Yuan Depreciation Not Helping As Population Leaves Third and Fourth Tier Cities

Ya Ho agency Guo Yi, director of marketing for the surging news that the continuing depreciation of the renminbi will make foreign investors to sell yuan-denominated assets more substantial outflow of funds. In terms of the impact of the property market, the limited impact of first-tier cities, as cities belonging to a net inflow of urban population, incremental population to support the purchase of consumer-tier cities.

But the larger impact is on third- and fourth-tier cities real estate market, bad local property market. Population exodus from third- and fourth-tier cities is clear, the property market is facing a big problem inventory pressure, driven by the depreciation of the renminbi and depreciation of assets, making further capital outflows, capital flows to first-tier cities or overseas, this will result in a vicious cycle.

iFeng: 人民币持续贬值影响楼市 利空三四线城市房地产

Why the Yuan Must Devalue: $700 Billion in Short-Term Loans Betting on Yuan Appreciation & Rate Arbitrage; One-Third of Reserves Is Hot Money

This post headline is a translation of the iFeng headline, a top story in the finance section. The article is originally from 岭峰资本. I've cleaned up the Google translation.

This year only three trading days, the offshore US dollar against the RMB exchange rate to appreciate 2.35 percent, more than two-year RMB deposits of interest. Last August 10 to today, the US dollar against the RMB exchange rate appreciation of 5.6% in the bank, while the same period the Shanghai Composite Index fell 10%. Devaluation trend has been very obvious. Why the RMB will depreciate?

To understand why the RMB will depreciate, we must first find out why the past ten years, the continued appreciation of the yuan. Over the years, China's rapid economic development, investment opportunities are everywhere, a lot of foreign capital inflows, pushing up its currency. On the other hand, China has become the world's factory, rapid export growth, the trade surplus more and more, also pushing up the exchange rate. From 2009 onwards, an important factor in an unknown supported the rise in the RMB exchange rate, currently also the factors that determine the renminbi exchange rate depreciation is a very determined event.

A few years ago, I was reading a shipbuilding enterprise's annual report and found significant abnormalities. The company's financial investment accounted for more than 60% of profits, exceeding the company's shipbuilding business. The balance sheet had more than 10 billion yuan of investment in a large number of domestic financial trust products supported by a large number of foreign US dollar loans. The company used RMB collateral domestically to obtain a full amount of US dollar letter of credit, the equivalent of financial leverage. The parent company's overseas subsidiaries relied on the guaranteed letter of credit in US dollars from teh domestic banks to obtain short-term US dollar trade loans from foreign banks. Then the overseas subsidiaries found various ways to move the capital into China, allowing the parent company to earn profits from domestic investments.

Six-month USD business loan interest was approximately 3%, and if the domestic investment financial trust products yield a 10% return, coupled with the appreciation of the yuan against the dollar, and then multiplied by leverage, corporate earnings are (7% + revaluation) x leverage. Even assuming conservative 2X leverage, the RMB from 2010 to 2013 appreciated around 1.4% to 5.0% each year, the company's rate of return would have been at least 20% or more. Such a rate of return during an increasingly difficult time for industry is very impressive. No wonder the company's executives believe this new business was low-risk, high-return, and vigorously expanded. These industrial bosses do not understand finance, really do not understand the financial risk, but the first taste of financial leverage arbitrage was sweet. Once the tasted blood, working hard at the industrial business to earn a small profit was soon disdained.

This is just a single business. I checked the Bank for International Settlements statistics, these arbitrage funds are higher than one trillion US dollars. More dangerous is that nearly 70% of this one trillion in arbitrage funds is backed by short-term loans of less than one year that must be constantly rolled over.

More than one trillion US dollars is not a small number, it's about one-third of forex reserves. That is to say about one-third of reserves is hot money arbitrage, at the first sign of trouble it will leave. The returns in the real economy are less and less, large inflows of foreign capital are gone, simply relying on the trade surplus has been unable to offset the pressure of capital outflows, the RMB exchange rate begins to depreciate. The more than one trillion US dollars in arbitrage funds is facing extinction. First, since the Federal Reserve raised interest rates, interest on overseas dollar loans rose. Second, domestic investment products offer ever lower rates of return. The key is that yuan devaluation reverses the arbitrage, the leverage becomes leveraged losses. As a result of the trend reversing, arbitrageurs must flee. This situation recently happened in the A-shares market. Speculators wantonly used high leverage financing, pushing the stock market higher, get high returns several times over, but in the stock market decline they collectively stampeded away.

