Here Comes Another RRR Cut

iFeng: 新一轮降准在路上!什么时候降?房价会涨吗?
Heavy! A new round of RRR cuts may be coming!

This is not a market forecast, but an official statement.

On December 23, while attending the China-Japan-Korea Leadership Meeting, Premier Li Keqiang stated during a visit to Chengdu, Sichuan that the state will further study various measures such as RRR cuts and targeted RRR cuts , refinancing and rediscounting to reduce real interest rates And comprehensive financing costs, it has significantly eased the financing difficulties and expensive financing problems for small and micro enterprises.

...Lian Ping predicts that in 2020, the central bank will also cut open market operations and medium-term borrowing convenience operation rates by 10 to 15 basis points , and continue to cut the benchmark by 100 basis points.

Dongfang Jincheng's chief macro analyst Wang Qing predicts that in 2020, there may be another two to three general reductions of 1.5 to 2.0 percentage points . Among them, before the Spring Festival may be reduced by 0.5 percentage points.

China Everbright's solid-income team analysts believe that the probability of a reduction in early January 2020 is high for two reasons. First, the Spring Festival of this year is January 25, and the scale of cash injection in the banking system before the Spring Festival will be larger than usual. Second, a large number of local government bonds will be issued at the beginning of January next year, which will also require medium and long-term liquidity injection.

As for time, some experts predict that the RRR cut may soon land. This Friday may be an important time window to observe whether the standards have been lowered .


Credit Guarantees Yet Again, In Shandong

Bloomberg: Defaults in One of China’s Richest Provinces Spook Investors
The problem isn’t the defaults themselves -- other provinces have seen more and worse. It’s the practice common among Shandong companies of guaranteeing each others’ debts. Firms don’t have to make public these liabilities, leaving investors to wonder who’s on the hook and for how much. With the once-strong industrial economy flagging, the murky ties between the province’s private companies threaten to drag them all down together.

This is one of many challenges bond investors must grapple with in China now, after defaults onshore climbed from zero just a few years ago to 130.7 billion yuan ($18.7 billion) in 2019. In Shandong and elsewhere, it’s still unclear how the government will intervene. Policy makers have been increasingly willing to let weak companies fail, but they’re also under pressure to keep the economy growing and the markets stable.

As of now, Shandong’s city and local governments have stepped in with piecemeal relief. It’s uncertain whether the provincial government will do the same. As a result, the province’s firms risk entering a vicious cycle that “spreads solvency risks to the entire region, swamping the good credits along with the bad,” according to an October report from S&P Global Ratings.
There are two main forms of credit guarantee blow-ups. One is a key firm goes down, triggers default protection and banks start calling in loans on many companies in the industry or geographic region. The other is a credit guarantee firm, running a business model similar to AIGs before 2008, goes bust.

This is not a new problem. China dealt with worse in 2014/2015 and papered over the problem. Since the prior cycle, governments became active in providing credit guarantees. Lately it has been aimed at science and technology firms. See 中南建设:为7家企业提供共计30.95亿元担保 and 辽宁五市设立科技融资担保公司 科技型企业将享专业化融资担保服务 If the economy picks up, they should have little trouble doing the same.

For those keeping time at home, credit guarantee blowups came in the earlier part of the economic downturn last time and peaked near the end of the downturn in China. Global financial markets would not bottom for another 6 to 8 months. Is trouble in Shandong an outlier event at the end of a downturn or a sign that a larger magnitude downturn is underway? We'll soon find out in 2020 once the initial blast of rushed infrastructure spending wears off.

Prior coverage


Rumored Mass Death of Companies in Xiaoshan District of Hangzhou If Banks Collect on Debts; Government Tells Banks to Sit Tight or Leave
Ye Tan's Commentary on Xiaoshan: Get Government Out of Credit Markets
Steel Trade Lawsuits Explode; Banks' Unceasing Nightmare; Defendants Flee
Credit Guarantee Firms Go Down Like Dominoes
Credit Guarantee Nightmare; How The Qingdao Port Scandal Goes Viral
Largest Privately Run Credit Guarantee Firm in Sichuan Goes Bust


The Credit Dominoes Are Falling Again; Northeast Faces Deflationary Collapse Without Bailout
Hebei Credit Collapse: State Owned Credit Guarantee on the Brink as AIG Business Model Falters
"The profit model is an important reason for the large-scale collapse of credit guarantee firms, a 2% profit is not sufficient for taking on 100% of the risk."

Shandong has seen credit guarantees blow up before, in 2017: Shandong Bad Debt Daisy Chains Exploding, Loanshark City Falls on Hard Times
A blanket of liquidity covered up bad debt for more than a year, but "neutral" monetary policy has revealed the underlying problem once more. iFeng has an entire special section devoted to Shandong's exploding daisy chain


Bitcoin Says Achtung Baby

Bitcoin is breaking below a 4-year support line that stretches back to August 2015. If Bitcoin is a new version of tulip bulb mania, it can implode into its own footprint. Even if it is tulip bulbs, and certainly if not, it is also an indicator of speculative mood. Divergence from the broader stock market bears watching here.


