199.25 billion) in net new yuan loans in September, more than analysts had expected and up from the previous month.

Analysts polled by Reuters had predicted new yuan loans of 1.35 trillion yuan, up from 1.28 trillion yuan in August.

Broad M2 money supply grew 8.3 percent in September from a year earlier, central bank data showed on Wednesday. Analysts had expected M2 to rise 8.3 percent, compared with 8.2 percent for August.
CNBC: China total social financing rises to 2.21 trln yuan in September
China's total social financing (TSF), a broad measure of credit and liquidity in the economy, rose to 2.21 trillion yuan ($319.08 billion) in September from 1.52 trillion yuan in August, data from the central bank showed on Wednesday.
Looks like another statistical adjustment was made since the PBoC claims TSF stock rose 106 percent yoy, but the reported figure of 197.3 trillion is more than 13 percent higher than year-ago figures.

2018-10-16

Chinese Debt Risk Rising

China has 179 trillion in M2 money supply ($26 trillion). There are $3 trillion in currency reserves, about 11.5 percent of M2.

M2 is a conservative measure of money supply because it doesn't include off-balance sheet items that might eventually end up in money supply should the central bank monetize it.

Bloomberg: China May Have $5.8 Trillion in Hidden Debt With ‘Titanic’ Risks
“The potential amount of debt is an iceberg with titanic credit risks,” S&P credit analysts led by Gloria Lu wrote in a report Tuesday. Much of the build-up relates to local government financing vehicles, which don’t necessarily have the full financial backing of local governments themselves.

...Even with the central government’s shift toward stimulus, however, S&P sees Beijing determined to “bring discipline to the financing practices of local governments and their LGFVs.” That ultimately may mean local authorities aren’t fully able to keep LGFVs afloat, however, and the bottom line is “the default risk of LGFVs is increasing.”
There's no evidence of fiscal discipline yet. All previous attempts failed. China works hard to avoid private bond defaults. Authorities might make an example of someone, but it will not allow widespread defaults. The debt will be rolled over, eventually monetized (directly or indirectly) by a bailout.

Currency Devaluation Fears Come to China: USDCNY 19.77 Goes Viral

Most fake news stories online represent either a real, factually-based counter-narrative (i.e. something truthful) or it is purely a counter-narrative. I occasionally do posts on suspected rumors out of China because, despite the likelihood they're false, the very fact that they went viral is a sign of something underneath, a fear or belief that causes a "Fake news" story to be readily accepted.

Chinese authorities are now dealing with a viral story whipping through Chinese social media: CNY should devalue 65 percent, to USDCNY to 19.77. The forecast isn't solid, but the fear of Chinese citizens is now exposed to the world and explains why draconion capital controls are in place.

SCMP: US$1 for 19.77 yuan? How a bogus social media rumour reveals fear that China is printing money
The theory surfaced in a number of social media accounts as long ago as June, but has been spreading rapidly since September after appearing on Zhihu, a Quora-style question-and-answer website, and Tianya.cn, an online bulletin board.

According to the theory, the fair exchange rate between the yuan and the dollar can be calculated solely using the respective GDP and total money supply of China and the United States.

The US had a GDP of US$19.36 trillion in 2017 and money supply, or M2, of US$13.92 trillion, resulting in a M2/GDP ratio of 0.719. Applying the same ratio, China’s US$12.24 trillion economy should have had US$8.8 trillion of money supply at the end of 2017. Instead, China’s actual money supply was 174 trillion yuan (about US$26 trillion at the current exchange rate), meaning – going by the M2/GDP formula – the actual value of a US dollar should be 19.77 yuan.
Here's one site posting this theory back in June: 1美元等于19.77元人民币?! It compares the money supply (red) sand GDP (green) of the US and China, along with the UK, EU and Japan.
This story is going viral and a former official from SAFE stepped in to refute it:
While this argument has fundamental flaws – such as assuming the US and China should have the same M2/GDP ratio – its simplicity has helped it to gain popularity on Chinese social media platforms including WeChat and Weibo, and stirred debates involving reputable economists.

Guan Tao, who works for a think tank and is a former senior official with China’s State Administration of Foreign Exchange, which is in charge of China’s foreign exchange policies, wrote an opinion piece in the Securities Times newspaper last week to dismiss the theory as sensationalist and without academic or empirical foundation.

“This theory is just another form of the argument that China has printed money excessively and the yuan is set to devalue,” Guan wrote.
The officials doth protest too much. A very easy way to bury a story is to ignore it. That's how governments and established powers keep a topic off the table. Now that there's an "official" response to this viral story, there's an opening for more plausible currency valuation theories. Instead of putting the issue to bed, authorities have opened themselves up to a game of whack-a-mole. And if they decide to censor new currency depreciation theories, that will tell the public the government believes it.
However, Zhao admitted the fear about excessive money printing in China was real.

“It shows that people are worried the central bank has pumped too much money into the economy … and shows panic and fear about the yuan’s exchange rate,” he said.

Professional foreign exchange traders are expecting modest yuan depreciation but few are forecasting it to tumble like Argentina’s peso or the Turkish lira.
Price controls are also coming back to bite Beijing:
At the same time, Zhao said Beijing’s rigid control over the exchange rate had instilled mistrust in the official prices, enabling outlandish theories and wild guesses to flourish.

“One of China’s problems is that the yuan was not allowed to float freely,” he said.
It's why CNH is the real exchange rate and why China is open to speculative attack on the yuan. China must prevent CNH from falling, and from CNY diverging from CNH, because CNH is the real price. See: The Informational Power of the Offshore Yuan Exchange Rate
When the market is operating under normal conditions, everything seems to indicate yuan strength and China has tight controls on inflows to slow yuan appreciation. But if the market is not normal— if there are no bidders for yuan, but instead a growing demand to hold dollars both onshore and offshore— the offshore yuan is free to tumble. And if CNH tumbles and the financial system sees a dollar shortage, the PBOC has to follow CNH lower to bid the dollars back or it has to spend its dollars (or let them be spent by banks and citizens) to halt the decline in CNH.
Depreciation fears are bottled up by capital controls, but Chinese can sell yuan for other assets. With stocks and real estate looking unattractive here, gold could step into the role of safe haven asset if it can establish a bullish price trend in CNY (or even better, CNH).

Here's Guan Tao's article: “1美元=19.77元”?这个判断不靠谱
His defense of the yuan doesn't exactly inspire confidence:
Third, although China's M2/GDP is much higher than the US, it does not mean that the RMB exchange rate against the US dollar is necessarily overestimated. Because, first of all, the difference between China and the United States is not much different, both around 2%. There is no high inflation in China that seriously erodes the purchasing power of the renminbi. Secondly, after years of loose monetary environment, both China and the United States have different levels of asset bubbles. China's housing market, the US stock market, and Japan's bond market are also called the world's three hardest bubbles. Again, the US and China's non-financial sector leverage is not low, only China's non-financial companies add leverage, while the US is The government department has added leverage, and the family has a difficult experience. Although the US government's tax reform measures centered on tax cuts have boosted US economic growth in the short term, the sustainability of medium- and long-term US government debt is even more worrying.
What happens to the yuan, dollar and yen if all three of these bubbles implode? Collapse, soar, collapse.