If the trend reversal is slow and orderly and speculative arbitrage funds can gradually exit, devaluation pressure may be smaller. However, the law of financial markets is to rush. In the book "Financial Alchemy", Soros wrote, "Even more important, when a change in trend is recognized, the volume of speculative transactions is likely to undergo a dramatic, not to say catastrophic, increase. While a trend persists, speculative flows are incremental; but a reversal involves not only the current flow but also the accumulated stock of speculative capital. The long the trend has persisted, the larger the accumulation. There are, of course, mitigating circumstances. One is that market participants are like to recognize a change in trend only gradually. The other is that authorities are bound to be aware of the danger and do something to prevent a crash." For the moment, arbitrageurs had already recognized the change in trend and after the central bank made various efforts that shows they have no will nor the ability to maintain the stability of the RMB exchange rate at the present level.

What is a real opportunity? When market participants act involuntarily, when they have to do something, it is the real opportunity. Soros said reflexivity is this case. During a bubble, participants act cannot help but join in, to not participate will cost you the opportunity to make big money, if you do not participate someone else will take your place. When the bubble bursts, if you do not run, others will run, if you do not run you will be trampled to death. The current exchange rate, if you do not exchange at it, others will, think that there is more than one trillion US dollars in arbitrage funds that need to swap, right now the price is really very favorable. These arbitrage funds, faced with extinction, have to buy dollars, the are "desperate for money." And overseas banks are not philanthropists, always have an umbrella in the rain, will call back the dollar loans. As a result, devaluation trend over the next few years is very clear.

Why the RMB will depreciate? In addition to economic factors, the most important thing is more than one trillion US dollars of reverse arbitrage funds. Speculators enjoyed a feast in previous years, with easy access to the highly leveraged profits, pushing up the currency. Today, speculators flee in panic, let the currency depreciate, let all hold RMB assets holders pay the bill.

iFeng: 人民币为何贬值：超万亿美元套利资金流出

PBoC Says All Is Well, Can Handle Yuan Speculators

RMB exchange rate remained generally stable against a basket of currencies in 2015

Further enhancing the decisive role of market and the two-way flexibility of RMB exchange rate is consistent with the direction of the RMB exchange rate regime reform. The RMB exchange rate will reflect, to a larger extent, the dynamic of market supply and demand, and refer to a basket of currencies, and it will move in both directions. Nevertheless, it is worth noting that the market force for the exchange rate to follow is the supply and demand in relation to the real economy, not the pro-cyclical and leveraged speculative forces on the foreign exchange market. Speculators always seek to gain from their speculative behaviors. But these transactions are not based on demand in the real economy and do not reflect real market supply and demand. They only lead to abnormal fluctuations of RMB exchange rate and send misleading price signals to the market. PBC is capable of maintaining the RMB exchange rate basically stable at an adaptive and equilibrium level against those speculators.

In 2016, the RMB exchange rate regime will continue to be based on market supply and demand and with reference to a basket of currencies. We expect that the exchange rate will move in both directions with flexibility. Moreover, the RMB exchange rate policy will also play a bigger role in the automatic adjustment of the balance of payments.

China Has Yet to Shock the World

This post is a bit of continuation of Prepare for Currency Chaos, why I expect things will be more volatile than generally expected.

