Fresh Reports of Real Estate Rage Signal Turn in Chinese Housing Market

Chinese homebuyers have demanded to return their housing in 2008, 2011 and 2014: each time the market price declined, but real estate rage first appeared in 2011. There was a report of real estate rage in Shanghai. The developer had slashed prices by one-third and homebuyers who purchased days or weeks responded by smashing up the sales office.
"My house's value has dropped by as much as one-third, and we have lost some 10,000yuan," a homeowner surnamed Yang told Shanghai Daily.
Real estate rage returned in early 2014. Angry homeowners in Hangzhou were upset for the same reason as those in Shanghai: the developer slashed prices. They flooded the developer's office, but police were quickly on the scene.

"In 2008, 2011, 2014, there were three rounds of very obvious check-outs in the country. As long as the house price fell, the pre-purchasers began to reduce their prices." Zhongyuan Real Estate pointed out that the phenomenon of price reduction "rights" It has appeared from time to time, with 2011 being the most typical.

According to public information, since September 2011, Beijing, Shanghai, Nanjing, Ningbo and other places have continued to reduce prices and defend their rights. The sales offices of various projects such as Vanke, Longhu and Hesheng have been destroyed, and some project owners have also physical conflict with security guards.
In September, there were several reports of "real estate rage" across the country. Instead of smashing offices, homeowners are protesting outside to "protect their rights" but the cause of their anger is the same: developers slashing prices to move inventory. While this evidence is anecdotal, there have been many reports about developers moving inventory to recoup cash. More importantly, both the 2011 and 2014 "real estate rage" incidents were coincident indicators of a housing market top.

Sohu: 房子降价业主就“维权”,房地产要凉透了
Here's the most widely covered incident in Hefei. A project by the Taihe group is being protested by homeowners who paid 19,000 yuan per square meter after the company began selling homes at the promotional price of 15,000 yuan per sqm.
The latest happening, the lively event is to count the Hefei yard under the Taihe Group. On September 20th, the news of the project “discount sale” was spread from the average price of 20,000/m2 to 15,000/m2, the lowest was 13,000/m2, and the discount range was 25% to 35%.

After the news came out, the owners collectively went to the sales office to defend their rights. This matter was also confirmed by the Taihe Group. "When the price was raised, the owner did not pay the money to us, but the owner of the price reduction came to defend the rights." A person in charge of the Taihe Group reported to the 21st Century Business Herald on September 25.

The person in charge said that the price cuts really existed. Just in the past Mid-Autumn Festival, the Hefei Yard chose to reduce the price of a certain apartment by 4000 yuan/square, but then attracted the old owners to collectively defend their rights.

Because of the difference in floor plan, orientation and floor, the price of different units in Hefei Yard has a price difference. The average transaction price in the previous period is about 19,000. At present, only the individual units are used for promotion, which is reduced to about 15,000, but the full subscription is required. .
Binjiang New City in Hangzhou was a similar scene.
This project is located in the Dajiangdong Industrial Cluster of Hangzhou City. The second-phase pre-sale certificate was announced in September. The first-phase owners found that some low-rise large-sized houses had a large price difference with the same room number, up to 350,000 yuan.

This project was previously purchased by Yaohao. It has launched two batches of lottery houses. The first phase is in late August, 36, 40, 41 buildings, 382 sets of houses, and the area of ​​90 square meters is 16,600 yuan/square meter. The average price of 90~140 square meters is 17,200 yuan / square meter.

The second phase of the recent registration is to launch 27 buildings and 28 buildings with a total of 155 suites. The number of units is 93~115 square meters, 90~140 square meters, and the average price is 16822 yuan/square meter.

From the average price point of view, the two opened 90~140 square meters, the price difference is 378 yuan / square meter. However, some netizens have carefully checked that the overall price of the second phase is lower by 887 yuan/square meter.

On September 15th, about 10 first-time owners went to the future coastal sales office to “defend rights” and demanded to make up the difference, send the parking space or check out the whole amount.
The article points out that developers aren't willingly slashing prices. Developers are under financial stress and trying to recoup capital:
Therefore, in fact, it is not the developer who wants to cut the price. It is completely forced by the situation. In order to recapture capital, price reduction promotion is a common means used by developers.
21st Century: 房地产价格回归成交低迷,楼市“博傻”时代已过
As early as June of this year, the sales office of the K2 Shili Spring Breeze Project in Tongzhou District of Beijing was once surrounded by the owners who asked to return their houses. The reason was also that the price of the project was lowered.

Throughout the history of real estate development in China, the phenomenon of owners defending their rights due to price cuts has occurred from time to time, and most of them appear when the market goes down. The sales offices of large-scale housing companies such as Vanke, Poly, Longhu, etc. have all encountered "siege."
Having learned from the past three cycles, developers are using indirect price cuts to hopefully avoid triggering real estate rage:
This year's market situation is considered similar to the above three years. Under the prolonged control, developers are increasingly demanding cash flow and collection rates, and price cuts have become a viable option.

However, some real estate developers have recently reported to the 21st Century Business Herald that “direct price cuts” are usually the last choice for enterprises. Because many years of trading experience tells home buyers, direct price cuts usually lead to similar disputes.

"If you have to make adjustments, the first choice is 'downgrade'." The person said that "downsizing" refers to lowering the standards for decoration, greening and other supporting facilities on the basis of not adjusting the price, thus making up for Loss of profit margin.

At the same time of "downsizing", some projects will also reduce prices in disguise, such as reducing the gift area, increasing the price of parking spaces, and improving the price of fine decoration. These practices can also achieve the goal of making up for profit margins. For the first time, the project can choose to open low (low price opening), or price concession strategy. Most of the recent price concessions have occurred in the first open project.

The person said that choosing a direct price cut usually means that the project has “no choice”, which is a “already lost profits, and now lose reputation”.
Price cuts often follow in the wake of inflated prices as developers cashed in on the bubble:
There are many reasons for direct price cuts in real estate projects, but in general, most of them have the phenomenon of excessive pricing in the early stage.

A housing company in Changsha told the 21st Century Business Report on September 28 that in the past year, housing prices in Changsha have risen sharply, and some projects have increased their prices by more than 50% within half a year. Although there are no good quality projects in good locations, some of the lots and poor quality projects have followed suit.

This year, Changsha’s control policies have been deepened, and the implementation of “limit orders” has been particularly severe. The price of the project in a good location can be maintained, and suburban projects of poor quality have to undergo price correction.

Yan Yuejin, director of the think tank center of Shanghai Yiju Research Institute, called this adjustment "return" because "the price increase in the previous period was a irrational behavior." Under the pressure of regulation, the price bubble must be squeezed out.

He said that in China's real estate market, demand has never been released smoothly. Affected by regulatory policies, buying up mentality, etc., market demand usually shows a concentrated release, and then concentrated shrinkage. The supply side response often lags behind the demand side. Therefore, when market demand shrinks, many projects have to adjust the price strategy.
Analysts see reason for optimism given tight supply in top-tier cities and low inventory in lower-tiers:
First- and second-tier cities still have support
As the regulation of the property market continues to deepen, price adjustments may continue to spread. Yan Yuejin pointed out that the decline in project prices will bring more wait-and-see mood. Some housing companies with tight capital conditions will add their projects to the price reduction. He believes that similar cuts will occur in October. But it does not rule out the possibility of a price rebound at the end of the year.

Ouyang Jie, senior vice president of Xincheng Holdings, agrees with the above view. He pointed out that the risk of large-scale price cuts does not seem to be high. This is because: in the first- and second-tier cities with strict regulation, the demand is long-term depressed, the supply is far from sufficient, the high-end residential is more, the urban growth potential is huge, the land price is reduced, and there is no room for housing prices.

Ouyang Jie also said that some of the second-tier cities that are not yet severely regulated are also the driving force for rising house prices.

According to the report of the Shanghai Yiju Research Institute, as of the end of July 2018, the destocking cycle of new homes in 100 cities nationwide was only 9.6 months, which was significantly lower than the reasonable range of 12-16 months. Some of these cities have a de-chemical cycle of less than five months.

However, with the sinking of the regulatory policies, some third- and fourth-tier cities where house prices have risen too fast in the early period are not optimistic.

Ouyang Jie said that in the third- and fourth-tier cities where house prices are rising too fast and customer traffic is shrinking too much, there is a high probability of a price correction in the future. He pointed out that in many provinces, the prices of low-energy and low-grade cities are higher than those of high-energy and high-grade cities. In short, the price of county towns is close to or exceeds that of provincial capitals.

Ouyang Jie said that in September this year, the average price of second-hand housing in Yiwu, Zhejiang Province was 21,519 yuan/m2, up 17.25% year-on-year, and the chain was also rising. This price is already higher than many provincial capital cities in the Midwest. At the same time, the prices in many places in Hebei are higher than those in Shijiazhuang; the prices in Jiangxi Province, Yichang City, Hubei Province, and Wuhu City, Anhui Province are close to their capital cities.