Working Through the Crisis Checklist: Largest Dollar Bond Default

Bloomberg: China Suffers Biggest Dollar Bond Default By State-Owned Company in Two Decades
A major Chinese commodities trader became the biggest dollar bond defaulter among the nation’s state-owned companies in two decades, in a moment of reckoning for Beijing as it struggles to contain credit risk in a weakening economy.

Tewoo Group Corp. announced results of its unprecedented debt restructuring, which saw a majority of its investors accepting heavy losses. This is expected to reshape investors’ perceptions about government-owned borrowers whose identity has for years offered a relatively strong sense of security.

It’s also seen offering a road-map for resolving similar debt crises in the future as the prospect of more failures by state-backed firms looms.

The one-time Fortune Global 500 company from the northern port city of Tianjin said dollar bond investors representing 57% of the the total $1.25 billion have agreed to be paid just 37 to 67 cents on the dollar, depending on the maturity of the debt.
Eurodollars went to money heaven.
Tewoo’s failure in the dollar bond market, the biggest for a Chinese SOE since the collapse of Guangdong International Trust and Investment Corp. in 1998, is a sign that the worst economic slowdown in three decades is limiting Beijing’s capacity to bail out its weaker state firms.
China's early 2000s bailout was trivially easy. It was 4th grade math easy. Bank balance sheets vs govt balance sheets and GDP growth rate. The govt could easily afford a huge bailout. This time, growth is slowing and the govt balance sheet cannot expand without negative impact on the wider economy.


Social Credit for Domestic and Foreign Companies Too

Back in 2018 I warned, If I was running a visible American brand in China, I'd be thinking about lowering my profile right now. . Nothing much has happened to this point in terms of boycotts, but the pieces are in place for a much stronger crackdown.

Breitbart: China Uses ‘Social Credit System’ to Control Domestic, Foreign Companies
Bloomberg News provided the example of China Railway Construction Corporation, a company that covered up some fatalities on a railroad project in Mongolia, got caught, and was banned from doing business for a year as well as being “subject to more inspections, limits on bidding for public projects and restrictions on issuing bonds and shares.” And those were only the immediate consequences – there is no telling how long the demerits fed into the social credit system will haunt the company and its managers across every province of China.

“The system will be widely used in China to oversee domestic and foreign companies, and firms have to assign resources to keep a real eye on making sure their records are clean,” noted Andrew Polk of the Trivium China consulting firm.

...The Chinese government is not shy about warning that American companies could be blacklisted as part of the trade war, or in retaliation for U.S. criticism of Chinese policies such as the internment of Uyghur Muslims in concentration camps.

Chinese Credit Growth Still Slowing

iFeng: 中国11月M2货币供应同比增长8.2% 新增人民币贷款1.39万亿元
At the end of November, the broad money (M2) balance was 196.14 trillion yuan, an increase of 8.2% year-on-year, and the growth rate was 0.2 percentage points lower than the end of last month and 0.2 percentage points higher than the same period of the previous year. The narrow currency (M1) balance was 56.25 trillion yuan, a year-on-year increase. The growth rate was 3.5%, and the growth rates were 0.2 and 2 percentage points higher than those at the end of last month and the same period of the previous year. The balance of currency in circulation (M0) was 7.4 trillion yuan, an increase of 4.8% year-on-year. Net cash invested in the month was 57.8 billion yuan.

21st Century: 企业贷款规模大幅增长 社融大增下M2增速仍回落
On December 10, the social financing scale data released by the People's Bank of China showed that after the trough in October, the social financing scale and credit placement in November both improved significantly, and the overall scale was higher than market expectations.

The data shows that the cumulative increase in the scale of social financing in November 2019 was 1.75 trillion yuan, 150.5 billion yuan more than the same period of the previous year, and a significant increase of 1.13 trillion yuan from October; the RMB loans increased by 1.39 trillion yuan in November. , A year-on-year increase of 138.7 billion yuan, a month-on-month increase of 728.7 billion yuan.

In terms of structure, the reason why the scale of credit injection in November exceeded market expectations was mainly due to the increase in corporate loans. Data show that in November, non-financial corporate and government group loans (referred to as "corporate loans") rebounded significantly, from 126.2 billion yuan in October to 679.4 billion yuan in November.

"Overall, both credit and social financing have been heavy this month. On the one hand, it is related to the low level of credit and social financing last month. Wen Bin, chief researcher of Minsheng Bank, said.
iFeng: 11月新增信贷、社融双双超预期,释放什么信号?
Regarding the fall in M2 data, Wen Bin pointed out to the International Financial News reporter that from the perspective of the increase of RMB 1.39 trillion in RMB loans in November compared with the previous month and the same period last year, an increase of RMB 7287 and 140 billion, in principle, credit derivatives The enhancement of capacity should promote the growth of M2, but it is lower than expected from last month, indicating that the currency tightening was caused by other reasons.