ZeroHedge: A Shocked Wall Street Reacts To China's "Surprising" Devaluation

Sean Callow, Sydney-based FX strategist at Westpac:

Today’s fixing was a big surprise, and impression is that upside risks to USD/CNY have grown
Allowing the yuan to trend lower against the dollar this year is consistent with the need to loosen domestic financial conditions to support growth
PBOC may not tolerate widening CNY-CNH spread for long since it will encourage capital outflows

Tommy Xie, Singapore-based economist at OCBC:

PBOC’s actions are conflicting: there was suspected intervention yesterday and sentiment stabilized, but it set such a low fixing today
PBOC may be taking dollar demand into consideration: usually at the start of a new year, retailers’ and corporates’ foreign-exchange requirements are higher
Central bank may be using the fixing to convey a message to the market that it doesn’t want the RMB index to be too strong

Zhou Hao, Singapore-based senior economist at Commerzbank:

Lowered-than-expected yuan fixing today shows authorities will tolerate more weakness for the time being
Will help loosen monetary conditions; still, risk of capital outflows could increase concurrently
Increasing outflow pressures may rule out excessive drop in yuan

Liu Dongliang, Shenzhen-based senior analyst at China Merchants Bank:

Yuan depreciation this week aims to stabilize the yuan index amid a stronger dollar environment
Expects 5%-10% depreciation by end of the year, though this depends on the pace of PBOC’s intervention and health of macroeconomy

ZH is correct, there's nothing surprising about what is happening with the yuan. Even if you don't think it is likely, a significant devaluation in the yuan is probable enough to warrant a speculative bet at the right price and it would be prudent to be hedging against this risk if you're exposed to it. A surprise here is the the timing. The Swiss National Bank suddenly ending its peg with the euro in January 2015 was a surprise on that day, but the act itself was not a surprise. It was forecast.

we venture that the SNB will sooner or later be forced to permit the franc to appreciate and thus to enrich the holders of low-priced, three-year call options on the Swiss/euro exchange rate. It's a long shot, to be sure--the options are cheap for a reason--but we judge that the prospective reward is worth the obvious risk.

A similar move is possible in China. Even without devaluation risk, the market is pointing towards depreciation.

In the ZH yuan article is this chart:

Whenever the spread is in the green there, when offshore yuan (CNH) is weaker than onshore (CNY), there is a incentive to pull USD out of the Mainland. There's also incentive for Chinese U.S. dollar earners (exporters) to hold their U.S. dollars outside of the China. We often think of currency outflows, but there is also a lack of inflows. A great way to avoid capital controls is to never fall under their control. Why sell your USD earnings for 6.5 yuan in Mainland China, when you can sell them for 6.7 yuan in Hong Kong? Or simply sit on them and wait for the yuan to drop further before exchanging your dollars.

The arbitrage opportunity between CNY and CNH is difficult to close due to capital controls. Nearly everyone views CNH as the real price for yuan because it is a market price and capital controls make it difficult for to arbitrage the price. The recent crackdown on banks is a way to keep them from earning risk free profit at the expense of the nation's FX reserves, which is possible because currency policy has left the vault door wide open. This is a good temporary policy if the trend is transitory, but lower CNH hardens depreciation expectations. The policy itself could backfire if the arbitrage opportunity doesn't close.

China devalued the yuan one day in 1994. From the viewpoint of policymakers, it worked. The calculation is different today due to the size of China's economy. Perhaps they will avoid a big move because of perceived political risk, perhaps they won't.

Conclusion

The big banks may be putting out optimistic yuan forecasts because they fear reprisals from Chinese officials, but I don't see significant depreciation expectation in the market (looking at CNH futures). Between the talk of orderly decline and "surprise" at a 2% move, this looks like the "consensus" view. Bearish yuan outlooks are growing, but maybe not a lot of money is being put behind those words or "the market" is ignoring them. HK futures are pricing in depreciation of about 4.3% in CNH out to March 2017. That is less than 7% depreciation in CNY.

Apparently the options market is heating up: Options Traders See Yuan Collapse Continuing In "Dangerous Situation For Policy-Makers"

Contract prices indicate a 79 percent probability that the currency will weaken this year and 33 percent odds that it will drop beyond 7 per dollar, a level last seen in 2008, according to Bloomberg calculations. That’s up from 15 percent at the start of December and comes as the central bank shows signs of reining in its support for the exchange rate in the face of rising intervention costs and sliding exports.

“We’ve seen explosive growth in demand for options betting the yuan will weaken as clients seek protection against further depreciation," said Frank Zhang, Shanghai-based head of foreign-exchange trading at China Merchants Bank Co., which trades yuan options. "The situation won’t get better until market sentiment stabilizes in the spot market, which isn’t going to happen in the next few months."