The aforementioned housing companies also said that the market capacity of the third- and fourth-tier cities is not large in itself, and it has been exhausted in the previous cycle. If the sheds change to a large resurgence of monetization, the demand scale and purchasing power of these cities will be affected, and prices will appear. It is not unexpected to downgrade.
Whether these markets will hold up or not is no longer a speculative question though, because the market has turned.
Zhongyuan Real Estate pointed out that in the past three years, house prices in the country have generally risen, investment speculation has risen, and many demand have used higher leverage. Regardless of whether this round of price adjustment will spread, market participants should increase their awareness of risk, because with the normalization of the property market regulation, "the time when the price only rises and does not fall is over."


CASS Calls the Housing Turn, Gold Sept Silver Oct Weak

iFeng: 社科院:中国一二线城市房地产“金九银十”或落空
The Chinese Academy of Social Sciences released a report on the 27th, saying that in the short-term, the “Golden September and Silver 10” in the first and second tier cities fell, and the house prices were stable and falling. The price increase in the third and fourth tier cities continued to decline.

On the same day, the Chinese Academy of Social Sciences Financial and Economic Strategy Research Institute and the Chinese Academy of Social Sciences Urban and Competitive Research Center project team released the September 2018 "China Housing Market Development Monthly Analysis Report" (hereinafter referred to as the report), based on August big data prices The Index (BHPI) analyzes the current status and development trends of the Chinese housing market.

The report pointed out that since the beginning of 2018, house prices in Beijing have begun to rise, Shanghai continues to fall, Shenzhen has risen slightly, and Guangzhou has risen rapidly. In August, under the policy of strict control of housing prices in the central government, the rhythm of Beijing's housing price recovery was interrupted. In August, the price of first-tier cities rose by 0.27% from the previous month, only 0.01 percentage points from the previous month. Among them, Guangzhou rose by 1.49%, Shenzhen rose by 0.85%, Beijing fell by 0.02%, and Shanghai fell by 1.24%. Compared with the previous year, house prices in first-tier cities in August rose by 4.1% year-on-year, of which Guangzhou rose by 18.19% year-on-year, Beijing rose by 0.09% year-on-year, and Shanghai fell by 8.37% year-on-year.

The report pointed out that although the housing prices in first-tier cities are stable, the first-tier cities are the most attractive urban groups. The residents have high incomes and large populations. The contradiction between potential supply and demand is difficult to ease in the short term.

The report shows that under the combined effect of the government's strict control of housing prices, the adjustment of the shed reform monetization policy, and the short-term market cycle close to the top, the housing prices in the first-tier and second-tier cities have significantly deteriorated. However, compared with the same period of last year, it still accumulated a high price increase. In August 2018, the price of first-tier cities rose by 16.09% year-on-year, and that of second-tier cities rose by 16.75%.

The report shows that house prices in third- and fourth-tier cities are still rising inertia, but the overall growth rate has declined. Since the 2018, the average of the third- and fourth-tier cities has increased by 10.45%. In August, the third- and fourth-tier cities rose by 0.45% from the previous month, and the growth rate dropped by 0.69 percentage points from July. The report pointed out that the vacant housing stocks in third- and fourth-tier cities are more serious, which has restrained the long-term development of the housing market.

In the later stage of the forecast, the report pointed out that the complicated and volatile international economic situation has led to an increase in market uncertainty, which will enhance the market wait-and-see mood in the short term. In addition, the central government will resolutely curb housing price increases and have a greater impact on housing price rise expectations. In the short-term, the “Golden September and Silver 10” of the first-line, first-tier and second-tier cities fell through, and the house prices were stable and falling. With the deepening of the control policies, the price growth rate of the third- and fourth-tier cities continued to decline.

Big UST Sale Oct 1: Federal Reserve Reduced Balance Sheet by $15.2 B, No USTs

The Federal Reserve reduced its balance sheet by $15.2 billion last week, none of it was U.S. treasuries. While this lowers the monthly total from $34 billion to $19 billion, and $19 billion in USTs mature on September 30, the Fed is supposed to sell $24 billion:
On September 30, $19 billion in treasuries will mature, but the Fed is scheduled to reduce $24 billion this month and because of a slower pace in July and August, it actually should reduce by $27 billion. Either $5 to $7 billion in treasuries will be sold next week or there's going to be a monster reduction in the final week of September. All together, the Fed has $34 billion left this month.
Since only $19 billion will mature (rolling off on October 1), the Fed will start October $5 (and really $8 billion) behind schedule on UST roll offs.

The S&P 500 Index declined 2 points in the week ended Wednesday. If the pattern holds, the stock market will decline sometime this week and will likely finish down for the week. The Chinese yuan is still tracking lower with the Fed's balance sheet.

SCMP Covers Phoenix Finance Shutdown

SCMP: China shuts down American-listed news site Phoenix New Media over ‘illegal’ coverage
The Cyberspace Administration of China (CAC) on Wednesday ordered Phoenix New Media’s news portal Ifeng.com to carry out a “thorough and in-depth rectification”.

The news site had “disseminated illegal and harmful information, distorted news headlines and shared news information in violation of rules”, the CAC said, without detailing the reports in question.

As a result, the site’s technology channel would be suspended for a month from Wednesday, while the general news and financial news channels, mobile website and app would be suspended for two weeks.
It is not a total ban as it says. Their real estate section updated today.

Haidilao Expansion Worries

Haidilao is a great restaurant that IPO'd in Hong Kong on Wednesday. The company is popular in China and rapidly expanding, and the latter is the main source of concern. Can it expand this quickly? Hotpot involves serving raw food tossed into boiling water. Recently, rival chain Xiabu Xiabu saw its stock plummet after a rat was found in one of its hotpots.

Inquirer: Chinese restaurant shut down after pregnant woman finds rat in hotpot soup
One man, surnamed Ma, said it was his pregnant wife who discovered the rodent in their meal, as reported by Kankan News via South China Morning Post last Sept. 10. They were apparently eating in a branch of the restaurant chain Xiabu Xiabu in Weifang, Shandong province last Sept. 6, and had only taken a few bites when Ma’s wife made the discovery.

Authorities have since suspended the restaurant following the incident, the report said. Meanwhile, Ma’s wife is set to undergo a hospital check-up, with Ma sharing that the restaurant staff offered them money for an abortion if they were concerned about the baby.

“If you are worried about the baby, then we’ll give you 20,000 yuan (nearly $3,000) to abort it,” Ma said in the report, recounting what the restaurant staff told him.

The restaurant also offered them compensation in the amount of 5,000 yuan (around $700), though Ma has shared that he is ready to negotiate the amount.

Xiabu Xiabu meanwhile released a statement last Sept. 8, saying they’ve always “placed great emphasis on food security.” They vowed that they would make the required changes to improve their service.
The Economic Observer has an in-depth article on Haidilao, below is the relevant section on expansion.
EO: 海底捞上市的底气与隐忧
Expansion worry

“The more stores are added, the greater the management span.” Zhu Danpeng believes that there are serious problems in the operation mode and profit model of the Chinese catering industry, that is, to pursue profit maximization through low-cost labor, rather than putting food safety first. From a regulatory perspective, the country's laws and regulations and penalties need to be improved.

Haidilao's risk factors listed in the prospectus are 31 pages long. It believes that the risks mainly exist in three aspects: food safety and quality consistency, restaurant store manager talent pool and supply chain management.

In terms of supply chain management, the founders of Haidilao have successively set up specialized companies in various links of the hot pot supply chain, such as Bohai Group, Bohai Group, Yuyun Oriental, Weihai Consulting, etc., responsible for the production of bottom materials and processing of food materials in Haidilao. , warehousing logistics, store construction and manpower consulting. In addition to the above four, the main related parties of Haidilao include Zhalutqi Haidilao. In the past three years, the purchase amount of Haidilao to the above five companies has increased year by year, respectively 1.879 billion yuan, 2.553 billion yuan, 4.904 billion yuan, accounting for 61.7%, 68.8% and 81.3% of the total purchase of sea fishing. Bohai Group also provides food processing and distribution services for other catering companies.

The division of the Haidilao headquarters and the restaurant manager is clear: the restaurant manager has a high degree of autonomy in the day-to-day operations of the restaurants it manages, and the headquarters is responsible for food safety, procurement, growth strategies and other aspects of the restaurant. In this case, whether there are enough managers in the store has a significant significance for the success of Haidilao's expansion. "At present, the reserve of Haidilao is about 100 people per month." Li Jianfeng told the Economic Observer Online.