"On the one hand, fiscal deposits decreased by 245.1 billion yuan in November, but decreased by 419.2 billion yuan compared with the same period last year; on the other hand, foreign exchange reserves in November decreased by 9.6 billion US dollars. It is expected that foreign exchange contributions will also fall and currency investment will be weakened." Wen Bin explained that although the currency growth slowed in November, credit and social financing still exceeded expectations and played a supporting role in the real economy.

The Bank's Financial Research Center stated that M1 was hovering at a low level and rebounded slightly, and the central bank's liquidity control remained mainly stable. In November, M1 rebounded 0.2 percentage points from last month, reaching 3.5%. However, historically, the growth rate of M1 is still hovering at a low level, which largely reflects the need to strengthen the strength of monetary policy on the credit side, and the vitality of corporate operations needs to be improved. The growth rate of M2 was basically stable, falling by 0.2 percentage points. The reasons may be various factors, including the deceleration of bond issuance at the end of the year, and the expenditure intensity at the end of the fiscal year was less than expected. In general, the general stability of broad-based liquidity has laid the foundation for policy development early next year.

"Short-term liquidity will have seasonal support, and there will be incremental releases across the years. According to the current pace of financing needs, it is unlikely that the central bank will quickly increase liquidity to push up M2. And CPI breaks up again, even if monetary policy requires The pace of development will be slower. "The Bank's Financial Research Center predicts that the 1 trillion local special debt plan issued earlier in the year will actually be issued in December. Under the pressure of subscription agencies' payment, the central bank may use quantitative tools in advance. , Such as the accuracy reduction.
China has no answers for its slowing growth:
It is reported that 2020 is the year when a well-off society will be fully established and the “Thirteenth Five-Year Plan” will be completed. Some people in the industry said that, from the recent meeting of the Political Bureau of the Central Committee of the People ’s Republic of China, the growth of economic policy next year is still the most important issue. In order to ensure stable economic growth, macroeconomic policies will increase countercyclical adjustment. Stable infrastructure will be an important starting point for achieving steady growth.
iFeng: 11月金融数据全面回暖,下阶段货币政策如何发力
As the CPI announced on the same day rose by 4.5% year-on-year and reached a new high of nearly 8 years, Wen Bin, chief researcher at China Minsheng Bank, believes that monetary policy operations may be restrained to some extent. A few days ago, the central bank stated that it must adhere to the goal of currency stability, and it is expected that the possibility of further interest rate cuts will decrease. The primary goal of monetary policy will be marginal conversion based on economic growth and inflation.

Bank of Communications chief economist Lian Ping believes that even if the monetary policy needs to be vigorous, the pace will be slower. "Of course, the 1 trillion local special debt plan issued earlier in the year was actually issued in December. Under the pressure of subscription agencies, the central bank has the possibility of using quantitative tools in advance, such as lowering standards."
One stat worth considering should anyone think a rebound similar to 2012 and 2016 is in the cards: if M2 keeps growing at 8 percent and forex reserves hold steady, by this time next year reserve coverage of M2 will fall below 10 percent with USDCNY below 6.90. Factor in falling reserves or faster credit growth, the picture worsens much more quickly. Reserves can rise, but then expect more trade tension.

Reserves don't matter until they matter. They don't matter as much with strict capital controls. CPI is running at 5 percent though, thanks to pork inflation. Injecting credit into a high CPI environment risks sparking sustained inflation. Chinese do not have to take money out of China to flee the yuan, they can buy property, equities, and precious metals among other options.


Checkup on DJIA yo 30-year Bond Price Ratio

Chinese Headline CPI Spikes on Porkflation, PPI Still Deflating

The spike in pork prices finally made it into the headline CPI in November. It's very likely the CPI will crack 5 percent for all of 2019.

NBS: 2019年11月份居民消费价格同比上涨4.5%

NBS: 2019年11月份工业生产者出厂价格同比下降1.4%

Talent War Could Cause Housing Shortages in Some Cities

No wonder the CCP is happy with the current state of the real estate market. Between tight controls and talent wars, some markets may experience housing shortages.

The grab war referenced below is the talent war, grabbing people.

Aside from being a real estate issue, it again highlights the big difference between Chinese and American development policy. The "demographic deficit" is driving up the value of native workers in China and driving it down in the USA. Wages are up and relative housing costs down in China. Cities offer rent subsidies and even pay worker's taxes for them! In the USA, mass immigration drives down wages and drives up real estate costs, in addition to creating all manner of externalities that are costs for natives. In both cases, there is a "haves and have nots" situation. The best run cities win in China and those left behind don't benefit. But there are areas of the USA left behind as well, and unlike in China, young people who move to the city aren't given a basket of goodies for doing so, instead they have to move into a slightly less worse situation. Clearly, China's policy will run into some issues, but on the whole, it is a far more intelligent development strategy for the long-term, for social stability alone.

iFeng: 百城加入“抢人大战”行列 多城或面临“房荒”困局
From the first-tier and second-tier cities to the third-tier and fourth-tier cities, the "talent battle" has intensified in all cities across the country in recent years. According to the latest “Personnel Policies and Anju Employment Report 2019” (hereinafter referred to as the “Report”) released by 58 cities and Anjuke, more than 100 cities including Tianjin, Shenzhen, Guangzhou, and Nanjing have introduced talent policies throughout the country this year. New settlement policies have been introduced in 30 cities.