Stability in the currency regime is over. Shifts from stability to volatility are not stable transitions, they are chaotic. Don't be surprised by what happens.

ChiNext Plunges 8.7%, Shanghai 7.3%, Market Halted After 13 Min of Trading, Closed for Day

iFeng: A股创历史最快收盘记录 交易13分钟直接收盘

CASS Forecasts National Home Price Increase

So much for the doom and gloom report: 中科院发布经济预测：房价仍将延续稳增态势

Today, the Chinese Academy of Sciences Research Center forecast released the 2016 Chinese economic forecasts, projections indicate that in 2016 China's economy will maintain stable growth, GDP growth at around 6.7%, compared with 2015 decreased by about 0.2 percentage points. For we are more concerned about the housing problem, the report is expected in 2016 real estate prices will continue steady growth trend in 2015, the average selling price of commercial housing forecast results for 7010 yuan / square meter, an increase of 3.9%.

Prepare for Currency Chaos

FT: China markets stabilise on state intervention

“At this point everyone expects (renminbi) depreciation, but the central bank doesn’t want to let things get out of control. They’re focused on preventing systemic risk,” said the head of forex trading at a Chinese bank in Shanghai.

Lars Christensen: PBoC should stop the silliness and float the RMB

Instead it is about time that PBoC either let the Renminbi float completely freely (which effectively would cause a significant depreciation of RMB) or implement a large devaluation – for example 30% – so to avoid any speculation of further devaluations and then introduce a peg to a basket of currency as hinted in December.

The problem with the present policy is that everybody in the market realizes that this is what we will get eventually and that has caused an escalation of the currency outflow from China and this outflow is likely to continue until the PBoC bites the bullet and introduce a completely new monetary regime. This halfway house will not stand for long and if the PBoC keeps fighting it the central bank will just do even more harm to the Chinese economy and potentially also cause an major banking crisis.

A 30% devaluation takes the Chinese yuan back to its hard peg level of 8.28 to $1. Lots of ways to profit from this, including bets on Trump winning the presidency, carnage across emerging markets, possibly Saudi Arabia and maybe even Hong Kong dumping their pegs as the world de-dollarizes.

The official forecast here is still that the U.S. dollar system dies by deflation. Fiat currency burns from the periphery to the core. The fire rises in 2016 and the transition to a new financial order will take many years to play out. If the old U.S. dollar cycles hold and this dollar bull tops out in 2017-2019, it could take until the mid-2020s before the U.S. dollar breaks its lows set in 2008. The strains will be visible much earlier, but a crisis in the U.S. dollar itself may not unfold until then.

From 2013: Here Comes the Global Rebalancing; What Happens to USD/XXX If XXX Goes to Zero?

The big wildcard is China.

The yuan is moving in the wrong direction. China targets hot money inflows with new forex rules

Indeed, the hot money is showing up as faster money supply growth: China April New Yuan Loans, Money Supply Exceed Estimates. Something will have to give in China.

All the while, the U.S. dollar and U.S. assets will absorb capital seeking a safe haven. It doesn't matter that gold should be a safe haven in this scenario because so many investors have gotten it wrong. The gold bulls nearly all expect U.S. hyperinflation and a major U.S. dollar rally could crush the gold bulls, while the rest of the market is anti-gold and will look to other assets. Therefore, I can foresee a massive decline in gold prices if this scenario plays out. It will be the buy of at least three lifetimes because a U.S. dollar bull will be temporary as the U.S. will eventually succumb to the deflation too, but investors may continue selling gold even when it reaches insanely cheap levels.

This was how the greenback was lining up with history back in late 2014:

Here it is today:

Possible correction coming up before a run to 120 or higher?

Also from 2013: Death of the U.S. dollar greatly exaggerated; Historic U.S. dollar rally still likely

The U.S. dollar is the core of the global financial system and global powers, including China, will seek to preserve it as long as possible. As each nation passes through hyperinflation, however, they become freed from the global financial system via devaluation. At that point, the cost of launching a new financial system have been paid up front. As each nation goes through hyperinflation, it puts the U.S. dollar in a more untenable situation and makes a nation more likely to defect to a new system. Since gold will likely be a part of a new financial order, even if there is deflation it is wise to obtain physical metal, but the ultimate denouement of the U.S. dollar may be years away.