His final paragraph also raises questions about the yuan's exchange value:
Fifth, foreign exchange trading is not the main business of most domestic market players. Therefore, it is advisable to grasp the general trend in the trend of RMB exchange rate. The fundamental factors in determining the trend of the medium and long-term exchange rate are: economic stability, stable currency, strong economy and strong currency. The reason why the short-selling and short-selling renminbi in the past two decades has been defeated is that these people have neglected the strong renminbi foundation laid by China’s 9% to 10% annual economic growth, and were short-term impacted by the Asian financial crisis and the global financial tsunami.
Two of the four pillars are gone. China's economy is not as strong as it was and it does not have a strong currency, evidenced by draconian capital controls propping it up. Stability is an illusion created by authoritarian price setting in the market, intervention to prevent visible weakness (such as defaults) or extremely limited access to global forex markets.

The market is aligned for a phase transition. USDCNY 9 is probably as absurd as 20 to many market participants. The Chinese government "won't allow it" is something believed with respect to defaults, recession and currency depreciation. In August 2015, the Chinese government allowed the currency to depreciate by an amount similar to a volatile week for the euro. Global financial markets panicked. While markets have adjusted to slightly more volatility and a yuan that moves inversely to the U.S. dollar, yuan-specific depreciation is an outlier view among China bears. But they now have a powerful group who is receptive to their bearish yuan arguments: the Chinese public.

SMEs Still Dying for Credit

China's economy is under pressure with deleveraging efforts, a cyclical (policy?) real estate slowdown, depreciating yuan and growing trade frictions. SMEs suffered during prior downturns/deleveraging efforts and they're suffering again. They relied on credit that was downstream of shadow bank lending. Banks don't want risky loan on their balance sheets though, so instead of shifting the source of credit, it's dried up.

Despite much focus on the needs of SMEs and several State Council meetings chaired by Li Keqiang centered on the issue, there's no help on the way. What's more, the government is making life even more difficult for SMEs. Last month social security reform was added to the list of worries. Many firms and their employees (easily one-third, possibly far higher) could see their incomes slashed in 2019 because they've been under reporting income to local social insurance departments. Next year, they'll pay the proper rate and begin making up past under payments.

Reuters: Lost in transmission: China's small firms get more loans on paper but not in reality
But in reality, banks’ loan eligibility requirements for small and medium-sized enterprises (SMEs) remain stringent, making it too difficult or too expensive for them to borrow, according to bankers and company executives.

That has forced some small firms, including exporters, to simply give up on borrowing and put investment plans on hold.

The health of millions of small firms, most privately owned, is crucial to China’s efforts to ward off a sharp slowdown and mass job losses while fighting a bitter trade war with the United States.

...Total new loans in the first eight months jumped nearly 19 percent from a year earlier to 11.76 trillion yuan, the latest central bank data showed. That is well on track to set a new full-year record, eclipsing last year’s 13.53 trillion yuan.

But the increased lending barely compensates for shrinking “shadow” loans, one of the major targets of regulators as they seek to curb systemic financial risks.

Off-balance sheet loans used to be a major source of funding for small firms traditionally shunned by the big state banks.
Prior coverage:

Chinese SMEs Can Only Survive Through Tax Evasion, Social Security Reform Could Be Killer
China's SMEs Cannot Obtain Low Cost Credit, Can Li Keqiang Finally Save Them?
Li Keqiang Losing War on Financing Costs; 70% of SMEs Have Seen Financing Costs Rise in 2015
SMEs Wonder Not How to Live, But How To Die As Borrowing Costs Spike

Chinese PPI and CPI Rise in September

Currency depreciation is flowing through to Chinese prices as the weaker yuan offsets falling U.S. dollar prices. The 12-month PPI declined in September, but that's because the PPI increased 1.0 percent a year ago, and "only" 0.6 percent this past month.
As for the CPI, pork prices rose 3.7 percent in September and fresh vegetables climbed 9.8 percent.

2018-10-14

Real Estate Financing Plunges to New Low in September, Overseas Dollar Financing Rises 84pc

21st Century: 房企近4年最严峻的生存大考:融资额创新低
With the gradual deterioration of the real estate market, in the context of the harsh domestic and international financing environment, housing enterprises want to “live” in 2019-2020, and the most need to be vigilant is the funding problem caused by financing difficulties.

According to statistics from the same policy institute, the total financing of 40 typical listed real estate enterprises in September was 44.311 billion yuan, which fell below the "black May" low of 45.117 billion yuan, a significant decrease of 26.48% from the 60.273 billion yuan in August 2018. A new a record low for year of 2018. From the trend point of view, since May 2018, the financing situation of housing enterprises has been not very optimistic. Although it recovered slightly in July and August, the amount of financing was far from the first four months of 2018. In September, the total amount of financing fell to the freezing point, creating a new low in historical financing this year.
Financing costs rose:
ccording to the monitoring data of the same policy consulting research center, the amount of debt financing in September was 44.118 billion yuan, accounting for 99.56% of the total financing of housing enterprises, down 26.72% from the previous month. Among them, corporate bonds (21.569 billion yuan, accounting for 48.68%), other debt financing (130.04 billion yuan, accounting for 29.35%), domestic bank loans (5.643 billion yuan, accounting for 12.73%), and trust loans (3.903 billion yuan, accounting for The amount of financing for the medium-term notes, entrusted loans and overseas syndicated loans is 0.

Specifically, the first place, corporate bond financing amount was 21.569 billion yuan, up 9.81% from August; the second largest other debt financing method financing totaled 13.004 billion yuan, a decrease of 35.16% compared with August. The third domestic bank loan financing was 5.643 billion yuan, a decrease of 42.28% from the previous month; the fourth trust loan financing amount was 3.903 billion yuan, a decrease of 55.06% from the previous month; the medium-term notes and the issuance of overseas syndicated loans and entrusted loans.

However, in terms of financing costs, the cost of financing for housing companies in September is high, generally between 7% and 8.5%. Among the disclosed data, the lowest financing cost in September is Vanke's 2018 short-term short-term financing bonds issued on September 21, 2018, with an issue amount of 2 billion yuan and an interest rate of 3.35%. Secondly, Hengli (Hong Kong) Real Estate Co., Ltd., a wholly-owned subsidiary of Poly Real Estate, issued a US$500 million five-year fixed-rate bond through its overseas wholly-owned subsidiary, Poly Real Estate Finance Ltd, with a bond coupon rate of 4.75%. The coupon rate of the $300 million senior notes due in 2022 issued by Xuhui Holdings is 5.5%. The highest financing cost is CFLD (CAYMAN) INVESTMENT LTD, an indirect wholly-owned subsidiary of Huaxia Happiness. A premium unsecured fixed-rate bond issued to a foreign professional investor with a coupon rate of 9%. Overall, housing financing costs are higher this month, generally between 7% and 8.5%.
Developers saw a big increase in overseas borrowing:
Affected by market regulation and supervision, the difficulty of overseas financing is large, but compared with domestic financing channels, overseas debt is still an important financing method for housing enterprises. In September, overseas financing rose, foreign currency financing totaled 15.192 billion yuan, up 83.99% from the previous month. The successful overseas issuance was almost from corporate debt channels. In September, corporate bonds were 21.569 billion yuan, of which 6.4 billion yuan was issued domestically. The overseas issuance of 15.169 billion yuan. According to the statistics of the same policy institute, in September 2018, the financing of housing enterprises was still dominated by RMB, followed by the US dollar and the third Hong Kong dollar. Among them, the total amount of US dollar financing was 15.169 billion yuan; the total amount of Hong Kong dollar financing was 0.23 billion yuan; there was no financing in other currencies in this month.