"Daily Economic News" reporters noticed that in this "grabbing war", Xi'an, Ningbo, Ma'anshan, Changsha and other cities have made regulations on talent policies, housing purchase and sales behavior. Obviously, these cities are trying to attract talents by lowering their entry thresholds, raising housing purchases, and renting subsidies.

However, will this "talent battle" be transmitted to the real estate market? Are the purchase restriction gates in various places being opened in disguise? With the influx of new populations, will these cities face the problem of “housing shortage”?
"Grab the War" to further upgrade

The most direct impact of the implementation of talent policy is the growth of the population.

Around 2010, with the rapid economic growth, the population of large domestic cities has grown rapidly, and the average annual growth of the permanent population has almost exceeded 100,000. From 2012 to 2016, the population growth of large cities has slowed down relatively, including Hangzhou, Nanjing, Suzhou, Xi'an, Hefei and other cities. The average annual net population growth of only tens of thousands of people, close to the natural population growth rate.

Since 2017, many large cities have introduced talent settlement policies, which has led to rapid population growth. For example, in Xi'an, the relaxation of college graduate registration policies in 2017 increased the household registration population by the end of the year. At the beginning of 2018, Xi'an again relaxed the settlement requirements and allowed immediate family members to move with their families. The population growth of household registration accelerated again, and the household registration population increased by 70 at the end of 2018. More than 10,000 people. Wuhan, Hangzhou, Nanjing and other cities also introduced a large population through talent policies in 2017 and 2018.
Some cities are even paying taxes for younger workers:
The "Report" shows that in addition to regular settlement and subsidies, some cities have introduced more personalized policies. Take Guangzhou as an example. For overseas high-end talents and talents in short supply who work in the Greater Bay Area, the portion of the personal income tax paid in the nine cities of the Pearl River Delta that has paid more than 15% of their taxable income is calculated by The People's Government of the Nine Triangle Areas provides financial subsidies that are exempt from personal income tax.
Some cities may face "housing shortage"

The entry of a large number of new people will inevitably stimulate the supply and demand of the local property market.

According to incomplete statistics, there are currently nearly 40 cities that have introduced talent purchase policies. Hot cities are in full swing, and more cities have yet to wake up. The urban population battle has just begun and is far from over.

The "Report" shows that many cities have made special provisions on talent purchase policies this year. For example, Hainan has introduced policies to reduce the number of years of social security or individual taxation for housing purchases to one year from the original two or five years for all kinds of talents actually introduced and working in Hainan but not yet settled.

When these cities open their arms to people, their attention has naturally increased. From the aspect of living, according to the data of 58 city and Anjuke platform, from January to October 2019, the number of new house visits in Xi'an, Chongqing, Wuhan, Chengdu and other cities is much higher than that of first-tier cities. , Wuhan, Shenyang, and Ningbo all visited more than 20% of the heat.


No Mention of Real Estate Signals CCP Content With Current Situation

iFeng: 政治局会议未提房地产是何信号?楼市数据不支持调控放松
The Political Bureau of the CPC Central Committee held a meeting on December 6 to analyze and study economic work in 2020. This meeting did not mention real estate related content, what signals did this reveal?

From July 24, 2017 to December 6, 2019, nine sessions of the Central Political Bureau focusing on the economy have been held. During this period, six meetings made important statements on the real estate market. The three meetings on October 31, 2018, December 13, 2018 and December 6, 2019 did not mention real estate.

From this year's perspective, the Politburo meetings held in April and July 2019 both emphasized "adhere to the positioning of houses for living, not for speculation." The July meeting even emphasized "not using real estate as a short-term Means to stimulate the economy. "
While the central govt wants the real estate market contained, local govts do not:
Reducing the economy's dependence on real estate, and not using real estate to stimulate the economy in the short term, does not mean that local governments do not want to develop the real estate industry. The real estate industry itself is connected to finance, and even to the physical industries such as building materials. The volume is large, and local governments at any level will not neglect the industry.
Keeping prices in check requires scientific central planning:
Under this principle, whether the real estate policy needs to be adjusted depends on what actually happened in the local real estate market. Overheating will be tightened, and overcooling will need to be relaxed. If the market is stable, the policy will also need to be stable. These adjustment costs This is the due meaning of the property market regulation, and it is also where the powers granted by the central government to the locality lie.