Key line in 6.8 yuan to $1. Beyond the only reference point is 8.28 yuan per $1 peg that existed for more than a decade before ending in 2005. A 5% drop in CNY will take out the 6.8 level. If the drop in USDCNH was proportional in percentage terms, it would trade above 7.

Gold would go below $1000 if the deflation scenario plays out, but the yuan price of gold may rally.

Reuters: Foreign banks in China could face curbs if they snub gold benchmark

China has warned foreign banks it could curb their operations in the world's biggest bullion market if they refuse to participate in the planned launch of a yuan-denominated benchmark price for the metal, sources said.

...A yuan fix would not be seen as an immediate threat to the gold pricing dominance of London and New York, but it could gain momentum if China's currency becomes fully convertible.

Or say, amid a yuan devaluation and collapse in dollar gold prices driven by the paper market, the yuan spot market traded substantially above NY or London paper prices, such as 10-20%. Then which is the real market?

China and other emerging market central banks aren't alone in feeling the heat: Sweden Prepares For FX "War" With Bloodthirsty Hedge Funds

“The market seems eager to challenge the Riksbank and there are rumors that many foreign hedge funds are long kronor and see a weakening of the krona after a possible intervention as a good buying opportunity,” he said. Exporters are also “structural krona buyers” and will probably exchange their foreign revenue after a dip, he said.

Krona has been fighting depreciation versus the U.S. dollar, making a possible triple bottom in 2015.

Take the volatility trade in 2016.

Hong Kong Retail SARS-Like Decline

SARS was a temporary overblown event.
Barron's: Hong Kong Retail Sales To Record Worst Slump Since 2003 SARS

Hong Kong retail sales is on track to record 3% fall in 2015, the worst since the SARS epidemic in 2003.

Chinese Govt Intervened in Equity Market Again

Bloomberg: China Said to Intervene in Stocks After $590 Billion Selloff

China moved to support its sinking stock market as state-controlled funds bought equities and the securities regulator signaled a selling ban on major investors will remain beyond this week’s expiration date, according to people familiar with the matter.

Government funds purchased local stocks on Tuesday after a 7 percent tumble in the CSI 300 Index on Monday triggered a market-wide trading halt, said the people, who asked not to be identified because the buying wasn’t publicly disclosed.

More at the link.

Kyle Bass: China Devaluation Best Opportunity Next 12-18 Momths

Jump to 10:40. Readers will be familiar with the thesis.
ZH: For Kyle Bass This Is "The Greatest Investment Opportunity Right Now"

Home Price to Income Ratios Show Housing Still Unaffordable in Top Tiers

The income to price data is a bit old, but year-on-year prices are climbing faster that wages in many top cities.

As shown in Figure E-House Real Estate Institute before "35 cities nationwide price earnings ratio list" list, Shenzhen, Xiamen, Beijing rushed into the top three, 35 cities the average price earnings ratio of 8.7. It is worth noting that in 2014 the country 35 cities ranked in the price earnings ratio, price earnings ratio of Shenzhen more than 20, ranked first, followed by Xiamen, Beijing, Shanghai, Guangzhou, Hangzhou and Fuzhou, a few cities, price earnings ratios reached 15.5,14.5,11.9,11.8,10.8 and 10.8. Shenzhen, for example, his price earnings ratio of 20.2 in 2013, Shenzhen's price earnings ratio is still only 18, has now soared to nearly 22.2, which means that in Shenzhen, a city reach average level of family income, if the purchase of a Suite 100 square meters of ordinary commercial housing, in fact, to spend 20 years to get what you want.

The article says a number above 6 indicates a bubbly conditions in developed markets.