The Yuan Illusion

One of these things can't be true.

Global Times: Market plays decisive role in exchange rate: Yi Gang
"China will continue to let the market play a decisive role in the formation of the RMB exchange rate," Yi said in the statement. "We will not engage in competitive devaluation, and will not use the exchange rate as a tool to deal with trade frictions."

...China's central bank governor Yi Gang on Saturday promised to keep the yuan currency's value "broadly stable" at International Monetary Fund and World Bank annual meetings in Bali, Indonesia, where the IMF attempted to prod the world's two largest economies to resolve their disputes.
It's true that China will not devalue the yuan to boost exports. It's also true that China can't boost liquidity in China without growing yuan supply amid quantitative tightening and rising interest rates in the United States. If push comes to shove, Chinese monetary policy will zig while the U.S. zags. The divergence is showing up as stress on the exchange rate. China is absolutely not letting the market set the exchange rate and it has draconian capital controls in place to make sure Chinese mainland investors can't participate in the market.

The market is allowed to operate between USDCNY 6.20 and 6.90. Below 6.20 and exporters scream. Above 6.90 and depreciation expectations start building. However, if the euro or yen also weaken, a falling yuan will be "broadly stable" as it devalues versus the U.S. dollar along with everything else.

The dollar bulls will take USDCNY past 7.0. It will take out major psychological barriers without raising alarm. Then we'll find out if capital controls are as tight as they seem.

Chinext 2015 Bubble Converges With Nasdaq 2000

All the extraordinary efforts of the Chinese government and "national team" were for naught.

Shenzhen Bails Out A-Shares With Pledged Loans

Shenzhen's municipal government will transfer equity market risk onto its balance sheet (and risk its overall credibility) amid a roaring bear market.

Reuters: China's Shenzhen city government to provide support to listed firms
The municipal government of Shenzhen plans to use tens of billions of yuan to provide liquidity support to listed firms and ease pressure of forced liquidations amid a downturn, the Shanghai Securities News reported on Saturday.

Under the plan, the city that hosts China’s second-largest stock exchange will provide liquidity via loans and equity investment in select companies, it said, citing unidentified people familiar with the plan.

The Shenzhen Composite Index .SZSC has fallen 32 percent since the end of last year, including a 10 percent drop so far in October. That has put shareholders who have put up shares as collateral for loans at risk of being forced to sell, which could further dent share prices.

The liquidity support in Shenzhen would be carried out by Shenzhen government-owned investment platforms, the article said.

The report said there are 281 listed companies in Shenzhen, of which 198, or 70 percent, had outstanding equity pledges as of Aug. 20.

2018 Midterms Simple Model Update

The only assumption going into the simple model is that the GOP should outperform the final generic ballot average by about 3 percent on Election Day. That could be wrong if there is a wave election, but the only time the GOP underperformed polling was when they led in the generic ballot.

In 2006, a wave election for Democrats, they underperformed the final generic ballot by 3.6 percent. They finished with a 7.9 percent lead in the final polling.

Today they are up 7.3 percent in the generic ballot.

The only historic scenario under which they take the House is a wave election similar to the GOP Tea Party wave of 2010.

The Democrats are within striking distance of taking the House even if the simple model is highly accurate. Luck swinging in their direction could give them the House. Conversely, if the GOP polling improves in the next two weeks, the outlook for the Dems will dim. The betting market odds are priced for no polling changes in the GOP's favor and the Democrats matching their polling lead today on Election Day.

2018-10-13

Resign, Flee, Get Arrested: A-Shares Executives Dropping Like Flies

Wealth, fame and fortune, passing through the clouds.
21st Century: 离职、跑路、遭刑拘…… A股“董事长”风光与压力
On October 11, A shares reappeared in a thousand-yuan limit, and the Shanghai Composite Index fell below the 2600 mark...

The pressure on the chairman of more than 3,500 listed companies in A-shares is enormous. And they used to be the "most prominent" role in the capital market.

On the evening of October 10, Hu Chengzhong, the chairman of Guangdong Ganhua (000576.SZ), resigned, less than one year from the beginning of his current term. One day ago, the chairman of Fujian Cement (600802.SH) and Yatong (600692.SH) also waved goodbye to this position.

These are not isolated cases.

According to the statistics of the 21st Century Business Herald, as of October 12, 386 chairmen of 376 listed companies have announced their departure.

The departure tide is not sudden.

According to the analysis of Zhongtai Securities Research Report, as of October 10 this year, more than 8,000 directors of A-share listed companies have left their posts, whether board members or executives they have surpassed the number of 2017 exits by 1000.

In terms of industry distribution, in the real estate and construction and decoration industries, 40% of listed company executives and directors have more departures than last year. In addition, 16% and 26% of utilities and leisure services companies also saw higher departure rates than in 2017.
Most executives and directors are leaving for business reasons such as mergers, changing business conditions, losing shareholder elections.
On the whole, personal reasons or job adjustments, changes, and general elections have become the main reasons for the resignation of the chairman.
But more than a few are falling into legal and financial difficulty.
Others who left the board of directors had to resign because they were put on file for investigation or were about to fall into a trap.

In May of this year, Zhu Xi, chairman of Tenjin Entertainment, was investigated by the China Securities Regulatory Commission and subsequently announced his resignation in September. Similarly, Sun Jiexiao, chairman and general manager of Chunxing Seiko.

On August 27, Jiuyou announced that the chairman Han Yue was criminally detained by the Shanghai Public Security Bureau Fengxian Branch for allegedly illegally absorbing public deposits. Although Han Yue has not resigned, the nine shares have been represented by the vice chairman.
And then there are the disappearances.
In addition to the normal resignation of the chairman of the board of directors, in the past three years, the chairman of the A-share listed company that lost contact (excluding being directly detained) has 11 people.

Wang Xianyu, former chairman of the *ST Bus Online (002188.SZ) who lost contact for more than 260 days, undoubtedly impressed the market.

As early as December 9, 2017, the *ST Bus Online announced that when the company and related parties planned to purchase major assets of the media industry, efforts to contact the company’s legal representative, director and general manager Wang Xianyu were repeatedly unsuccessful. Relevant documents could not be signed on time and it was decided to terminate the reorganization.

Since then, the *ST Bus Online has been caught in a long journey to find the chairman.

Until July 16, 2018, the 4th Board of Directors of *ST Bus believed that "Wang Xianyu, as a director of the company, has not been able to attend the Board of Directors for 9 consecutive times and has not entrusted other directors to attend, and has not been able to attend the shareholders meeting for three consecutive times (including 2017). The annual general meeting of shareholders) is no longer suitable for continuing to serve as a director of a listed company, thus eliminating the need for directorship.
Coincidentally, after the close of August 20, Steyr (000760.SZ) announced that it was unable to get in touch with Chairman Li Xiaozhen in recent days.

It is worth mentioning that Li Xiaozhen is the 80-year-old chairman of the board of Steyr, because the former chairman of Steyr resigned for personal reasons.

On August 21, Steyr fell to a limit and closed at 7.67% on August 22.

Until September 27th, Steyr announced that “Since the company’s controlling shareholder Shandong Yingda Steel Structure Co., Ltd. involved an economic dispute with a natural person, Li Xiaozhen was the former party of the matter and was taken by Shandong Binhai Public Security Bureau from 2018 8 On the 11th of the month, he was forced to detain to assist in the investigation. Fortunately, Li Xiaozhen was not arrested by the People's Procuratorate and was released on bail on September 17, 2018.