However, if local governments adjust real estate regulation and control policies, they must still grasp the timing and scale. Otherwise, the market will fluctuate sharply. It will obviously deviate from the "three stability" goal and the possibility of being stopped by the central government will be very high.
The government is in the Goldilocks planning zone for now:
Under such circumstances, there is no basis and necessity for directional adjustment of real estate regulation and control policies, and overall stability is still the main focus. The December Politburo meeting didn't mention real estate at all, but it also shows that the industry itself does not currently have a significant need for policy adjustments, that is, the entire real estate regulation and control policy has no turning requirements.

Shenzhen Rents Plummet 40pc

A crackdown on P2P lenders has hit the real estate market and it should last into 2020, but analysts see growth in the long-term as the government promotes the development of a megacity linking Guangdong, Shenzhen, Hong Kong and Macau.

iFeng: 火爆的深圳楼市 部分写字楼租金却暴跌40%
Compared with Shenzhen's fiery second-hand homes, Shenzhen office buildings with rising vacancy rates and falling rents are in a "cold array."

A reporter from China Securities News (ID: xhszzb) recently visited the office buildings in the central areas of Futian and Nanshan and learned that the rental prices of some office buildings have fallen by more than 40%.

Industry insiders pointed out that the "cold winter" of the Shenzhen office market was related to previous P2P thunderstorms. After the exit of related financial companies, the vacancy rate increased; after the increase in office supply in new areas such as Qianhai, office rents in the central area could not rise significantly in the short term.

Industry insiders predict that the Shenzhen office market will hardly show signs of improvement in 2020; however, in the medium and long term, under the effect of the policies of the Guangdong-Hong Kong-Macao Greater Bay Area and the Pilot Demonstration Area, Shenzhen office buildings may continue to grow and are expected to enter a stage of steady development.


Is It May Again?

Back in May:


Doesn't feel as clean a moment as in May, but maybe Kudlow or Trump will come out cheerleading later today.

Globalism Can Work With a Global Totalitarian Govt

Caixin: Opinion: Time for a Global Rethink on Taxation
If you are a citizen of a country, should you only pay taxes on the income you earn within that country’s geographical limits, or on all the money you earn, independent of location? The United States, Mexico, India, China, and Chile tax global income. Western Europe, Japan, Canada, Peru and Colombia tax territorial income. If the world moved toward global taxation and enhanced some incipient information-sharing mechanisms, the impact on inclusive growth, especially in the developing world, would be very positive.
Globalism creates a new set of problems, the solutions to which involve destroying nations, whether they care about liberty or not.


Social Mood 2020: White Van Terror and Tyranny

CNN: A Facebook rumor about white vans is spreading fear across America
Terrifying rumors initially propelled by Facebook's algorithms have sparked fears that men driving white vans are kidnapping women all across the United States for sex trafficking and to sell their body parts. While there is no evidence to suggest this is happening, much less on a national, coordinated scale, a series of viral Facebook (FB) posts created a domino effect that led to the mayor of a major American city issuing a warning based on the unsubstantiated claims.

The latest online-induced panic shows how viral Facebook posts can stoke paranoia and make people believe that spotting something as common as a white van, can be deemed suspicious and connected to a nationwide cabal.
As a signal of social mood, the factual content of a rumor doesn't matter. If this is an organic rumor zooming around the Internet, it speaks to what I've been covering here for years: the negative and declining social mood amid a depression masked by central bank intervention.

However, that the media jumped on the algorithm angle opens up the possibility that this is a "false flag" part of a broader government/media regulation effort. Tyrants do not like objective algorithms on Facebook and YouTube because they recommend popular content, even if that content is politically incorrect, dissident, or even completely fake (such as flat Earth). Facebook and YouTube seek increased engagement of users. They want users spending more time on their platforms, to sell them more ads. Their algorithms achieve this by serving up videos based on what works.

Rumors were around long before the Internet because there are many ways of transmitting information through society. Many in American society, mainly those who sit in positions of power in media, education, government and technology, want to use this tech to censor and eliminate competing information channels. This will turn America into something similar to China under the CCP.


6 Key Words for 2020

iFeng: 十多位大佬解读:关于2020年 你必须知道的六大关键词
Keyword # 1: Quality Enterprise

Zhang Xiaoyu, executive vice-chairman of the China Association for the Promotion of International Multinational Corporations and director of the United Nations University for Peace, said bluntly: "The number and quality of a country's multinational companies is directly related to the country's position in the world."

He took stock of China's top 500 companies: "Most of them are central enterprises, the remaining real estate companies, and some emerging Internet IT companies. The development of IT enterprises is an administrative concession granted by the government."
This next one does not make me confident.
Keyword # 2: Confidence

When the economy fluctuates, it is not money that is lacking, but confidence. In economics, confidence is about expectations, and expectations are about behavior.

In the first day of the forum, Wei Jianguo, the vice chairman of the China International Economic Exchange Center and the former vice minister of the Ministry of Commerce, took a shot.