In addition, the method of cultivating the manager of Haidilao adopts the “apprenticeship system” to increase the enthusiasm of the store manager to bring out new people through rewards. The store manager can not only enjoy the performance of the store, but also obtain a higher percentage of performance in the stores managed by his apprentices and apprentices.

"For Haidilao, the biggest risk lies in food safety." Zhu Danpeng told the Economic Observer Online.

In terms of food quality and safety, Haidilao currently invests more than 500 full-time staff directly responsible for food quality and safety. Each restaurant has one or two employees dedicated to food safety. According to the Haidilao official website, more than 300 employees of the Haidilao suppliers such as Bohai Group, Bohai Group and Zalute Banner are responsible for food safety and quality control.

When the Economic Observer Online asked “How Haidilao ensured that the rules and regulations were in place”, Haidilao said, “In terms of safety, Haidilao is committed to providing consumers with a comprehensive and strict quality control management system through the development and implementation of a comprehensive and strict quality control management system. Healthy, safer and more assured products, including detailed and standardized quality control measures, frequent and extensive inspections, clear accountability, upgraded restaurant design and technology, and large-scale investment by food safety personnel, as much as possible Make sure the food is safe."

But obviously, Haidilao can't guarantee 100% without any problems.

In the Haidilao official website management announcement page, basically every month there are behaviors that do not strictly abide by the rules and regulations. Last year, after the Haidilao Beijing Jinsong store was exposed, there was a mouse in the kitchen. At the Sun Palace store, the staff used the colander used by the customer to eat the hot pot to clean up the clogged garbage.

Every exposure will have a major impact on sea fishing. Especially after the listing, if there is a problem in food safety, the damage to Haidilao is obviously not a level compared with before, and the more stores, the greater the lethality.

In early September, a shop in Weifang, Shandong Province, was blown out of a hot pot soup to remove a dead mouse. After the incident, the stock price fell on both the 10th and 11th of September. More than 6%.

The existence of food safety issues is a common problem faced by catering companies. At the end of May 2018, the famous hot pot brand Xiaolongkan was exposed to the media by recycling the use of saliva oil and the unhealthy hygiene of the kitchen. Soon, another chain of restaurants - Yang Guofu Mala Tang was exposed to a store staff in Guangzhou to put their feet on the cutting board to cut vegetables.

From the sea bottom to the Xiaolongkan, then to Yang Guofu Mala Tang, squatting and feeding, many chain catering companies have been planted, food safety is a risk that the catering industry cannot avoid. How to ensure the quality and safety of food while expanding rapidly is the key to the continued rapid growth of Haidilao.

"Haidilao can have two ways to die: one is to manage problems. If it happens, the death process may last for months or even the last year; the second is food safety problems. Once it happens, Haidilao may close tomorrow. Life and death are at stake. We understand that although the road to good food safety is tortuous and difficult, it will not go away." Haidilao wrote on his official website.

Bike Sharing Investment Scams Return

EO: “共享单车认购”庞氏骗局再现,涉案资金多达百万人民币
Economic Observer Online reporter Feng Qingyan intern reporter Zhao Wei recently, the WeChat friend circle "share bicycle subscription" scam has hit again, there have been many cases of scams in the country, involving funds of up to one million yuan.

According to CCTV reporters, the Shenzhen Municipal Public Security Bureau’s anti-telecom network fraud center pointed out that the highest peak in Shenzhen received more than 10 cases of the same type of fraud one day, involving as much as one million yuan.

It is reported that the fraud scheme adopted by the scam is: "Subscribing to a 880 yuan, returning 60 yuan per day, and pulling the head to reward 80 yuan", many victims are driven by the interests.

The "Legal Evening News" opinion program pointed out that the victim Wang was attracted by the advertisement of "shared bicycle subscription" and took the initiative to add a "supervisor" WeChat. The fraudulent party pulled the victim Wang into the "cycling partnership", Wang transferred 880 yuan to subscribe to a bicycle, and the next day can receive a daily return of 60 yuan. After the first taste of sweetness, Wang bought 7 bicycles, but after the transfer, he was blacked out by the “supervisor” and kicked out. It is reported that after the fraudsters defrauded the victims' money, they re-established a new group to be hooked by other victims.
A 7 percent daily return for renting bicycles. Although its referred to as a Ponzi since it uses what seems like a Ponzi model, there's no pretense of an investment beyond a couple of days. Once they have the victim's investment, they cut off contact.
In fact, not long ago, there was a scam about sharing bicycles, and the scam mode was similar. The fraudsters used the empty shell of "Small Honey Bicycle" to package themselves and defraud the victims' trust. The scam routine also has a subscription price of 880 yuan per vehicle. The daily income of each vehicle after the subscription is 60 yuan. There is no limit to the subscription, the more the subscription, the greater the return. Many netizens were deceived, and the quilt funds could not be recovered. The scam was reappeared. "There is no change of medicine for changing soup." There are still many victims "into the pit."

The police suggested that you should be cautious when you see the “consumer rebate” and the “recommendation of a circle of friends”.

With the popularity of the Internet, under the wave of the "Internet economy", many people choose to use the Internet to "make money", "lie down to make money" and "make a finger can make money" tempting words are common, but the public needs to be vigilant, Keep in mind that there is no free lunch in the world.

China Establishes 10 Billion Yuan Rural Revitalization Fund

Yicai: 预计规模100亿,乡村振兴发展基金成立
On September 26, the CPC Central Committee and the State Council issued the "Village Revitalization Strategic Plan (2018-2022)" to make specific arrangements for the implementation of the first five-year work of the rural revitalization strategy.

On the 27th, at the first Rural Revitalization and Development Forum held in Zhengzhou City, Henan Province, Zhongmin Investment jointly established the Rural Revitalization Development Fund with Henan Agricultural Development Corporation and Zhongyuan Bank. The fund size is expected to reach 10 billion yuan.

The fund will invest in the neighboring plaza, promote the popularization of cold chain logistics service facilities and deep processing facilities for agricultural products, develop green agriculture projects and new business forms such as agricultural products entering the city.

Wang Tuanwei, vice president of China Minsheng Investment, said that in the rural revitalization development fund, the Chinese people accounted for 20%, and the state-owned agricultural policy investment and financing platform Henan Agricultural Development Co., Ltd. accounted for 20%, and the remaining 60% were held by institutional investors. . The fund will adopt the "national capital guidance, China-industry investment and investment" approach to guide financial capital to fully participate in the rural revitalization strategy and support the development of rural finance, industry, culture and education.

Zhongmin Investment will cooperate with a number of partners to create an innovative rural revitalization solution for “Online Farmers' Wealth Growth Digital Project + Offline Zhongmin Township Cultural Square”, relying on financial technology to serve “three rural” and help farmers achieve Wealth growth and consumption upgrades.

AMD Topping Patterns

If AMD makes a clean break above its long-term resistance then I will be out of the trade and I thought I might be a few times, but it has hit a wall of resistance, for now.

Chip stock Advanced Micro Devices, Inc. (NASDAQ:AMD) has more than tripled in the past six months, and could get a short-term boost after today's Fed rate hike, if recent history is any indicator. However, the shares could retreat heading into 2019, as AMD tends to struggle both in the month of October and in the fourth quarter.

Below are the 25 worst stocks to own in October and the fourth quarter, respectively, looking back 10 years. Per Schaeffer's Senior Quantitative Analyst Rocky White, AMD stock has ended the month lower 60% of the time, with an average loss of 8.95% -- the steepest on the list. Meanwhile, AMD has surrendered an average of 7.03% in the fourth quarter, ending higher just 30% of the time.
AMD went through a six-week topping pattern in 2000 and a month in 2006 after making its final high. If this is a topping pattern, it is already two weeks old.


Turn: Mid-Autumn Sales and Prices Tumble Nationwide

Has the fever broken? A number of articles over the past two days are calling the turn in the housing market in the wake of weak Mid-Autumn Festival sales.


Affected by policy regulation and control, in the first week of September, the transaction area of ​​21 cities monitored by China Index Research Institute decreased by 10.4% mom, and the transaction volume by area of first-tier cities fell by more than 40% mom. Analysts believe that in the next stage, the property market will gradually increase and the purchasing power will be difficult to support the market to continue to rise.

As the final "Golden September and Silver 10" in the real estate market in the year, this year, it was unfavorable. Under the background of strict regulation and control, the once lively scene no longer exists.
People's Daily: 多地新房降价促销是怎么回事?多地新房为什么降价促销
In the mid-autumn holiday of 2018, the property market was flat as usual, and the "Golden Nine" did not exert its strength. According to statistics from the Central Plains Real Estate Research Center, two days before the small holiday, 180 new sets of commercial housing were signed in Beijing, and 62 sets of second-hand houses were basically the same as the average level from July to August. Compared with the same period in 2016, 422 sets and 280 sets were down 57% and 78% respectively.