On October 12, the 21st Century Business Herald reporter called the Steyr Securities Department several times, but no one answered.

Coincidentally, for Yang Zishan, former chairman of Nanfeng (300004.SZ), the "May 1" holiday in 2018 may be extremely difficult.

Seven years ago, Yang Zishan, who was one of the representatives of the "second generation" in South China, who took over from his father, was exposed on May 3. On the evening of May 7, further news showed that Yang Zishan’s personal debt may involve the company about 380 million yuan.

Since the resumption of trading on May 7, the share price of Nanfeng shares has dropped from 11.3 yuan before the suspension to 3.92 yuan, a drop of more than 60%.

Since then, Nanfeng has been subject to litigation related to private lending, totaling 220 million yuan; on June 28, the CSRC investigated Nanfeng shares, and then deputy general manager Zhou Hui also announced his resignation.

The loss of more than 140 days is also the chairman of Taihe Health (000790.SZ) Wang Renguo.

In fact, the head of the "Taihe Department" has been lost for the second time. Because of the Sichuan-related cases, Wang Renguo disappeared on January 2, 2018, and reinstated on the 19th. Less than four months later, Wang Renguo Once again lost, the vice chairman Li Xiaoping will perform the duties of the chairman.

The loss of Wang Renguo also directly affected Taihe Health's business in 2018. The company's net profit in the first half of the year decreased by 58.13%, and total assets shrank by 20%.

According to media reports, Wang Renguo is eager to sell the core assets of the “Taihe” (Taihe Group and its subsidiaries) to ease debt pressure.

In the process, there are also listed companies encountering an oolong side.

On March 24 this year, Yili shares (600887.SH) had to issue a clarification announcement, saying that Chairman Pan Gang had not been taken away for investigation, and the news about his loss was rumored.
Overall, the impact of executive departures is mixed as long as they're not fleeing prosecution and/or financial crimes.
Zhongtai Securities pointed out in the article "Following the Risk of Separation of Executives under the Pressure of Lifting the ban in the Fourth Quarter - Observation of Market Funds" that many listed companies have changed their executives and have two main effects on the company's stock price.

The first one is the phenomenon of “backing black pot”. “When a listed company faces a decline in performance and faces significant risks in its business activities, it is a way for the company to find a 'scapegoat'.” In this case, if the newcomer does not have the ability to match his position, The performance of the company fell, the company's stock price may face further bottoming.

The second is positive incentives. Zhongtai Securities pointed out that if the management of inferior performance is replaced, the newly appointed management can stop the loss in time, which will obviously promote the stock price.

It combed this year's data and found that 50% of the listed company's share price fell on the first day after the chairman's departure. After one week, after January, the proportion of the decline has been rising. Therefore, from the statistical sample of this year, the replacement of the chairman of the board has a very limited effect on the stock price.
The simplest explanation for executives is a simple one: as the heat rises, they're getting out of the kitchen:
"In the context of economic turmoil, the risk rate of operating enterprises is getting higher and higher. Many of the chairman of the board are bosses. They like to control the company and rush to the forefront. But now, once the company has a problem, the executive responsibility is investigated, now hand the company over to others to manage, and control some big directions," the company executive pointed out.

2018-10-12

Failed Land Auctions Proliferate, Exceed 2012 and 2015 Highs

Caijing: 土地遇冷 流拍住宅用地超过400宗
In the chaos, not only new houses and second-hand houses, although during the National Day holiday, although the central bank announced the news of reducing the deposit reserve ratio, it was widely interpreted as a signal for the release of funds, but in fact, in the land auctioning and auctioning of heavy funds, the instances of failed land auctions has been accelerating, and the land sold for zero premium has also increased significantly.

Not long ago, a research report published by a research institute showed that the number of failed land auctions reached a record high this year. According to the data, among the 300 cities with statistics in the country, there have been more than 800 failed land auctions in the national real estate market in 2018, including 446 residential land plots with a total planned construction area of ​​56.45 million square meters, which is about 1.8 times the total area of failed auctions in 2017.
History rhymes:
In fact, reviewing the development of the real estate market in recent years, the phenomenon of failed auctions is not new. From 2011 to 2012, there was a peak in failed residential land auctions. From 2014 to 2015, there was another wave of failed auctions. After these two auctions, the real estate market has entered the bottom, the volume of transactions has fallen, and the price has fallen. In 2018, the failed auctions reappeared, and the planned construction area of failed auctions and the failed auction rate continued to rise, reaching a historical high.
Developers are worried about survival.
In this regard, Kerry's analysis report also said that the land market turned cold towards normalization, low premium and even the bottom price transaction became normal, and the number of land flow cases continued to increase. Under the circumstance that the regulatory policies continue to exert strength and the financing pressure of housing enterprises is becoming more and more serious, the wait-and-see mood of enterprises has become more intense, and the new land acquisition has been slowed down. Some housing enterprises have even withdrawn from the local auction market. Ke Rui Rui analysts predict that the land auction market will turn cold, the land price will be turned from the ups and downs, and some cities will be the first to adjust downward.
Everything is working against land prices.
Why are developers no longer keen on grabbing land?

Guo Yi, chief analyst of Heshuo, said that there are two main reasons: First, the cash pressure of real estate companies is now larger than that of the year. In the context of deleveraging, the cost of financing for housing companies is getting higher and higher, and the difficulty of financing is getting bigger and bigger. The regulatory authorities are also making three orders and five applications, and it is strictly forbidden to enter the real estate market in violation of regulations. From January to August this year, the country's housing enterprises raised a total of 739 billion yuan, a year-on-year decrease of 9%. Among them, the total amount of financing in August was only 74.4 billion, a year-on-year decrease of 23%. Therefore, under the pressure of huge funds, it is naturally more and more cautious for real estate developers to take their land.

Second, the local price limit policy has also curbed the enthusiasm of real estate companies to take the land. In the past two years, cities across the country have introduced various price limit policies in order to curb overheating of housing prices. After the price limit, the prices of these cities have almost become a horizontal line, and the average price per month is fluctuating several dollars. Although house prices have been effectively curbed, the real estate market has been distorted, and the prices of first-hand and second-hand houses have been upside down.

In addition, the number of land sold by local governments is growing, and the increase in land supply has also led to an imbalance between supply and demand in the market. According to the data of a research institute, since March this year, the newly-launched homesteads in the 300 cities nationwide have continued to grow year-on-year. The monthly growth rate is basically above 20%, and the individual months have even increased by more than 80%.

On the one hand, the money bag is tight, and the land is more rational; on the one hand, the land restrictions are strict, and the cost of land auction is high. Under such a joint effect, the developer’s enthusiasm for the land has dropped to the bottom.
The weak stock market could also play a role: it's cheaper to buy land through acquisitions.
If the land flow is increased, does it mean that the developers do not take the land to build the project? In fact, some leading developers with strong financial strength just think that the land cost obtained by bidding and auction is too high, and there are more restrictions, not directly in the land auction. In the competition, but in private, through the cooperation, mergers and acquisitions companies to buy shares, to obtain new land or project reserves.

2018-10-11

SCMP Covers Real Estate Rage

SCMP: Public anger in China spreading as property prices drop
Not only were their sales figures grim for September, but the seven-day national holiday last week also brought at least two fangnao incidents – when homeowners protest against price cuts offered by developers to new buyers.