China's wealth and income disparity doesn't make average salary the best tool, but a quick interpretation of the data is that third- and fourth-tier city homes are affordable, but few want to buy because prices are falling (supply exceeds demand). First- and second-tier homes are unaffordable and rising in price because prices are rising (demand exceeds supply). Developers are already losing money in some third- and fourth-tier cities:

From now, the national property market differentiation is still evident after large stockpile of some second-tier cities and the four-tier cities, inventory is still on the rise this month, a large housing prices nationwide marketing official pointed out. "Housing sales prices are market-oriented operation, if the stock can not be clearing, then the developer must have been long concession, and now even some of the four-tier cities are already selling at a loss, basically no room for price cuts."

iFeng: 2016年房价是否会降价 降到老百姓买得起？

Analog Holds: Shanghai and Shenzhen Suspend Trading, Yuan Slides

Originally posted 2016-01-04 8:30 PM Beijing Time. Update below.
Bloomberg: China Halts Stock Trading After 7% Rout Triggers Circuit Breaker

The world’s second-largest stock market began the year on a down note after data showed manufacturing contracted for a fifth straight month and investors anticipated the end of a ban on share sales by major stakeholders at the end of this week.

From October 21:

Update: Government decided to save the market again: China regulator may restrict stock sales by major shareholders

China's securities regulator said on Tuesday it is studying rules to regulate share sales by major shareholders and senior executives in listed companies.

Coal Production Cuts Imminent, ￥30 Billion in Transition Aid For Capacity Cuts

Steel shutdowns are anticipated at the start of 2016, see Chinese Steel Industry "Sliding Into The Abyss"; Chinese New Year Could Bring Mass Bankruptcies. Now talk of coal production cuts is hitting the headlines.

Background from The Hindu: End of China’s super-boom spells pain, no end seen yetEnd of China’s super-boom spells pain, no end seen yet

Among industrial commodities, iron ore prices have tumbled 40 per cent 2015 this year due to global oversupply and shrinking Chinese steel demand, for a third year of losses, and the rout is seen stretching into 2016. In coal, thermal prices fell almost a third in 2015, hurt by waning Chinese demand and the rise of renewable energy, with Goldman Sachs and the International Energy Agency saying China's coal demand has peaked.

Both iron ore and coal have shed around 80 percent in value since their respective historical peaks in 2011 and 2008.

In 2014, the state-owned coal companies managed to earn 30 billion yuan in profits. In 2015, this profit swung more than 50 billion yuan in the other direction, to a 22.3 billion loss——as of October. Profits are down 62% and 80% of firms are losing money.

President of the China Coal Industry Association Wang Xianzheng on December 3, 2015 meeting of the National Coal Trade Fair, said the first 10 months of 2015, the national scale coal enterprises realized profits fell 62%, industry loss of more than 80%. State-owned coal enterprises overall profitability of 30 billion yuan from the previous year to a loss of 22.3 billion yuan, Heilongjiang, Jilin, Liaoning, Hebei, Shandong, Anhui provinces and six industry-wide losses.

The government is already targeting overproduction in 2016 across a range of industries and a blueprint is already in place to shutter half of the mines by 2020:

Faced with such a grim situation, the coal industry associations and relevant departments have formed the mine exit mechanism of preliminary policy recommendations, which will promote market-oriented manner to resolve excess capacity. Earlier, in January 2015, China Coal Industry Association released the "coal industry development situation and" Thirteen Five "Outlook" will be mentioned in the "Thirteen Five" period to continue to promote corporate mergers and acquisitions, 2020 , the number of coal mining companies to reduce the country from the current 6,390 to less than 3,000. This means there will be more than half of coal mining enterprises have been eliminated.

Of course, the problem of overproduction has been known for years with no results thus far...but the market is going to force the government's hand now. If creditors back off from funding these firms, they will be solely on government support:

Steel Overcapacity in China is a "disaster area." At present, China's steel production capacity of over 1.1 billion tons, more than 300 million tons of excess capacity; in addition, cement, plate glass, aluminum, etc. are concentrated industry overcapacity. In the A-share market, some companies in these industries to become Gouqietousheng "zombie companies." Wind data from the display, the current 266 "zombie" listed companies, including 197 in the iron and steel, nonferrous metals, paper , textiles, shipbuilding, petrochemical, chemical, machinery, cement, coal and other traditional manufacturing companies represented. These "zombie companies" because of poor efficiency, mainly rely on bank and government support to take care of barely survive.