  In addition to Beijing, the real estate market in other cities has also performed flat. According to the data of Zhongyuan Real Estate, the number of new residential houses signed in Shenzhen on the first two days of the small holiday was 70 sets and 76 sets respectively, which was basically stable compared with the previous market. In Guangzhou, the first two days of the small holiday signed 1871 sets, which is average. Zhang Dawei, chief analyst of Zhongyuan Real Estate, said that the "Jinjiu" property market was not available in 2018, and the property market cooling has arrived.

  Zhang Dawei said that after a long period of guidance, buyers have become more rational. Taking Shanghai's property market in September as an example, although the supply has increased significantly, the sales momentum has been further weakened. During the week from September 14 to September 20, the supply of new homes in Shanghai reached 143,203 square meters, an increase of 34.18% from the previous month. However, from the transaction point of view, it was slightly down by 0.94% from the previous week.

  "In August, the property market is nearing the top of the 'top.'" Zhang Bo, chief analyst of the 58 Anju Room Production Research Institute, said that the cooling of the property market has arrived, and the lack of color in the "Golden September and Silver 10" is a market consensus. According to the August Home Buyers and Brokers Confidence Index, the home buyers confidence index was 98.4, down 2.7% from the previous month; the broker confidence index was 105.3, down 6.3% from the previous month.
People's Daily: “金九”失色,杭州二手房价开跌
September is about to pass, and for the second-hand housing market, the cold "Golden Nine" means "Silver Ten" or no longer. According to the data of the transparent home sales network, as of 21:00 on the evening of September 26, the transaction volume of second-hand housing in Hangzhou urban area (including Fuyang without Lin'an) was 2,718 sets, a decrease of 32% from August, and the volume in September will be It is almost an indisputable fact that the new low in six months.

  After the volume fell to the bottom, the price of second-hand housing also began to loosen. The reporter interviewed the relevant person in charge of the second-hand housing intermediary stores in Hangzhou, and found that the average transaction price of second-hand housing in most sectors fell by 5% to 10%, and even more than 30% in individual communities. Jing Haiyan, chief analyst of Zhejiang Zhongyuan Real Estate, said that when the market started to decline, such a decline was “somewhat amazing” and it was worthy of attention.
Wall streetcn: 楼市“转折点”来了?房子降价、打折、促销!这些人却不高兴了...
Ouyang Jie, vice president of Xincheng Holdings, told the 21st Century Business Herald:

"From the internal communication situation of the developers, everyone has noticed two signs of adjustment in the market: first, the increase in promotional activities; second, the increase in land auctions. For the indicators of next year, some developers have indicated that they will no longer increase their growth."
Developers are slashing prices to move inventory. One anecdote:
“Our project marketing has always been a high-end route. At the beginning of the project, the average selling price was 20-22 thousand yuan/square meter, but the real average selling price was about 19,000 yuan/square meter.

During this Mid-Autumn Festival holiday, we will take out a certain type of building for a promotion, and the price is about 15,000 yuan / square meter.

Although the price is reduced by 4,000 yuan / square meter, but we are also very demanding payment methods for customers, requiring a full payment in one lump sum. ”
Developers may have to give the discount to current owners as well:
But what bothered him was that the price reduction of the Hefei yard attracted the dissatisfaction of the old owners. For the rights protection behavior of the old owners, the plan given by Hefei Yard is that the old owners can choose to check out to re-purchase the promotional listings, but the full amount must be paid.
Developers are focused on survival and return of capital:
“Live” and “Safety First” have become the most important demands of real estate enterprises.

This reflects that the property market is that developers have begun to pay attention to cash flow returns. This does not rule out the way to cut prices.
Some analysts are calling the turn:
Yang Hongxu, dean of the Yiju Institute, believes that September and October are the turning points of the decline of the market. Large-scale enterprises have increased their discounts in new markets , including Country Garden, Vanke, Poly, Evergrande and Jindi, all of which are multi-city joint promotion in many cities across the country. This is the sign and signal that the market is obviously cooling down. It is expected that the next two or three years will be the process of down, adjustment and bottoming.

Even in First-Tier Cities, Regulators Still Battling Real Estate Chaos

iFeng: 9月多地严打房地产市场乱象 未来调控或继续加码
The reporters of Chinanews.com found that four first-tier cities in Beijing, Shanghai, Guangzhou and Shenzhen have launched special actions to control the chaos in the real estate market.

On September 19th, both Beijing and Shanghai issued a notice on the special action to control the chaos in the real estate market. The key rectifications included speculative real estate behavior, real estate development companies and brokerage agencies.

The specific contents of Beijing’s strict investigation include “school district housing”, “commercial housing”, “cutting room” and “big shed”, which were previously attracting attention. Shanghai has strengthened its efforts in rectifying down payment loans and illegally collecting public accumulation funds. "Restricted purchase, limited external, limited enterprise" review.

It is worth noting that in mid-September, Beijing also issued a new fund for the provident fund, which also approved the loan for the provident fund loan, and linked the loan amount to the payment period. Zhang Bo, chief analyst of 58 Housing Research Institute, believes that this policy is generally aimed at implementing the goal of “staying and not speculating”. While ensuring the housing demand of residents, it actively guides reasonable housing consumption, encourages step-by-step purchases, and cracks down on property speculation. .

Phoenix Financial TV to Shut For One Month, Issues Rectification Statement

Phoenix Finance Channel has issued a statement of rectification. This is the third time the network has had to rectify its behavior this year.

iFeng: 凤凰网财经频道整改公告
According to the requirements of the relevant departments, Fenghuang.com conducted a thorough review and reflection on some channels, "Phoenix News" client and WAP website to disseminate illegal information, distorted the original meaning of the news headlines, and illegally reprinted news information. Management requirements, in-depth self-examination and self-correction, comprehensively strengthen the website business and personnel management, will strictly follow the rectification notice, immediately carry out rectification, and stop updating the Phoenix News client app, mobile phone Phoenix network and related channels during the rectification period, and, as always, welcome Users and the community will supervise and help Phoenix. We will take the responsibility of maintaining the order of network information dissemination and actively create a healthy cyberspace.

Phoenix Network Information Channel and Financial Channel stopped updating from 15:00 on September 26 to 15:00 on October 10, and the technology channel stopped updating from 15:00 on September 26 to 15:00 on October 26; "Phoenix News" client The update will be stopped from 15:00 on September 26 to 15:00 on October 10; the Phoenix WAP network will be updated from 15:00 on September 26 to 15:00 on October 10

EO: 凤凰网被北京网信办约谈,部分频道、“凤凰新闻”客户端及WAP网站暂停更新
On the afternoon of September 26, Beijing Netcom Office opened the information, the National Internet Information Office directed the Beijing Internet Information Office to disseminate illegal information on some channels of the Phoenix Network, the “Phoenix News” client and the WAP website. Distorting the original intention of the news headlines, reprinting news information and other issues, and interviewing the person in charge of the Phoenix Network in accordance with the law, ordered the immediate suspension of violations of laws and regulations, and comprehensively intensive rectification.

During the rectification period, Phoenix Network Information Channel and Financial Channel stopped updating from 15:00 on September 26 to 15:00 on October 10, and the technology channel stopped updating from 15:00 on September 26 to 15:00 on October 26; The client stopped updating from 15 o'clock on September 26 to 15 o'clock on October 10; the Phoenix WAP network stopped updating from 15 o'clock on September 26 to 15 o'clock on October 10.

The person in charge of Fenghuang.com said in the interview that he has recognized the seriousness of the problem and will strictly implement the requirements for rectification and fulfill the main responsibility.

...Earlier, on September 11, NetEase also issued a rectification announcement. Netease said that during the operation of the financial channel, there were some serious problems. NetEase conducted a profound review and reflection, and decided to stop the financial channel update from 12:00 on September 11th, carry out in-depth and comprehensive rectification, and vigorously rectify violations. .
The last time Phoenix TV was hit with a crackdown was in in August 2007: Phoenix TV hardest hit in crackdown on 'illegal transmissions'
The central government's television watchdog has set its censorship sights on blocking all non-mainland television channels in a harsh clampdown on 'illegal transmission' of overseas channels, including Hong Kong's popular Phoenix TV.

A Phoenix TV source said the campaign was motivated by a political desire to clean up television screens ahead of the Communist Party's 17th congress this autumn, and a long-term plan by local authorities to drive out competition from overseas channels and maintain the monopoly of more politically obedient state television stations.

Will Xi Close the Dollar Window?

Bloomberg: China Deleveraging Is Going Into Reverse, New BIS Data Show
Chinese non-financial corporate debt is rising again as a percentage of gross domestic product following a year and a half of deleveraging from its mid-2016 record, according to new data from the Bank for International Settlements.