These protests are often directed at sales offices, with varying levels of intensity – from throwing rocks to holding banners and putting up funeral wreaths. As home ownership has remained the most important channel of investment for urban households in China in the past decade, price cuts have become increasingly unacceptable and a cause for social unrest.

In eastern Jiangxi province last week, angry homeowners who paid full price for units at the Xinzhou Mansion residential project in Shangrao attacked the Country Garden sales office after finding out it had offered discounts to new buyers of up to 30 per cent.

A similar incident took place in suburban Shanghai, where the same developer slashed prices at another project called One Mansion by a quarter.

“Property accounts for roughly 70 per cent of urban Chinese families’ total assets – a home is both wealth and status. People don’t want prices to increase too fast, but they don’t want them to fall too quickly either,” said Shao Yu, chief economist at Oriental Securities.
More rage is expected.
Zhang Dawei, chief analyst at Centaline Property, warned that not only were the overall sales dropping, but poor construction quality could also be a cause for more violence. “Try not to buy homes built in 2018, because while the developers were short of money, the same is the case with contractors,” he said.

“The fourth quarter would be a peak time for residential project completion. Issues which used to be papered over by rising prices could erupt in this period… so we should look out for a sudden surge of fangnao in the coming months,” he said.

NDRC Calls For Accelerated Fertility Suppression

China Banking News: NDRC Calls for 100 Million More Chinese to Be Settled in Cities
The directive says that the settlement of 100 million people in urban areas is a “key mission for advancing high-quality new-model urbanisation….an organic integration point for expanding domestic demand and improving the livelihood of the people [and] an intrinsic requirement for the comprehensive establishment of a well-off society that benefits a larger population.”

2018-10-10

Update: Vanke Says False Crying Children Get Milk: Vanke Refunding Homebuyers 1 Million Yuan Following Price Drop

Update: Vanke says the story is false.

Wallst.cn: 戏精万科
In 2014, Vanke threw out the "silver theory" and lowered the price again.

In 2018, Vanke will not only take the lead in price cuts, but also enable "price protection."

Vanke "first down to respect", the refund rumors are not true
The article sees trouble for the housing market, including for Vanke.
Can Vanke really survive?

In August, Vanke's sales amount and sales area both reached the lowest this year except February; the rate of removal in July was 51%, and the rate of removal in August was only 47%, significantly lower than the rate of 55% to 65% in the first half of the year. . Behind it, Vanke is facing greater regulatory pressures in more than 600 projects in first- and second-tier cities, and the diversification of long-term rental apartments, logistics real estate, commercial real estate, etc., is also facing a great test.

As the industry booms down, Vanke’s anxiety that “the big ship is difficult to turn around” is indeed intensifying.

...High-sounding Vanke, who can't live, can live his own life, so that other housing companies can't live.

The turning point is currently, is this really different?

Yu Liang said that most of us have not experienced the policy adjustments of 2008, and many people have not responded to the most basic market signals. In 2012, Vanke judged that the industry entered a turning point. It was just a prediction. I don't know when there will be a real turning point. Today, the turning point is really coming.

It’s not that its cold now, it’s that it was a bit too hot in the past.
The last line in potentially good news for the economy, but its not good news for highly leveraged developers and speculators. For them, the spread between credit costs and price appreciation is all that matters.

Finally, although this story was false, it's rapid spread in Chinese social media shows the current state of social mood and the real estate sector.

Original post below:

Vanke is refunding 1 million yuan to homebuyers who paid 4 to 5 million yuan for homes now priced at 3 million yuan. Critics, including the oft-quoted Zhang Dawei of Centaline, say this sets a bad precedent because they're under no obligation. It is akin to "crying children get milk." Additionally, back in September 2008 amid a far steeper price decline and a global economy whose wheels were already coming off, Vanke refused compensation.
Meanwhile, Vanke is turning down all requests, saying compensation is not an item in the contract. But it has also said it does understand why customers are disappointed.

Sina: 别墅买贵了能退100万?万科回应:正在了解情况
It is reported that the developer has negotiated with the old owner and will compensate for the difference in the purchase price through refunds.

Recently, the first price cuts of a townhouse (villa) developed by Vanke in Xiamen have caused widespread concern. The total price of villas with a total price of 4 to 5 million yuan has fallen to less than 3 million yuan. It is reported that the developer has negotiated with the old owner and will compensate for the difference in the purchase price through refunds.

In this regard, a public relations officer of Vanke said to Zhongxin Jingwei, they are also understanding the situation.

If you buy expensive, you can give it back?
Prices have plummeted in the area of the development in question.
With the deepening of the regulation of the property market and the changes in the market environment, the Xiamen property market, which has been burning like oil, has gradually cooled down. Many real estate projects have made great efforts to reduce prices. Located in Xiang'an District of Xiamen, the first-ever Vanke Egret County has not had much advantage. In September, it also introduced a large preferential measure. The price was reduced from 4.5 million to 5 million yuan per townhouse to about 2.78 million yuan, the price in the area is about 2.98 million yuan per townhouse.

Zhongxin Jingwei learned that the previously sold villas were given 5,000 yuan/square meter for fine decoration and two underground parking spaces with a unit price of 160,000 yuan, while the special room was delivered with blanks, no parking spaces and indoor elevators. Even if the previously purchased villas plan to go to the decoration and parking space, the minimum total price is about 3.7 million yuan / set, and the price of the new special room is still cheaper by nearly 1 million yuan.

Many real estate agents said that after the price cut, the enthusiasm of buyers was high, and the special room was sold out on the opening day.
The old homebuyers are not happy:
The drop of nearly 1 million yuan in price has naturally caused dissatisfaction among the old owners. There is a WeChat public article saying that Egret County is preparing to refund the owner of the pre-purchased owner and is negotiating with the bank to change the mortgage contract. The owner who buys the expensive only needs to sign a supplementary agreement with the developer to ban the fine decoration and the free parking space agreed upon before, and the corresponding price reduction is about 1 million yuan, directly offsetting the mortgage part.

Zhongxin Jingwei asked several real estate agents. A Li surnamed intermediary in Chain Real Estate said that he had not heard of this news yet. He and his colleagues who had previously dealt with the customer did not give feedback to them. The intermediaries who found the new housing department of the two shells also said that they also saw the news on the Internet on the morning of the 10th and had not been notified from the real estate.

A consultant from Vanke Egret County said that it was indeed negotiating with the old owners, but the specific plan has not yet been fixed, and he does not understand the details.

At noon on the 10th, a public relations officer of Vanke responded to Zhongxin Jingwei: "We are also understanding the situation, and if there is a specific explanation, it will be released as soon as possible."
Has Vanke set a new standard for the industry? The positives are good PR (no smashed up sales offices) and possibly lower costs IF buyers have the right to return the home. Then developers would have to refund their money and sell it at the lower price. In those cases, compensating buyers may be the cheaper option.The downside is that many homebuyers do not have the right to return their home. For those homeowners, there's an incentive to smash up sales offices if it means receiving extra-contractual compensation.
Will other housing companies follow up?

Since September, the property market has suddenly turned cold. Some housing companies have begun to reduce sales prices through various preferential promotions. The price reduction of many real estates is relatively large. These measures have caused some old owners to feel that their own interests have been damaged. Before and after the National Day holiday, there have been many activists' actions to protect their rights.

Recently, it was reported that a sales office in Shangrao Country Garden in Jiangxi was smashed because the developer reduced the price from 10,000 yuan/square meter to 7,000 yuan/square meter, causing the old owners to defend their rights. At the same time, Country Garden was also exposed to lower prices in other places. Country Garden eventually had to clarify, saying that only a few cities have discounted individual projects.