The government has spoken of aid to help displaced workers and local economies hit by closures. A rumored figure is 30 billion yuan:

MIIT one person to the Weekly Times reporter revealed that the size of the first phase of the special funds may be 30 billion yuan, mainly for social security resettlement withdraw excess industry employees, the focus is to promote the "zombie companies" to exit.

But until press time reporter, how to distribute the funds to 30 billion and other issues, the relevant departments have not developed specific criteria.

A framework for dealing with the problem is in place, but will the government pull the trigger? In some cases (likely most), government firms are the key to solving the problem of overproduction:

However, the small colliery production in Jixi coal industry accounted for very little of the energy, the real impact of the entire coal industry production capacity is Dragon Coal.

Data show that Dragon Jixi Coal Group coal production in 2014 was 13.361 million tons, accounting for nearly 80% of the total coal production. As a large state-owned coal enterprises, Dragon Coal Group to move production capacity even more important.

Lee told reporters to Die Zeit said: "Due to the current coal market 'volume and price' influence, PBM is now very difficult province which has been proposed to reform it, the first step is to go now surplus. personnel shunt placement. "

Lee calls the "PBM" is the Long Branch Jixi Coal predecessor. 2004, Dragon Coal Group was formally established and reorganized Hegang, Jixi, Shuangyashan and Qitaihe "four coal city" of the Bureau of Mines, and master the vast majority of high-quality coal mines. But local residents will still be "PBM" argument retained.

Dragon Coal Group was first established just in time for the coal industry recovery, the once "do nothing to boil," the four PBM pull back from the dead line. But with the decline of the coal industry as a whole, from 2012 onwards, Dragon Coal Group started to suffer losses. Public reports, Dragon Coal Group 2012 net loss of 800 million yuan, 2013 loss widened to 2.3 billion yuan, in 2014 a loss of nearly 6 billion yuan. In the first eight months, the Dragon Coal Group reduced losses by more than 1.1 billion yuan year on year. As of June 11, Dragon Coal Group Coal Floor backlog of capital has reached 1 billion.

While successive losses, the staff has become a burdensome knife stabbing Dragon Coal Group in the heart. At present, the Dragon Coal Group employees total 240,000, this figure is higher than the 10 times larger Shenhua Energy's 214,000 employees.

Meanwhile, the Dragon Coal Group also for huge numbers of retirees and disabled workers, survivors payroll. Data show that as of the end of August 2015, Long Branch Hegang coal workers in the post 48,436 people, have to pay more than the total number of 63,400 retirees outside pension insurance, as well as disabled workers, survivors and other related costs.

Cuts hit the coal machinery industry hard. Already, some firms are subsiting on maintenance contracts:

"At present, about half of the workers did not live dry, it does not take a salary. Now the coal industry downturn, the machine is very hard to sell, only to pick up some repairs done live." Jixi Coal Mining Machinery Co., Ltd. who has more than 20 years seniority workers Wang (a pseudonym) says to reporter.

The coal industry has gone through a downturn before...in the late 1990s.

In fact, the coal industry is not the first winter hit. In the last century, the coal industry has experienced a trough. The last round of coal prices turning point occurred in 1997, when the annual profits of coal enterprises above designated size was 50.6 billion yuan. But a year later, this figure will turn profit into loss becomes -4.26 billion deficit in 1999 to further expand and become -18 billion.

But in the laws of the market, backward production can be gradually eliminated. 1998--2001 years of coal trough period, a total of 58,000 coal mines were forced to shut down, accounting for 73% of the time the total number of small coal mines. In 2002, the coal industry in the country to slash capacity situation down, and ultimately the market reversal, and ushered in after the "golden age."

However, in the eight years through the "golden age" total 3.1 trillion huge investment, the coal industry overcapacity situation again. Huge production over 50 million tons of capacity has far exceeded the consumption of coal, "to capacity" has been back on the agenda.

iFeng: 六省市国有煤炭企业全行业亏损 中央拨款安置

Taiwan Going Nationalist Too

In Taiwan, the DPP is a left-wing party under standard political measures of the past 50 years, but in the new world of identity politics, they are far-right nationalists poised to win a landslide victory on January 16.