The ratio jumped to 164.1 percent in the first quarter of 2018 from 160.3 percent in the final three months of 2017, erasing more than half of the progress Chinese companies had made in reducing debt loads since the ratio topped out at 166.9 percent in the second quarter of 2016, the BIS data, published September 23, show.

...The government is also preparing measures on the fiscal side to boost domestic consumption and investment in the face of rising external risks, including tax cuts and infrastructure spending, Chinese officials told reporters Tuesday in Beijing. Lian Weiliang, vice minister of the National Development and Reform Commission, said "China is fully capable of hedging the impact by expanding domestic demand."
Chinese consumers finance consumption with consumer credit. Infrastructure development is funded by debt.

ECNS: China unlikely to follow further Fed rate hike: analysts
The People's Bank of China (PBOC), the country's central bank, is likely to leave its policy rates unchanged after the possible Fed rate hike and will manage liquidity through open market operations, said Wen Bin, a researcher with China Minsheng Bank.

Nomura analyst Lu Ting also expects the PBOC to maintain its rates, adding that low interest rates are needed to stabilize economic growth amid headwinds, while interest rate differentials between China and the United States given the PBOC some leeway in not following the Fed's hike.

As the exchange rate of the yuan remains generally stable against the greenback, there will be limited concern about a weaker currency if the PBOC does not follow suit with raising rates, Lu said.
Back in June I wrote Is China in Recession? Then It Isn't Deleveraging. Without a new source of economic growth, China cannot slow credit growth without suffering a major blow to nominal demand. If the economy isn't slowing and defaults aren't rising, the country is not deleveraging.

Economic reform could generate new growth, but the window for reform has all but closed. Aside from the growing evidence that the CCP isn't interested in reform, trade tensions create a new headwind for growth. China left itself very exposed to a "sudden" change in U.S. policy. It cannot cushion the blow without resorting to inflation.

Chinese FX reserves are stable, but the trade war hasn't hit yet. The yuan faces persistent depreciation pressure as long as the U.S. dollar remains strong. To this point, yuan weakness is entirely due to the stronger dollar, not a jump in depreciation expectations. What happens to FX reserves when the trade war fallout hits and dollar inflows slow? If FX reserves shift into net decline again, China will be inflating against a depreciating asset (FX reserves) that explicitly back the yuan. Maybe capital controls will hold, but even a modest outflow pressure could quickly burn through Chinese reserves. Chinese yuan depreciation/devaluation was never about trade. It's about protecting reserve assets, finding a sustainable level for the yuan and recognizing the true value of the yuan. China is unlikely to close the dollar window and float the yuan because there's no evidence the CCP is interested in letting the market set prices. The most likely outcome is still a large, one-off devaluation that balances reserves against a growing tidal wave of credit that the government has no ability or no willingness to contain.


Labor Unrest Leads to Anti-Maoist Raids, Increased Marxist Rhetoric

Straight out of an Ayn Rand novel, last week a the Deputy Minister of the Ministry of Human and Social Affairs last week said that private enterprises should allow workers to participate in democratic management of companies. By itself maybe nothing, China is officially a Marxist country. Yet it came a week after a blog post by a Mr. Wu that set the Chinese Internet on fire. That post said the government should merge with private companies to better fight the U.S. in the trade war. It also said that "China's private sector has 'basically fulfilled its task of assisting the state-owned economy in achieving its rapid development.'" In China, I often heard that the country was opening up to allow for rapid development, but would then close/turn socialist again. Capitalism was the boot-loader for advanced socialism. Without technical expertise and capital, China could never compete with the capitalist West. Once it had those skills, it could then "turn off" capitalism and go back to being a communist country.

However, maybe the Marxist rhetoric is only designed to cut off growing labor disputes and the rise of student-supported labor movements. In August, the government raided Maoist websites for supporting the efforts of a group working against Jasic.

Occam's razor says the Marxist rhetoric is aimed at reducing support for labor movements. Rising labor tensions created an opening for Maoists and the government is slamming it shut. It's not entirely optimistic since labor tensions will only grow when the full effect of the trade dispute hits over the next six months, but it's not the end of China's capitalist experiment. The pessimistic take is that Mr. Wu's blog post is a trial balloon and real policies will follow. Increased state ownership is a bad sign for future growth. Even if you think China has hit upon a successful model of state capitalism, the U.S. would eventually sever all economic relations with a China that has no clearly delineated private economy and demand its allies do the same.

Sina: 人社部副部长:民企要以职工为本 让职工参与企业管理
On September 19, the reporter learned from the Ministry of Human Resources and Social Security that Vice Minister of the Ministry of Human Resources and Social Security Qiu Xiaoping said at the recent National Conference on Deepening the Democratic Management of Private Enterprises and Enhancing the Endogenous Dynamics of Innovation and Development. Private enterprises must adhere to the main body status of employees, and be staff-oriented, so that employees can enjoy full democratic rights, participate in enterprise management, and share the fruits of enterprise development.

"Strengthening democratic management of enterprises is an important measure to build a harmonious labor relationship with Chinese characteristics." Qiu Xiaoping said at this meeting that socialism with Chinese characteristics has entered a new era, and that private enterprises are facing new development environments and development tasks. All types of enterprises, including private enterprises, are required to further change their development concepts. Through deepening democratic management, we will promote the joint construction of employees and enterprises, create benefits, share benefits, share risks, and maximize the enthusiasm,c reativity and initiative of employees.

Qiu Xiaoping said that to promote the democratic management of private enterprises, we must persist in strengthening the party's leadership, adhere to the main body status of employees, and insist on strengthening institutional guarantees. He said that only by serving the staff, allowing employees to enjoy full democratic rights, participating in enterprise management and sharing the fruits of enterprise development can inspire employees' enthusiasm and creativity, and achieve win-win development between enterprises and employees. Only by perfecting the democratic management system of enterprises and relying on institutional norms and carrying out work can we ensure the long-term and sustainable development of democratic management of enterprises and ensure that they do not go through the field or form.

Qiu Xiaoping requested that the human and social departments at all levels should strengthen close cooperation with the trade unions and the Federation of Industry and Commerce, participate in the open coordination mechanism of factory affairs, support the trade unions to play an overall coordination role, and perform the functional duties of the human and social departments. Strengthening the democratic management of enterprises as an important part of the work of coordinating the tripartite mechanism of labor relations, strengthening the coordination and coordination of the three parties, forming a joint force to deepen the democratic management of private enterprises, build harmonious labor relations, and promote the healthy development of enterprises.
This ode to Karl Marx comes a few weeks after raids on workers who tried to form a union, plus the students and online websites that supported them.

RFA: China Raids Maoist Websites, Detains Editors Who Supported Jasic Labor Movement
Authorities in the Chinese capital have raided two leftist websites in the wake of a Maoist-supported labor movement in the southern province of Guangdong, detaining at least eight members of staff, RFA has learned.

Chen Hongtao, editor-in-chief of the Red Reference website confirmed to RFA that their offices in Beijing's Fangshan district had been raided at around the same time that some 50 supporters of the labor movement at Jasic Technology in Guangdong's Shenzhen city were bundled onto buses and held in detention.

...Another source who asked to remain anonymous said further arrests had been carried out in Guangdong province, in what appeared to be a nationwide, coordinated police operation targeting leftist supporters of the Jasic workers' campaign for an independent trade union.
SCMP: China’s labour relations have entered a dangerous new phase, as shown by attacks on Jasic workers and activists
A group of workers at Jasic Technology in Shenzhen have been protesting about inhumane conditions, unfair dismissal and harassment. Matters came to a head when they attempted to organise a factory-level trade union in July.

They are facing severe repressive measures by the authorities, with over 60 workers and supporters detained. Four workers were formally arrested on September 3 and four supporters and an NGO worker are under criminal detention.
Taiwan News: Peking University Marxist group shut down for supporting workers
The snub comes after a number of students from the university's Marxist Society in August turned out at the Jasic factory in the Pingshan District of Shenzhen City to support workers in their bid to create a democratic trade union, reported HKFP. After students from Peking University and three other top universities gave speeches, presented peaceful demonstrations and posted open letters on social media in support of the workers, police raided the guesthouse where they were staying and arrested at least 40 students, reported the Financial Times.

Among those arrested included Peking University Marxist Society member Zhan Zhenzhen, who had previously investigated working conditions for low-paid workers at the university. This fall semester, the society, which says its focus is labor rights, was denied support from the university's department of Marxism to back their application for registration, with no explanation, according to the report.
As for Mr. Wu's blogpost, here's Minxin Pei in Nikkei: The mysterious Mr Wu and the growing threat to China's private companies
China's social media have been abuzz with worried commentaries since Wu Xiaoping, a self-claimed "veteran in China's financial sector," posted a blog on Sept. 11 boldly claiming that China's private sector has "basically fulfilled its task of assisting the state-owned economy in achieving its rapid development."