Zhang Dawei, chief analyst of Zhongyuan Real Estate, believes that in the current weak market situation, some cities' real estate projects will not carry out price reduction promotion, sales performance will certainly not improve, but if the price is cut, once the owner checks out, things will become more complicated.

In fact, apart from Vanke, some housing companies have responded to this thorny problem in a similar way. In the face of the price reduction rights of the owners of Hangzhou Binjiang New Hope New City Future Coast Phase I, Binjiang Group agreed to check out and not charge any liquidated damages. In September, Hefei Taihe Yard reduced the price of some units from about 20,000 yuan / square meter to about 15,000 yuan / square meter, causing dissatisfaction with the early owners. Later, Taihe said to the media that the old owners can check out and then press the current offer. Price purchase.

For the price reduction of house prices, Zhang Dawei believes that although the developer can understand the behavior of accepting the negotiation from the perspective of maintaining the brand image, it may play a bad demonstration role for the market.

"The phenomenon of price reduction and rights protection is obviously not in line with the spirit of the contract. The troublemakers generally have the mentality of 'the crying children get milk', and from the historical point of view, most of the housing troublemakers get benefits, but those who don't cause trouble take losses."

MLF Outstanding September 2018

2018-10-09

Market Top Chart

Chinese Millennial Travelers Put Golden Week Trips on Credit

EO: 十一黄金周旅游消费掀热潮 调查显示近半数人 “借钱”也要出去玩
"borrowing money" also has to go out to play

Compared with the past, early consumption is becoming more and more popular in travel.

If the money is not enough, will you still choose to travel during the holidays? In the 360 ​​survey, more than half (54.55%) of the respondents chose “no, wait until they have enough money to go”. However, as many as 42.43% of the population said, “It will be convenient to use various travel stages or to swipe credit cards and flowers.” In addition, 3.02% of the population chose to borrow money from friends.

In the interview, the reporter found that although some 90's generation wages were not high, their consumption was higher than those of the 70's and 80's generations. "In fact, it is just to buy and buy, and spent a total of several tens of thousands of dollars. They all brushed credit cards, or used flowers and other methods, and then slowly returned." Xiao Wang, born in 1995, told reporters. Xiao Wang belongs to the "moonlight family" and believes that young people should go out and take time to play, buy and buy.

Some 80s later believe that today's various types of consumer loans and installment products are very convenient to use. Even if they are not bad, they will choose this type of payment when they go out. "Deposits keep money, and most of them use credit cards when they spend." Ms. bluntly, but even if she lacks money, she will definitely not borrow money from her friends.

China Endgame, Again

Ludwig Von Mises explains China's endgame.
True, governments can reduce the rate of interest in the short run. They can issue additional paper money. They can open the way to credit expansion by the banks. They can thus create an artificial boom and the appearance of prosperity. But such a boom is bound to collapse soon or late and to bring about a depression.
The essence of a credit-expansion boom is not overinvestment, but investment in wrong lines, i.e., malinvestment.
What is needed for a sound expansion of production is additional capital goods, not money or fiduciary media. The credit boom is built on the sands of banknotes and deposits. It must collapse.
If the credit expansion is not stopped in time, the boom turns into the crack-up boom; the flight into real values begins, and the whole monetary system founders.
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.

Global Times: Beijing needs proactive stimulus policies to shield economy from worst of trade war
China is in a critical period of stabilizing its economy. One decade after the global financial crisis, the Chinese economy is again facing uncertainty and challenges under internal and external pressure. It may be that China can't overcome these difficulties by simply continuing to fine-tune its economic policy. To maintain a stable trend in economic development, strong measures must be taken to support growth.

China will adopt more proactive fiscal measures, such as tax cuts, to help businesses affected by the trade conflict with the US, Chinese Finance Minister Liu Kun has said.

Total tax cuts for 2018 are expected to exceed 1.3 trillion yuan ($189 billion). The country will also study more large-scale tax reductions, Liu said in an interview with the Xinhua News Agency.

...Apart from steps China has already announced to reduce business costs, the country needs to draw up more policies to reduce taxes and support the real economy. Liu's comments about large-scale tax cuts are timely and necessary to ease investors' concerns. The questions are: How soon can those measures be taken and how proactive will the policies be?

In 2008, the Chinese government announced a 4 trillion yuan stimulus package to fight the impact of the global financial crisis. Now, the Chinese economy is under even tougher pressure amid escalating trade friction. Beijing must draw up strong stimulus policies to inject new momentum into the real economy.
I'm no advocate of big deficit spending, but of all the types of deficit spending that exist, structural changes to the tax system are among the least destructive for the economy. China needs efficient capital allocation, not a new round of infrastructure investment. China avoided an endgame in 2008, in 2011 and in 2014, each time finding there was plenty more room for centrally-directed credit investment. Can they do it again?
Global Times: China GDP to grow 6.2% in 2019: IMF
Maurice Obstfeld, Economic Counsellor and Director of the IMF Research Department, stressed during an IMF press conference on Tuesday that the trade dispute China is currently having with the US will negatively impact the country's GDP growth next year, although such a negative influence will be offset by Chinese authorities' efforts to stabilize the economy.

The IMF forecasted that China's GDP growth will be 6.6 percent this year, the same forecast in April.

Liu Xuezhi, an economist at Bank of Communications, told the Global Times on Tuesday that the trade war will have an "evident" impact on the domestic economy.

"It is likely to drag back the mainland GDP by 0.1 to 0.2 percentage point for this year and next year. And if the trade disputes worsen, the drag will widen to 0.4 percent to 0.5 percent," Liu said.

...But experts said the Chinese government has the capacity to minimize such impact with the launch of more stimulus policies, especially policies to boost domestic consumption.

The People's Bank of China announced on Sunday to cut the reserve requirement ratio (RRR) by one percentage point from October 15.

"It's possible that the PBC will launch more RRR cuts before the end of this year," Liu said.
Some economists forecast a hit to consumption in 2019 because of social security reform.

Social Security Change Could Cause Layoffs and Shave 1.5pc Off GDP in 2019
Chinese SMEs Can Only Survive Through Tax Evasion, Social Security Reform Could Be Killer

Lower taxes are needed to offset tight financing conditions and a coming hit from back taxes, since many SMEs and their employees have dodged social insurance taxes for years.

FT: Will China’s stimulus prove a boon for emerging markets?
Jean-Charles Sambor, deputy head of EM debt at BNP Paribas Asset Management, said a move by China to deliver more stimulus would be “positive news for the emerging market macro story”.

“It means there’s a low risk of a hard landing . . . so imports should remain quite strong, commodity prices quite strong, and therefore any pass-through would have a positive impact on . . . commodity exporters.”

China, for example, is the biggest destination for Brazilian exports, and there are already signs that other EMs are benefiting as the country grapples with economic growth that slowed in the second quarter to a pace last seen in 2016.

Li-Gang Liu, chief China economist at Citi, said China previously bought a lot of oil and gas from the US, but said that was “cut to zero” in August. Meanwhile, in the area of agriculture, “if you look at the price differential between soyabean prices in the US and Brazil, Brazil is now 25 per cent more expensive”, he added.
Missing from most discussions about China is its inefficient capital allocation. During a rising credit cycle, everything looks good because debts are financed. Only when the tide reverses will you see the true extent of malinvestment.