"The overall economic situation next year will be better than this year, and there will be a development trend of" low front and high back ", and the additive effect of policies will be more significant."
Keyword # 3: Fintech

How to solve the problem of confidence? Find new economic growth points.

In recent years, big data and blockchain have become hot words, and the era of digital economy and fintech seems to have arrived. However, many industry experts saw in advance the hidden concerns behind the blossoming flowers.

How to prevent risks in the digital economy era? This is a question that must be answered.

Li Lihui, the leader of the Blockchain Working Group of the China Internet Finance Association and former President of the Bank of China, pointed out the importance of "digital trust" in his speech.

Finance needs credit, how to build trust in the digital economy era?
Here's an OK Booomer one:
Keyword # 4: Aging and the city

In recent years, "aging" has become a hot word, causing a lot of social anxiety.

In the age of aging, one child raises four elderly people, how to solve the problem of providing for the elderly? "Before getting rich", where does the money for old age come from? Will China enter an "aging" society like Japan?

Ni Pengfei, director of the Urban and Competitiveness Research Center of the Chinese Academy of Social Sciences, is more optimistic. He raised a very different perspective on the challenges brought by the aging population to society.

Ni Pengfei believes that in the digital age, aging should not be called aging, it should be called longevity.
Keyword # 5: House prices

The house is related to the safety and well-being of every people, and it is related to the national economy and people's livelihood. When talking about the economy, the topic that cannot be avoided is the property market.

Sheng Songcheng, Counsellor of the Shanghai Municipal People's Government, Executive Deputy Dean of the China-Europe Lujiazui Institute of International Finance, and former Director of the Department of Investigation and Statistics of the People's Bank of China, attended the forum and delivered a keynote speech entitled "Structure Issues Regarding Real Estate Regulation in China"

Regarding the future trend of housing prices, Sheng Songcheng believes that housing prices may rise again in the next six months to a year.

"Why is house price likely to rise? Because supply has fallen and supply has fallen. Now people are more worried about house prices falling. Many people will say that house prices may fall. On the contrary, I am worried that house prices may be Rising again. "

"Because we control demand now. And demand can only be postponed. You can't control the future and not buy a house. Not buying now does not mean not buying later. And if supply continues to fall, house prices are likely to rise after one year."
Keyword # 6: Trade

A major change in 2019 is that trade is not only an issue for China and the United States, but has become an international trend. The rise and fall of trade frictions between countries constitutes a major geopolitical instability.

As a witness and witness of China's joining the "internationalization" wave, China's chief negotiator for accession to the WTO and former vice minister of the Ministry of Foreign Trade and Economic Cooperation Long Yongtu talked about his thoughts and feelings.

He bluntly said: "Over the years, I have a very profound experience. As long as you import a lot, as long as you are able to carry out some import commitments more boldly in trade negotiations with some countries, trade negotiations will become easier."

"Expanding imports is the most important and effective way to resolve trade frictions. Of course, for us, increasing imports also has a major strategic goal, which is to make China the world's largest trading power. After years of efforts, we It has become the world's largest exporter of trade, which is not enough. "Long Yongtu pointed out in his speech. "

He mentioned that Americans have long dominated the hegemony on the international trade stage because it is the world's largest importer.


Astrology Makes a Comeback

The signs of a major turn in social mood keep piling up. Superstition, magic and witchcraft are signs of negative mood. The stock market is at all-time highs and the economy has grown slowly, but if you look at the cultural markers, it's negative on nearly all points. The next recession is going to unleash 20 years of pent up negative mood.

SCMP: How millennials and app culture turned astrology into a modern obsession
The apps are, regrettably, correct. Not only am I all of those things, I’m a Cancer sun, Sagittarius rising and an Aries moon. I found this out when I fulfilled a typical millennial trope: texting my mother to ask her what time of day I was born.

“It was early,” she replied. (Wrong. It was evening, we later determined.)

It was Co-Star that told me to text my mother, because the app needed the information to produce my natal chart, which uses the positions of planets and stars at the exact time of one’s birth. It produces horoscopes that some say are far more sophisticated than the generic “good luck in finance and love” you see in many newspapers and magazines.

CBIRC Revises Rules for Bank Failures

Caixin: China’s Regulator Revises Rules on Banks’ Capital Replenishment Tools
China’s banking regulator clarified criteria for innovative capital instruments for commercial banks, which are under increasing capital pressure following a national deleveraging campaign.

In a guideline issued Friday, the China Banking and Insurance Regulatory Commission (CBIRC) laid out the capital loss absorption sequence for different classes of capital instruments, addressing questions such as which get paid first between holders of perpetual bonds and preferred stock in case of a liquidation.

Under the CBIRC’s rules, perpetual bonds and preferred stock will be paid at the same time as they are both tier-1 capital replenishment tools. The commission ruled that when a trigger event occurs, all of the same class of capital instruments shall initiate a write-down or conversion at the same time in proportion to the total amount of capital instruments of that class, before the write-down or conversion of the next level of capital instruments.