As a result, Wu went on to say, "China's private sector should not blindly expand. A new form of more concentrated, unified, and scaled-up economy of mixed ownership ... may gain a greater share."

The main reason given by Wu for merging China's private sector into the state-owned sector is that this is the only way to respond to America-led Western containment against China and fight back against U.S. President Donald Trump in the trade war.

"If we fail to concentrate the power of the state but instead allow the market to dictate and move toward a path of complete economic liberalization, China's economic and social reform and opening would face unimaginable pressure and resistance, and the advantages and results we have gained could be gradually lost."

...Chinese entrepreneurs are not being paranoid. After Wu's blog post ignited a firestorm in the Chinese cyberspace, no senior Chinese officials publicly criticized it or said anything to calm shattered nerves. Tellingly, China's much-vaunted cyber censors, who normally purge anything deemed subversive with ruthless efficiency, did nothing to stop the dissemination of Wu's inflammatory post.
If Mixin Pei paints an accurate picture of entrepreneurs' concern with that post, we will soon find out if there are any holes in China's capital controls.

The Missing Debt is the Crisis

A growing theme in recent years is the rise in debt and the risk it poses.

ZH: Nomi Prins: 10 Years Later, A Debt Crisis Is Building Again
That’s because the last financial crisis was about debt and debt levels have increased substantially since 2008. The entire “recovery” was built on debt.

From 179% before the financial crisis, the global debt-to-GDP ratio has jumped to 217% today. Companies and governments have piled on more debt than before. Emerging-market debt, led by China, is also at a record. The big banks are even bigger, and remain “too big to fail.”

...Now, ten years after the financial crisis, there are major complications building with the deluge of debt created on the back of quantitative easing policy.

When the next shoe drops from our inflated bubble markets, it will be the debt markets that lead the way. Whether the financial bubble begins to pop in emerging markets, over-leveraged corporate sectors or from over-stretched consumers — the reality is that a storm is brewing.

All of this is a recipe for another crisis.
There are sharp increases in subcategories such as student loan debt, but overall the domestic U.S. credit market is stuck what we would call a recession before 2008. The post-2008 depression is the result of slower than "normal" credit growth.
The next crisis won't be caused by U.S. debt levels and it won't be caused by there being too much U.S. debt creation post-2008. It might be that the entire post-2008 period is an intermission in this Great Depression, an extended intermission purchased by central banks. Many of the gains from increased central bank balance sheets will evaporate when the stock market declines and/or interest rates rise. Maybe the debt increase since 2008 was particularly inefficient. However, the absolute increase in domestic U.S. debt post-2008 is not a crisis in and of itself.

China Targets Developer Presales

Chinese developers use presales to finance construction. This avenue of funding is now gone in six cities.

SCMP: Chinese property stocks hit as housing ministry instructs six provinces to conduct in-depth study of pre-sales
Chinese property stocks fell on Tuesday after a long weekend break amid reports of possible property pre-sale restrictions in Guangdong and five other provinces, while the ongoing US-China trade war continued to hurt the overall market sentiment.

...According to a Reuters report on Tuesday, citing housing ministry document, six Chinese provinces – Hubei, Sichuan, Jiangsu, Henan, Guangdong and Liaoning – have been told to reconsider the pre-sale system, which is a key source for builders to finance projects.

The ministry has instructed local housing bureaus of these provinces to make an in-depth study of the pre-sale system, and set out reasons why it should be retained or scrapped, the report added.
Although the government asked for a study, Guangdong's real estate industry is preparing for a phaseout. iFeng: 卖楼花模式将终结?广东住建厅:现售是趋势
On September 21, following the new policy of shared property housing, the Guangdong housing market once again became the focus of the outside world: the Guangdong Real Estate Association issued an "Emergency Notice on the Relevant Opinions on Providing Pre-sale Permits for Commercial Housing" to the vice presidents (hereinafter referred to as "Notice"). The "Notice" stated that the Guangdong Provincial Department of Housing and Construction has cooperated with the Ministry of Housing and Urban-Rural Development to conduct a survey on the pre-sale system of commercial housing and to formulate relevant materials. It is proposed to "phase out the pre-sale system of commercial housing and fully implement the current sale". The material is scheduled to be reported to the Ministry of Housing and Urban-Rural Development on September 25.

...A related person from the Guangdong Provincial Housing Association told the reporter of China Business News: "The document is only for consultation and is not really implemented.
The biggest losers are the marginal developers who need this source of capital:
Song Ding, director of the Tourism and Real Estate Research Center of China Comprehensive Development Research Institute, said in an interview with Time Weekly that the current development funds for housing enterprises mainly come from three aspects: self-owned funds, bank loans and pre-sale backflow. "There is a very big test for the strength of housing enterprises." Song Ding said: "China's pre-sale system is the practice of studying Hong Kong's 'completed building' in the early years when developers' funds are tight but supply demand is high and development pace needs to be accelerated. After more than 20 years of implementation, the Chinese real estate market has changed. In the course of many years of implementation, the pre-sale system has also incurred most of the capital risks for buyers and the disputes over the board when the building was repossessed. The problem, overall, the current sale is the future trend."

For the impact of the cancellation of pre-sale on the survival of real estate companies, Yan Yuejin said that under the pre-sale system, if the developer builds a house, if it is a 30-story house, it can be pre-sold after 5 floors. The funds will be returned and the follow-up investment will be made. However, if the current sale is made, it may take 30 floors of the houses to be completed before the sales can be resold. This will put pressure on the funds of the housing enterprises. “The weak capital enterprises will not be able to develop. investment".

Song Ding said that the full implementation of the housing sales system, "will eliminate at least half of the housing enterprises, leaving some large, strong enterprises." For the supply tension that may be brought about by the sale, Song Ding believes that supply is tight in policy The promotion phase will definitely exist, but it depends on how the relevant cooperation methods are handled. "The market will gradually adapt to the future and eventually form a non-pre-sales pattern."
Others believe the system won't change for a couple of years:
Xiao Wenxiao concluded that the draft of the consultation will inevitably lead to a strong rebound in the industry, and the high intensity of the rebound should be within the expectations of the relevant departments. “Why do you still have to do such a temptation? A big possibility is to retreat and try to improve the threshold of pre-sale of commercial housing, which means that the pre-sale system is likely to be retained, at least not in two or three years. It may be canceled, but the threshold will increase. Currently, the supervision of the pre-sale system of commercial housing in the first- and second-tier cities is relatively in place, but some third- and fourth-tier cities need to be vigilant.” Xiao Wenxiao said, “If the big development encounters the market downturn, sell it’ There will be big problems in the uncompleted building.
Developer presales are a weak point in China's housing market. In several cases, such as in Handan, presales at the peak of a cycle led to partially constructed abandoned buildings and home buyers losing deposits. Presales are a form of leveraged home speculation and removing them is a positive for the market in the long-term, particularly for larger developers who will see their weaker competitors exit.


EM Decline: India Next

The next leg of EM decline should see India complete its topping pattern.

ZH: India's NPL Crisis Erupts: A Major Shadow Bank Defaults On Three Debt Payments
With the meltdown of IL&FS in motion, another unit, IL&FS Transportation Networks, reported that its chief financial officer, Dilip Bhatia, was demoted to chief strategy officer, for the goal of divestment of assets. The regulatory filing said Bhatia would relinquish his responsibilities as CFO with immediate effect, and the company will search for a replacement.

The shockwaves spread further on Friday, when IL&FS Financial Services, another unit of the IL&FS group, said its managing director and chief executive had resigned.

Why is this important? IL&FS’s outstanding debentures and commercial paper account for 1% and 2% respectively, of India’s domestic corporate debt market as of March 31, according to Moody, while its bank loans made up about 0.5% to 0.7% of the entire banking system loans.

And while bad loans in the Italian banking system have received a ton of attention from investors, India is not far behind and India's economic recovery is built on an even shakier foundation.
India ETFs in U.S. dollars are tracing out a topping pattern, but the Sensex is still in an uptrend.

Vatican Submits to CCP Control

Chiesa: Submission. The Phantom Accord Between the Holy See and China
What is not said is that the Chinese authorities will still be first in line in the selection of future pastors, with only a feeble right of veto granted to the pope on any candidates who may not be to his liking.

In this sense, the accord can rightly be defined as “historic,” because it marks a sensational about-face in the journey that the Catholic Church has made over centuries of history to free itself from submission to political powers, particularly in the “investiture” of its pastors.


Shorting AMD

I shorted AMD when it hit its long-term resistance line. I got stopped out and reopened the position. There's no fundamental thesis for the trade. If AMD breaks through that trendline, it's over.