The dollar is a problem for China, but even if it abandons the dollar, the yuan will devalue against real assets. Major economic reform is the only way out, but major economic reform entails giving up political control over the economy. The behavior of the CCP indicates it prefers political control to economic reform.

2018-10-08

Chinese Developers Resume 10pc Down, Free BMW, Free Rooms, Coupons

Chinese developers offered free rooms, purchase with only 10 percent down, free cars with a purchase and even coupons for cash rebates to entice buyers over the Golden Week. They also enticed non-qualified buyers by offering sales that will become official when they qualify.

Caijing: 黄金周楼市凉:北京深圳成交量腰斩 一成首付再现
In Beijing, at least six properties have undergone price cuts or increased incentives. For example, a real estate in Fangshan District will be offered in the form of a special room, and the average price will drop from 38,900 yuan per square meter to 35,000 yuan.

In Shanghai, there are not only price cuts, but also delivery. For example, two properties in Songjiang and Jiading will be priced at 8.9 percent on the basis of the original price. If the company recommends the purchase of a house, it can also add a discount of 9.8 percent, and then send a 30,000 yuan purchase coupon. Another example is a real estate in Baoshan, which has launched a special offer of “buy a house to send a BMW”. If you don’t need a car, you can get a discount of about 300,000 yuan.

The promotion of the second-tier city property market is even stronger. For example, in Hefei, the price of Daping will be reduced from the previous hardcover of 22,000 yuan per square meter to the average price of blanks of 17,400 yuan, 10 percent down to buy, and non-resident buyers can wait for social insurance. In addition, in Dongguan, Chongqing and other third- and fourth-tier cities, developers are also reducing prices.

2018-10-07

Hangzhou Developers Cancelling Housing Lotteries for Lack of Interest

One of the bellwether markets for housing sentiment in recent years, Hangzhou is showing signs of rapid cooling. Developers have begun supplementing housing lotteries with direct sales and some have even cancelled their lotteries.

iFeng: 多地因楼盘降价引发纠纷 楼市几大信号不可不重视
Two major signals cannot be ignored

Zhang Dawei, chief analyst of Zhongyuan Real Estate, said that due to the increase in the supply of new homes, the inventory of typical cities including Beijing, Nanjing, Shenzhen, Ningbo and Fuzhou has increased to varying degrees. At the same time, hot cities are still under strict control, credit tightening, not only commercial loans continue to be high pressure, the provident fund policy has also begun to tighten in many cities across the country, making the market continue to wait and see. At this stage, the purchasing power of buyers is hard to support the market to continue to rise. Beijing, Shanghai, Shenzhen, Hangzhou, Nanjing, Hefei and other cities have seen signs of falling prices.

In addition, several major signals in the property market also convey important information -

1 sales department disputes are more and more

At present, the price reduction in the property market is not yet widespread, and it only appears in case projects in a small number of cities. Guo Yi, deputy general manager and chief analyst of Siyuan Real Estate Market Development Department, said that although “households are not speculative”, even if they are self-occupied buyers, they hope that the value of assets will continue to rise and they will be held in historical verification. Optimistic expectations, it is difficult to accept the price reduction behavior of housing companies, especially in a short period of time, the price of real estate has been lowered. The emergence of disputes is also one of the manifestations of the real price cuts of housing companies and the cold turnover of the property market.

2 lottery winning rate is getting higher and higher

The housing lottery is itself a response to a hot property market. It is an important signal when the lottery win rate is getting higher and higher, and even lotteries that don't sell out.

Taking Hangzhou as an example, the reporter learned that since September, there have been more and more limited-price real estate listings. Buyers tend to be rational, and the wait-and-see attitude is obvious. The lottery rate is getting higher and higher, and many real estates have supplemented the lottery and opened for sale. There are even some phenomena in some properties, such as the phenomenon of canceling the lottery. Some insiders pointed out that perhaps the future non-popular real estate will not need the housing lottery.

RRR Cut Offers No Hope for Housing Market

iFeng: 释放7500亿元流动性 央行降准给予房地产什么信号
Regarding the impact of the RRR on the property market, Zhang Hongwei, director of the same property research department, believes that because of the heavy firewalls for the financing channels of housing enterprises, most of them cannot enter the development field. This money has nothing to do with real estate. Very nervous, the general trend of price cuts in the property market will not change.

Another background for the central bank to be able to lower the RRR is that the real estate market has been basically controlled. At present, due to the decline in the scale of shantytown renovation, the real estate market in the third and fourth tier cities has begun to fall. Affected by the strict regulation of real estate and the control of bank credit, the real estate market in some second-tier cities accelerated, while the real estate in the first-tier cities kept the price falling and the volume contracted.

In addition, discussions about property taxes are also affecting the expectations of market-related entities. As long as the real estate market is not loosely regulated, the central bank's RRR cut is expected to have a very limited impact on the real estate market. Real estate companies should still be prepared for the winter.

In the first half of the year, due to the tight funding of major banks, almost all the real estate market faced more serious financing problems. Therefore, everyone is suffering. In the second half of the year, with the continuous implementation of the four RRR cuts, the flow of banks Sex began to get a certain improvement. At this time, the Matthew effect of the real estate market will be further exerted. Large-scale and leading real estate enterprises are more likely to obtain more funds from the banks because of their better credit records in the banks.

Chinese Homebuyers Wait and See During National Holiday

During Golden Week, some real estate agents went on vacation themselves given the calm in the normally roaring housing market. Anecdotal evidence from Sanya, Suzhou and other cities points to a swift cooldown as buyers wait for lower prices. Sentiment has shifted.

People's Daily: 观望多成交少 国庆长假楼市“哑火”
The "Golden September and Silver 10" National Day holiday is often a hot period of stepping on the plate and buying a house, but this year's Golden Week, the property market is a bit "dumb". Although the major real estate developers have thrown preferential olive branches, the sales office still feels "cool". According to industry insiders, the overall property market of the National Day holiday was stable, and the market gradually showed a high level of decline.

  Yan Yan is a salesman of a real estate in a second-tier city. This National Day is not busy. She took a group of customers to see the room and also took a break with her colleagues for two days. In the first few months, she will receive dozens of customers in one day.

  "In recent years, there have been few calm periods during holidays." Yan Yan said that this year's National Day, their company in some other cities and cities also appeared a bit deserted.

  Sanya, which has always been a popular city for real estate, is no exception. During the National Day, the real estate exhibition hall on the first floor of the Sanya Real Estate Service Center only had a brief introduction of real estate projects and some chairs, and chose a closed door.

  Not far from it, the “Wanke Lakeside Holiday Park” project recently launched the first shot of the price reduction of Sanya housing enterprises. "The filing price is about 29,000 yuan. After all kinds of discounts, the minimum price can reach 26,000 yuan." According to the salesperson, the current sales situation is definitely not comparable to the beginning of the year. "There are too few people who are eligible to buy a house. We have no choice but to cut prices."

  Zhang Dawei, chief analyst of Zhongyuan Real Estate, said that on the one hand, most of the hotspot cities have a comprehensive price limit, and the real estate market has no dim peak season; on the other hand, it is related to the current high housing prices and the strong wait-and-see attitude of buyers.

  Zhang Dawei said that although many developers have prepared ammunition during the National Day, from the point of view of transactions, the city's property market has gradually begun to appear to fall back, and house price adjustment has begun to appear from point to region. Hot cities began to decline gradually, and purchasing power is hard to support the market to continue to rise.