Plug Pulled on Latin America

If this holds, the U.S. dollar is about to get a Latin American rocket booster.

CIRC Chief Discusses Shadow Banking

iFeng: 银保监会主席郭树清:继续拆解影子银行 遏制房地产泡沫化倾向
Guo Shuqing, Party Secretary of the People ’s Bank of China and Chairman of the Banking and Insurance Regulatory Commission, said at a symposium on “deepening financial reform and serving the development of the real economy” hosted by Nanchang Zhongzhi of the People ’s Bank of China. We have done a solid job in "six stability" and made concerted efforts to prevent and defuse financial risks and made substantial progress. The main manifestations are as follows:

The first is to accurately deal with illegal financial institutions and financial groups, and to rectify various violations in an orderly manner according to law; the second is to deal with the risks of shadow banking in an orderly manner and substantially reduce the size of cross-financial business; Activities, and continued to carry out special rectification of Internet financial risks; the fourth is to increase efforts to expose and dispose of non-performing loans in the process of supporting economic restructuring and effectively prevent traditional credit risks; the fifth is to strive to stabilize the overall economy and the leverage ratio of major sectors , Focus on reducing the level of debt ratio of state-owned enterprises; sixth, while resolutely curbing the increase, steadily resolve the risk of the local government's hidden debt stock; seventh, further suppress the financialization and bubble of real estate, stabilize housing prices, land prices and expectations; eight is positive Support small and medium-sized banks to deepen reforms to prevent risks and encourage multi-channel capital replenishment. Nine is to respond to external shocks securely and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.


Shenzhen Banks Stop Mortgage Lending

财新:多家银行深圳分行暂停发放按揭贷 利率不会随LPR下调
The real estate market has already played the "five limit spectrum."

  The so-called "five-limit spectrum" refers to the restriction of loans, purchase restrictions, sales restrictions, price limits, and business restrictions, which form a suppression of the real estate market from both sides of supply and demand. In terms of credit limit, the measures adopted by the supervision are mainly through window guidance and compliance inspection, and strictly control the scale of on- and off-balance sheet of real estate personal mortgage loans and development loans.

In this context, individual banks in individual regions have suspended the issuance of housing-related loans. In September 2019, individual stock exchanges in East China had suspended the issuance of real estate development loans (see Caixin.com, “ Banks tightened development loans, individual branches in East China have suspended lending ”).

  According to Caixin reporter, in mid-November 2019, the Shenzhen branch of the two major state-owned banks , China Construction Bank and Bank of China, has suspended the issuance of mortgage loans. A senior real estate market source told Caixin reporter, "From November 18, 2019, CCB Shenzhen Branch has suspended the lending, and the CCB head office directly closed the Shenzhen branch's (mortgage loan) lending system."

  A Shenzhen branch of a stock company also confirmed the above information, and said that because of the role of CCB in Shenzhen, the bank is also considering whether to follow up on lending. According to Caixin reporter, Ping An Bank Shenzhen Branch suspended the mortgage loan from October, and “the annual loan quota has been used up”.


Pork Prices Fall for Three Weeks

iFeng: 降降降降!降降降降!刚刚,“二师兄”八连降
Among them, imports from Spain, Germany, Canada, Brazil and the United States were 247,100 tons, 221,600 tons, 171,500 tons, 144,000 tons and 139,400 tons, accounting for 70% of the total imports, respectively, a significant increase year-on-year. 42.5%, 27.6%, 38.2%, 32.8% and 73.3%.

Since the beginning of this year, the list of permitted importing countries in China's pork market has continued to increase. On November 19th, the first batch of Italian frozen pork exported to China had successfully entered the domestic market. At present, there are 18 countries and regions that allow pork exports to China, including the United States, Canada, Argentina, Brazil, Mexico, Chile, France, Ireland, Italy, Denmark, Germany, Finland, the Netherlands, Spain, the United Kingdom, Austria, Portugal, Switzerland.

In addition to the increase in the supply of pork, from the beginning of October, the number of breeding sows in the country has stopped falling, and the decline in live pigs has narrowed significantly. According to the monitoring of the Ministry of Agriculture and Rural Affairs, the number of breeding sows in August decreased by 9.1%, the decline in September narrowed to 2.8%, and in October it increased by 0.6%.

China 2019 is China 2014

Same debate, only this time with more debt and greater risk. The PBoC lost all prior rounds.

Bloomberg: Inside the PBOC’s Struggle to Balance China’s Growth and Debt

Existing Home Prices Slowing in Beijing, Shenzhen Stronger

21st Century: 北京二手房降价调查:量价齐跌最长下滑周期来袭,限竞房“价格战”施压
"(Second-hand housing) prices are indeed declining. In the past few months, the price of the offer has been raised more than that. But even then, the transaction volume is not large." On November 19th, the business of Chain Home Real Estate Beijing Zhujiang Oasis Store Xiao Liu told the 21st Century Business Herald.