With that said, here's a bearish take AMD: Dangerously Overpriced, Here's Why

On the broader semiconductor sector, from Slope of Hope: One Possible Future (by Piano Man). The focus in on testing company Teradyne (TER) as an indicator of the sector's direction.
The best trades come when short-term indicators line up with a fundamental shift. For now it's a short-term trade that could get stopped out as soon as today given recently volatility in AMD.


2018 Midterm Election Prediction as of Sept 20

I made a simplistic model that looks at generic ballot polling versus number of seats. My forecast based on a normal election year is Democrats pick up between 14 and 17 seats. If the Democrats enjoy a wave similar to Republicans in 2010, the may pick up as many as 50 seats. If they enjoy a wave as in 2006, 21 seats. The average of the past four midterms, which includes the GOP outlier blowout of 2010, projects 23 seats. Democrats need 23 to take the House.

Individual House races can swing on the quality of the candidates. Turnout plays a huge role. Democrats have a demographic advantage in states such as Texas and Arizona, states that will likely turn blue over the next decade. Big turnout could make that shift come earlier.

I'm a little surprised at the projection because it says the House is close to a tossup today. Republicans typically surge late in polling though (and they usually outperform 2 to 3 percent on Election Day). FiveThirtyEight forecasts 80 percent odds of Dem takeover with an average gain of 37 seats.

If the Dems widen their polling lead in the next few weeks, the odds of a House takeover will be solidly in their favor. If the polling tightens, a GOP hold starts looking possible.

Federal Reserve Rolls $2.7 B Off Balance Sheet

The Federal Reserve reduced its balance sheet by $2.7 billion last week, all of it MBS. The Fed has two weeks left in September (the second week ends on October 3). On September 30, $19 billion in treasuries will mature, but the Fed is scheduled to reduce $24 billion this month and because of a slower pace in July and August, it actually should reduce by $27 billion. Either $5 to $7 billion in treasuries will be sold next week or there's going to be a monster reduction in the final week of September. All together, the Fed has $34 billion left this month.

On a percentage basis, the Fed is set to reduce its balance sheet by 0.8 percent over the next two weeks. It reduced by similar amounts 3 times this years, twice across two weeks and once over three.

The first was the last two weeks of February. The S&P 500 gained for this whole period, even though it fell on February 27 and 28.
The second major reduction period came in late June and into early July. Again, the S&P 500 Index rose, but it was a bumpy ride.
The last period was the last two weeks of July. I included the next two weeks because the week ending August 15 saw the largest single-week reduction in percentage terms at 0.68 percent.
If you're bullish on the market, then you can expect prices will be higher following the next couple of weeks. If you have shorter time frames, the couple of days heading into September 30 could be a shorting opportunity.

Now It's a Trade War: China to Increase Imports

A few days ago in Trade War Lessons from Ancient China, I wrote:
What can China do to mollify Trump? The CCP doesn't want an open the economy, it has been ratcheting up its control. It would have already granted its own citizens greater economic freedom if this was an acceptable solution. Thus, the only politically acceptable option that will get China back on its long-term track is greatly increased imports. And if they study Guan Zhong, they would know that's the best way to fight an economic war.
Instead of importing from everywhere, however, China will cut tariffs on non-U.S. goods.

ZH: In Latest Trade-War Escalation, China Will Cut Tariffs On Imported Goods
China is planning to cut the average tariff rates on imports from the majority of its trading partners as soon as next month, two people familiar with the matter said, in a move that will lower costs for consumers as a trade war with the U.S. deepens.

Premier Li Keqiang said Wednesday that China would further reduce the tariffs, without elaborating. The two people who spoke on the new reduction asked not to be named as the matter isn’t public yet.

By cutting duties on goods even as it retaliates against President Donald Trump’s trade war with higher charges on some U.S. goods, China is following through on long-stated goals to boost imports. The move comes as the nation is trying to stimulate domestic consumption to support a slowing economy, and follows similar cuts to tariffs in July on a wide range of consumer goods.
This will boost China's soft power, but it won't end the trade tensions with the United States because falling exports to China is a politically acceptable result for Washington if the offset is larger declines in Chinese imports.


Chinese Regulators Focus on Rental Chaos

There's one consistent theme in Chinese real estate be it home buying or renting: chaos. Many analysts were looking for a turn in the second half of 2018 because of the stringent crackdown the began in June, but now many see the "chaos" lasting until year end.

iFeng: 多地严打租售乱象 房地产行业迎“整治潮”
On the 18th, Shanghai issued the "Notice on Launching the Special Renovation of the Real Estate Market Order in 2018" (referred to as the "Notice"), requesting that by the end of 2018, the Housing Construction Committee, the Housing Management Bureau, the Public Security Bureau, the Judicial Bureau, the Taxation Bureau, the Banking Regulatory Bureau, etc. The departments jointly carried out special rectification work in the real estate market, focusing on cracking down on illegal and illegal activities such as false information, speculative real estate, virtual transactions, illegal charges, and illegal housing withdrawals.

Up to now, Shanghai, Beijing, Guangzhou, Shenzhen, Hainan, Tianjin, Nanjing, Suzhou, Hefei, Xiamen and other places have jointly carried out special actions to combat illegal and illegal behaviors in the real estate sector and to control the chaos in the real estate market.

Zhang Dawei, chief analyst of Zhongyuan Real Estate, said that since August, more than 50 cities across the country have issued special rectifications to the order of the real estate market, strictly cracking down on the chasing of rents and sales.

The eight departments of Hainan Province recently issued a special action plan, focusing on four acts such as speculative real estate speculation and real estate “black intermediary”. Changshu's nine departments issued a document. As of the end of December, the city carried out anti-law violations against real estate interests in order to strengthen the supervision of the real estate market and further regulate the order of the real estate market.

In response to the various irregularities in the leasing market, Beijing, Nanjing, Xi'an and other places have successively issued new policies for centralized rectification. The Beijing Municipal Commission of Housing and Construction and the Municipal Banking Supervision Bureau and other departments have concentrated on talking about the owners of major housing leasing companies such as free-flowing, Xiangyu, eggshell apartments, etc., and clearly require that housing leasing enterprises should not use bank loans and other financing channels to obtain funds for vicious competition to seize the housing. . In Nanjing, it is required that leasing companies should not viciously compete for market share, promote renting prices, or monopolize rental housing.

Some insiders said that because there are still many speculations and violations in the real estate market, the chaos for the rental and sales market will last at least until the end of this year.

Prof: Chinese Economy Will Double USA

iFeng: 教授:中国将成为最大经济体 会比美国市场大一倍
Ding Yuan mentioned that China will become the world's largest economy in the future and will be twice as large as the US market. At present, it is also strengthening the protection of intellectual property rights and actively improving the business environment of foreign businessmen. Many high-pollution factories in China have been closed down. Foreign investors should adopt an optimistic attitude to seek more cooperation. Ding Yuan said that in the process of becoming a core position in the world, China needs to shoulder more responsibilities - to be open and to be equal.


Existing Housing: There is a Price, But No Market

iFeng: 二手房市场严重分化,部分城市有价无市
Recently, the statistics of market institutions show that although the price of existing homes in hotspots in first- and second-tier cities in August is much higher than that in third- and fourth-tier cities, from the perspective of transactions, there is generally a priceless market.

According to data released by Zhuge Fangfang.com , in August, the average price of existing homes in 100 cities monitored was 14,935 yuan/square meter, up 1.3% from the previous month. Among them, the average price of existing homes in first-tier cities is 57,406 yuan / square meter, which is 5.94 times the average price of listed cities in third- and fourth-tier cities.

...According to Wang Wei, a researcher at the Yiju Real Estate Research Institute, from the monitoring data of Yiju, the number of existing homes in 10 key cities monitored in August was 61,000, down 5% from the previous month and up 2% from the same period last year. In the past three months, exising home transactions in 10 cities have continued to decline.

"This also shows that existing housing transactions are facing downward pressure." Wang Wei analysis believes that "by the influence of continuous regulatory policies, buyers are less motivated to enter the market. At the same time, the supply of new homes in some cities has increased, some buyers may give up on the existing home purchase, turn to new homes."

The Other Yield Curve

2-Year U.S. Treasury Yield minus S&P 500 yield.

CSRC Chief: 2018 Not Like 2015, London-Shanghai Connect Coming

Fang Xinghai isn't worried about the stock market.

iFeng: 方星海:目前中国股市状况不同于2015年 我们非常放心
September 18th to 20th, the 12th Summer Davos Forum was held in Tianjin. The conference was based on the theme of “Building an Innovative Society in the Fourth Industrial Revolution”, and Fenghuang Net Finance reported the whole process.

Fang Xinghai, vice chairman of the China Securities Regulatory Commission, said at the Tianjin Davos Forum that “the current Chinese stock market situation is different from 2015, we are very comfortable”.

Fang Xinghai said that the situation was serious in 2015, and if it did not interfere, it could lead to systemic risks.