  Taking Suzhou as an example, although there were 7 new properties opened on September 30, and more than 10 properties were held in the Golden Week, there was no phenomenon that buyers used the holidays to watch large-scale houses. According to statistics, at present, there are 43,613 sets of new homes sold in Suzhou, and only 290 sets will be sold on October 1 and only 105 sets on October 2. The second-hand housing market seems to be more deserted. In the first two days of the Golden Week, the volume of existing housing in the city was zero.

  In Jiangmen, multi-projects launched “special room”. Among them, Midea · Agile Park Tianyi launched four sets of "special room", the average price of about 10,000 yuan / square meter; Swan Bay launched 10 sets of the lowest unit price of 9500 yuan / square meter "special room"; Country Garden · Zhonghai Yu Yuefu Launched 10 sets of "special room", the average price was 12,600 yuan / square meter; Country Garden Xijiang Huafu 147 square meters unit hit 5 percent discount.

  The Xiangjiang Emerald Oasis in the Guangzhou metropolitan area is playing an advertisement for “full-size single contract, as long as 10% down payment, and National Day limited time six major gift packs!”.

  Some insiders said that during the National Day holiday this year, the property market showed a large promotion, but wait and see more transactions. Even the actual price of the first product is significantly lower than the previous “blowing price”, but it is still affected by the consumption power of regional customers.

  Zhang Dawei said that the property market has been heavily regulated, commercial loans have continued to tighten, and the provident fund policy has begun to tighten in many cities across the country, making the market continue to wait and see.

Guangzhou Homesellers Concede on Price

iFeng: 二手楼市现买方市场特征 业主大多价格让步
The characteristics of the “buyer market” of the existing property market in Guangzhou have become more and more prominent. Many agents said that in September, the sentiment of existing homeowners in the region was not as strong as before, and most of them will accept the price concessions.

China Cuts RRR 1pc, USDCNY Breakout to Follow Despite Govt Assurances


The relationship between RRR and CNY is fairly straightforward because the Chinese monetary system remains heavily reliant on U.S. dollar liquidity. When U.S. supply is expanding, the PBoC increases the RRR to soak up liquidity. When U.S. liquidity is tight, the PBoC cuts the RRR. This latest cut should unleash a rally in USDCNY towards 7 and then a breakout to the upside.
Nikkei: China slashes banks' reserve requirements as trade war imperils growth
China's central bank on Sunday announced a steep cut in the level of cash that banks must hold as reserves, stepping up moves to lower financing costs and spur growth amid concerns over the economic drag from an escalating trade dispute with the United States.

The reserve requirement cut, the fourth by the People's Bank of China (PBOC) this year, comes as Beijing has pledged to expedite plans to invest billions of dollars in infrastructure projects as the economy shows signs of cooling further, with investment growth slowing to a record low.

Reserve requirement ratios (RRRs) -- currently 15.5 percent for large commercial lenders and 13.5 percent for smaller banks -- would be cut by 100 basis points effective Oct. 15, the PBOC said, matching a similar-sized move in April.

Economists predicted further cuts ahead.
There were no trade wars in 2008, 2011 and 2015. There was dollar pressure. It has returned in 2018. Trade war is another straw on the camel's back, but the dollar is the far greater concern. Even without trade war, China would be cutting its RRR.

Official Response

The People's Bank of China and SAFE both issued statements defending the currency today, but they doth protest too much. While the move is not intended to weaken the yuan, it will weaken the yuan. China is in an unenviable position, albeit one of their own making thanks to years of dragging their heels, because actions they take to prop up the economy will increase depreciation pressure on the yuan.

People's Daily: 央行:降准释放约7500亿增量资金 不会对人民币形成贬值压力
Whether the RRR cut will increase the pressure on the RMB depreciation, the above-mentioned person in charge said that this RRR has made up for the liquidity gap of the banking system, optimized the liquidity structure, and the monetary policy has not relaxed. The market interest rate is stable, the broad money (M2) and The growth rate of social financing scale is basically matched with the nominal GDP growth rate, which is reasonable and moderate, and will not form depreciation pressure. This RRR cut is conducive to promoting economic restructuring and promoting high-quality development. The economy is basically facing the consolidation of the RMB exchange rate. As a large-scale developing economy, China's exports have strong competitiveness. At the same time, China's economy is dominated by domestic demand, manufacturing industries are complete, industrial systems are relatively complete, import dependence is moderate, and the RMB exchange rate has sufficient conditions to maintain a reasonable balance. Basically stable at the level. The People's Bank of China will continue to take necessary measures to stabilize market expectations and keep the foreign exchange market running smoothly.
People's Daily: 外汇局:外汇储备规模有望在波动中保持稳定
Wang Chunying, spokesperson of the State Administration of Foreign Exchange, said that in September, China's foreign exchange market continued to maintain a stable overall trend, and the market participants' foreign-related transactions were more rational and orderly. In the international financial market, the US dollar index was basically the same as that at the end of August. The main non-US dollar currency exchange rate has risen and fallen, and the price of major national bonds has fallen slightly. The combination of exchange rate conversion and asset price changes has led to a slight decline in the size of foreign exchange reserves.

  Wang Chunying said that since the beginning of this year, in the face of the complicated external environment, China has adhered to the general tone of steady progress, deepened the reform and opening up, maintained a generally stable and stable economic situation, continued to optimize the economic structure, and flexible the two-way fluctuation of the RMB exchange rate. The company continued to strengthen, the balance of payments was basically balanced, and the scale of foreign exchange reserves remained generally stable.

  Looking forward to the future, Wang Chunying said that although the external environment still faces great uncertainty, China's economy has strong adaptability and ability to withstand external risks. The sound fundamentals will continue to provide a solid foundation for the smooth operation of the foreign exchange market. The comprehensive role of domestic and foreign factors, China's foreign exchange reserves are expected to remain stable in the volatility.
China announced its change in forex reserves today as well.

Xinhua: China's forex reserves edge down in September
China's foreign exchange reserves edged down 0.7 percent, or 22.7 billion U.S. dollars from a month earlier, to 3.087 trillion U.S. dollars by the end of September, the central bank said Sunday.

Wang Chunying, spokesperson of the State Administration of Foreign Exchange, attributed the contraction to a number of factors including exchange rate conversion and changing asset prices.

"Bonds usually take up a large portion of many countries' forex reserves," said Zhao Qingming, chief economist of derivatives institute of China Financial Futures Exchange. "The interest rate hike by the Federal Reserve has led to declines in bond prices across the world, which also influenced the assest reassessment of China's forex reserves."

In addition, Japanese yen weakened over 2 percent, resulting in write-downs in the yen assets China held with its forex reserves.

According to Zhao's estimates, China's forex reserves lost about 10 billion U.S. dollars in book value because of the weakening of yen.
This is the price of dedollarization. China has diversified its assets and many of those assets are depreciating. USDJPY has broken out to the upside and EURUSD is threatening to breakdown.
Chinese reserves depreciated $22.7 billion, but only SDR 6.5 billion. The SAFE spokesman is correct in blaming forex movements, but this is only good news if you are neutral to bearish on the U.S. dollar. If the U.S. dollar breaks out, Chinese reserves will depreciate. The risk of capital controls failing, a speculative attack or depreciation expectations running wild on the Mainland become increasingly dangerous risks as reserves dwindle.
Even without a crisis in China, a move through USDCNY 7.0 will intensify pressure on Chinese trade partners. The real pain for emerging markets has yet to begin.