Toronto Star: China warns of ‘complex changes’ with Taiwan’s upcoming presidential election

China on Thursday warned of a serious disruption of ties with Taiwan as the island’s voters appear set to elect a new president with a far more skeptical view of dealings with Beijing.

The underlying shift is caused by Taiwanese nationalist education. Just as China began indoctrinating students with nationalism in the 1990s, Taiwan began replacing Chinese history and identity with Taiwan history and identity in the 2000s. A whole generation raised under the new identity is beginning to vote.

The Diplomat: Taiwanese Students Occupy Education Ministry Over Textbook Controversy

Dozens of Taiwanese students briefly occupied the Ministry of Education (MOE) in Taipei last night to protest a series of “minor” adjustments (課綱微調) to school textbooks which activists and academics claim are Sino-centric and whitewash the authoritarian period in Taiwan’s history.

Taiwanese politics are more subtle for obvious reasons, but the underlying shift in Taiwan is not fundamentally different than in Germany or Holland or the United States. Facts on the ground vary, but the political shift is in many ways similar. Identity is the core issue in politics now.

Denmark Initiates Temporary Border Control With Germany

In addition to borders with Germany, Denmark will fine Swedish vehicles carrying illegal migrants:
DR.DK: Danmark indfører midlertidig grænsekontrol

As the clock struck midnight expanded Swedes ID checks at the border. This means, among other things, that the Swedish law on carrier liability is in force.
Conveyor responsibility means that DSB, bus companies and shipping companies must ensure that none of their travelers crossing the border illegally. Where it happens, the carrier may risk fines of up to 40,000 Danish kroner.

China National Radio: No Hope of Home Price Rise in 3rd or 4th Tier

iFeng: 2016房价走势大研判：三四线城市无上涨可能

Third- and Fourth-Tier cities housing prices may not rise

Rates of change is also highly anticipated. In 2015, the central repeatedly referred to the inventory of the property market, the Central Economic Work Conference also encouraged developers to cut prices, indicating that the property market markdowns may be inevitable. However, the latest statistics have shown that, in December 2015 in malls and housing prices over-year rise for the fifth consecutive month, and rose to continue to expand. Whether the property market is up is down it? Yao believes that in 2016 the property market differentiation will continue, first-tier cities and the hot urban, house prices could steadily, but the third- and fourth-tier cities housing prices did not rise possible.

Yao: Real estate inventory Nationally, home to this one now is 400 million square meters, mainly concentrated in the four-tier cities. Obviously, four-tier cities so much inventory, prices are unlikely to rebound it.

Tan Yaling says to expect greater yuan volatility. Depreciation, but not in a straight line:

Tan Yaling: 2016 RMB trend may be bilateral shocks, the magnitude of the devaluation will continue to expand, but it will not be a straight line depreciation of, there may be rallies along with sell-offs. Our central bank will take management tools, effective interventions on the exchange rate.

Beijing Rents Climb 7.2% in 2015

The chart below shows the average rent in Beijing and the annual change.

iFeng: 北京住宅租金上涨7.2% 5年来涨幅首次回升

Why Doesn't Spain Annex Portugal?

And other popular web searches by Chinese netizens.

CREIS: New Home Prices Close Out 2015 With Strong Gain

CREIS 100-city survey shows an increase of 0.74% for the month of December; 4.15% yoy. This is a continuation of the monthly price increase, which has been stronger and steadier than the official NBS 70 city survey.

Of the top 10 cities: prices increase 1.14% in December. Shenzhen new home price increased 3.53% on the month and the worst of the top 10, Chengdu, saw prices rise 0.05%. Year on year the gap was enormous: Shenzhen prices rose 38.7% from December 2014 to today, while Chengdu saw its prices fall 3.3%.

The biggest increase overall was in Xiamen: new home prices rallied 3.56%. Baoji in Shaanxi tied Shenzhen with a 3.53% increase. Kunshan in Jiangsu saw a 3.10% rally.

The worst performer was Sanya: prices fell 2.30% in December.

The split between cities with rising, falling and flat prices was 51-45-4. This breakdown has fluctuated but there's no rising or falling trend. The rise in home prices is due to the first-tier and upper second-tier pulling the average higher.

100-city Survey data: 2015年12月中国房地产
Google Translated: 100-city Survey Data page

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