Fang Xinghai also said that there is currently no risk of forced liquidation of retail investors, and there are very few leveraged transactions.

Fang Xinghai said at the forum that the US economy is not as flexible as some people think. As trade tensions continue, it is not surprising that the US stock market begins to fall.

Fang Xinghai told the media during the meeting that Huluntong was "coming for the end of the year"

Trade War Lessons from Ancient China

Ancient Chinese history provides a lesson about bubble, malinvestment and trade wars. A legend called 种桑误国 describes how minister Guan Zhong of Qi conquered the neighboring countries. It says the minister ordered everyone to wear silk, but forbid the domestic production of silk (no planting of mulberry trees). All farmland was to be used for food production. The price of silk soared and the neighboring countries planted many mulberry trees and shifted into silk production. They became wealthy exporting silk. Then Guan Zhong ordered all of the ministers to stop wearing silk and cut off food exports. Faced with starvation, people fled to Qi. In this way, Qi easily conquered its neighbors.

The legend may have grown from a real event, the war with Hengshan.
In the record of Guanzi Chapter 84, Duke of Huan wanted to restrain the threat from State of Hengshan(衡山国)and asked Guan for solution. State of Hengshan was famous for its weapon production. Guan then ordered officials to buy arms from State of Hengshan in large quantities. After ten months, worrying that the price will continuously grow up, State of Yan, State of Dai and later State of Qin followed up the buying. The price then jumped sharply and, as a result, almost all household in State of Hengshan switched to make weapons instead of farming. One year later, Guan ordered officials to buy rice from State of Zhao, at a price more than three times higher than normal. By seeing the potential huge profit, State of Hengshan sold its rice inventory to officials from State of Qi. Afterwards, Guan suddenly ordered State of Qi's army to invade State of Hengshan. With selling out of weapon and rice, State of Hengshan soon surrendered.
Trade wars are often thought of in terms of kinetic wars. Both sides take losses, each side fights using direct attacks such as blocking trade. A more thorough form of economic destruction requires a long setup using passive strategies. Guan Zhong was a Machiavellian Austrian economist. He wasted money on weapons and rice to draw the enemy into unproductive economic activities. Right until the military invasion, the Fake News of ancient China might have written untold articles about the stupidity of Guan Zhong and the wealthy rising economic power of Hengshan.

Who is Qi today? Both China and the USA cause more economic destruction internally with debt-fueled housing and financial bubbles. Longer-term, both countries are their own worst enemy. In the short-term, a straight comparison of the trade relationship argues for the USA. China is more fragile not simply because trade is a larger share of GDP, but because it is dependent on U.S. demand. Chinese factories do not make goods for Chinese consumers. They serve U.S. customers. The immediate impact of a full-blown trade war in the USA is empty shelves at Wal-Mart and changing consumption patterns. The immediate impact in China is unemployment and factory closures. (If China had a credible currency and debt market alternative, it might qualify as Qi because it could pull the plug on the dollar. But it doesn't, not yet and probably not for at least 10 years.) President Trump has inelegantly described this situation as America having already lost the trade war. The more perspicacious Steve Bannon understands America's "weaknesses" leave it in a momentary position of strength. Steve Bannon even channels Guan Zhong: We Can Take the Whole Thing Down, Total Victory for USA

A more subtle lesson from Guan Zhong is the power of consumption. Trade wars are focused on production, but it is through consumption (yin) that victory was achieved in part because everyone focuses on production (yang). The consumer has the greater soft power because the producer serves the consumer.The people of the United States have made much of China into an extension of the U.S. economy because those factories operate to serve U.S. customers. China's chief representative if WTO accession negotiations understands this deeper truth. He argues China should increase its imports because that is what made America so powerful.

iFeng: 龙永图:美国为什么那么牛?因为它是全球最大的进口国
Why is the United States so powerful? Think about it, come out one - it is the world's largest importer!

As the chief representative of China's WTO accession negotiations, Long Yongtu judged the significant contribution of imports to the US economy. He believes that the importing country has largely determined the price and determined the market. This is "the dream of all of us who engage in foreign trade." Therefore, the entrepreneurs and the government are called upon to give greater attention to imports . Just as President Xi’s positive import increase to the Boao Forum is an important measure for our new opening up, we should do this in accordance with the requirements of President Xi!

Under the global economic situation, our global trading system is still “cutting and chaos”, what should we do? The United States has repeatedly threatened to "retreat the group" and Long Yongtu said, "I hope it will not be retired, and don't be afraid of it." Why is the United States "bullish"? How can China, as the world's second largest economy, be invincible in global trade?

...So what kind of policy choices can we make based on such a chaotic and very complicated global trading system? What should we do in China? Long Yongtu proposed two options for this:

First, continue to support the global system represented by the World Trade Organization and the threat of US withdrawal from the WTO. Take a positive attitude: I hope it doesn't quit, and don't be afraid to quit it.

Second, on the basis of continuing to support the WTO global system, we will participate more actively in global regional trade arrangements. One of the most important things is how to speed up regional trade negotiations in Asia.

For our trade policy, we should pay equal attention to both exports and imports, and we should increase our efforts to increase imports.
Lou Jiwei takes an opposite approach from Guan Zhong, proposing a yang strategy instead of yin:
Caixin: Chinese official: Beijing should target goods needed by US
Speaking Sunday at an economics forum, Lou said Beijing should disrupt supply chains of American companies that rely on China's vast manufacturing industries, the website Sina.com reported.

China's "counterattack strategy needs to restrict exports to the United States as well as (imports of) U.S. goods," Lou was paraphrased as saying.

"Only knowing the pain of fighting will stop the war and cause (the United States) to negotiate seriously," said Lou.

Lou was finance minister through 2016 and serves as chairman of China's 1.9 trillion yuan ($290 billion) National Social Security Fund, which manages assets of government pension plans. He is a former chairman of China's sovereign wealth fund, the China Investment Corp.
Lou Jiwei's approach plays into Trump's hands. As long as the U.S. is willing to accept the pain, it would accelerate the movement of supply chains out of China and into politically secure jurisdictions. The genius of Guan Zhong was in appearing weak and making the enemy believe he was strong (and rich). China has been running a strategy similar to Guan Zhong for 20 years, mainly because the United States was being looted by its financial and political establishment. That regime is losing power and China isn't sure what to do. It has been courting its old Wall Street allies, but their power has waned.

NYTimes: As Trump’s Trade War Mounts, China’s Wall Street Allies Lose Clout
When President Bill Clinton deliberated whether he should loosen trade barriers against China, Wall Street helped plead Beijing’s case.

When Presidents George W. Bush and Barack Obama talked tough about labeling China as a currency manipulator, Wall Street urged restraint — and both presidents backed down.

Today, China is hoping that Wall Street will once again use its political heft to soothe tempers in Washington. But as President Trump ratchets up the trade war with Beijing, Wall Street’s words are falling on deaf ears.

Senior Wall Street executives met in Beijing on Sunday with current and former Chinese officials and bankers at a hastily organized session to find ways to strengthen financial ties between the United States and China. On Monday, the group — which included executives from Goldman Sachs Group, Morgan Stanley and the Blackstone Group, the private equity firm, among others — planned to meet with Vice President Wang Qishan, the right hand man of Xi Jinping, the country’s leader.
As I wrote back in 2014:
The protectionists are ever so slowly gaining the upper hand thanks in part to negative social mood. 2008-2009 will probably mark the peak moment for Wall Street and the Treasury Department, even though there is as yet no sign of it in Washington. Changes can be seen in the form of issues such as immigration, which has turned the grassroots of the conservative movement against the Chamber of Commerce and large corporations (due to an attack initiated by the latter against the former). This has pushed the Overton window of acceptable debate among conservatives who can now take shots at big business. There is also the growing libertarian faction pulled together by Ron Paul that supports his son, Rand Paul, that consistently attacks the Federal Reserve and Wall Street. Put it together and it is not hard to envision an anti-Wall Street, pro-manufacturing political consensus emerging. This will cut across party lines, with manufacturing unions pulling in Democratic support if there are specific bills to vote on.
The alliance grows stronger by the day.

If China wants things to "return to normal" it needs Trump gone and populism ended. Then it can get back to the old strategy with Wall Street as its witting partner and Washington its unwitting partner. Next best is getting back to its grand strategy: lulling the world into a slumber as it peacefully rises. China's Made in 2025 initiative and military expansion in the South China Sea came too early. A renewed focus on economic development is needed.

What can China do to mollify Trump? The CCP doesn't want an open the economy, it has been ratcheting up its control. It would have already granted its own citizens greater economic freedom if this was an acceptable solution. Thus, the only politically acceptable option that will get China back on its long-term track is greatly increased imports. And if they study Guan Zhong, they would know that's the best way to fight an economic war.