This store is located outside the East Fifth Ring Road in Beijing and belongs to the Shuangqiao area of ​​Chaoyang District. According to the data of the chain home app, at this stage, the average transaction price of second-hand houses in the region is about 45,000 yuan / square meter, which is slightly lower than the price level in the first half of the year. Since the second half of the year, the volume of transactions in the region has been at a low level.

In this round of real estate market adjustment, Beijing is one of the earliest regional markets that have introduced policies and are the first to be effective. At present, the volume of second-hand housing transactions in Beijing accounts for more than 80% of the overall market. The change in the second-hand housing market is almost a portrayal of the Beijing property market.

According to the National Bureau of Statistics, from July to October this year, the average transaction price of second-hand residential properties in Beijing fell for four consecutive months. This is the longest downturn in Beijing's second-hand housing prices since 2018. The information reported by the frontline brokers is that the owners continue to cut the offer, but the wait-and-see attitude of the buyers is still serious.

Since the "317 New Deal" in March 2017, Beijing has not introduced new heavyweight control measures for more than two years. So, what are the factors that "disturbed" the price of second-hand housing in Beijing?


Every Time a Bell Rings, A Chinese Bank Goes Bust

ZH: China Quietly Bails Out Another Bank With 620 Billion Yuan In Assets
Harbin Bank, which is one of the biggest banks in China’s northeast with 622 billion yuan in assets as of June 30, 2019, and trades on Hong Kong’s stock exchange, becomes the fifth bank - after Baoshang Bank , Bank of Jinzhou, Heng Feng Bank, and Henan Yichuan Rural Commercial Bank - to be bailed out by the state, and will be 48%-controlled by two government entities after six private shareholders shed their stakes, according to a bank statement issued late on Friday.

Total consideration for the shares involved came to almost 15 billion yuan, or around $2.1 billion, the bank said, though it described the transactions as transfers rather than stock sales, which is to be expected if the bank was being bailed out instead of actually selling a viable stake.

As has been the customary case, the bank didn’t provide any reason for the transactions in the statement, and Chinese bank regulators made no comment on the action.

And, as was the case with at least one previous bank "rescue", Harbin Bank was connected to a former oligarch who disappeared not that long ago amid allegations of massive fraud. Indeed, as the WSJ reports, the bank is among a handful of financial businesses in China linked to once-powerful tycoon named Xiao Jianhua who in early 2017 disappeared amid a wave of prosecutions of big private investors. Businesses owned by some of those people, including Wu Xiaohui’s Anbang Insurance Group Co., have also since become government-owned.
What separates bulls from bears is fraud and how far it reaches into the economy.

Harbin Bank is also politically connected. From three years ago SCMP: Harbin Bank leads US$1.5 billion syndicated loan to Russian state bank, offering lifeline amid EU sanctions

WSJ: Why China’s Smaller Banks Are Wobbling

As I laid out in Pivot Time: Another Bank Run, This Time in Troubled Liaoning, I laid out a very brief and simplistic explanation of China's past decade of growth. Commodities fueled by China-related infrastructure development peaked in 2011. China then relies heavily on real estate, which in some areas peaks in 2014. Then banking took over and some banks, like the Bank of Jinzhou bailed out earlier this year, grew assets rapidly by making interbank loans. To boil it down even more simply, at first credit was force fed into infrastructure, then it funneled into real estate (and briefly into A-share stocks from mid-2014 into mid-2015), and then finally into the banks themselves. Credit is losing its efficacy, the marginal return on debt is falling, and now it takes rapid credit growth merely to prevent a collapse. Which is why I'd get very concerned if total credit growth slipped below 10 percent.

In the near term, markets reacted positively to China signaling the concerns are warranted.

CNBC: China cuts short-term funding rate for first time since 2015

You can go broke betting against the market because you can run out of money before the market does. The market is a weighing machine in the long-term, not in the short-term. Traders play poker. Markets bounced today because they have a Pavlovian response to central bank actions and the history of Chinese success in this area. There were bounces after downturns in 2008, 2011, 2014 and now in 2018. However, unlike the previous times, there's no major stimulus effort yet. Moreover, even if they try, history suggests the outcome will be even lower commodity prices, a higher USDCNY, a larger pile of bad debt and higher risk that stability is lost.

In not entirely unrelated news, China Battles Wave of Online Criminal Activity
The case was revealed by the Ministry of Public Security (MPS) during a briefing last week to highlight criminal activity on the internet that’s become so pervasive it prompted the authorities to start a special campaign in January called “Internet Cleanup 2019.” Part of the offensive involves cracking down on entities that infringe on citizens’ privacy through the acquisition of personal information and data. As of the end of October, the police have investigated almost 46,000 cases of internet crimes and arrested nearly 66,000 suspects for offenses including computer hacking, internet fraud, online gambling and cybersex, the MPS said.

One key focus of the campaign is a practice known as predatory lending, where unscrupulous money lenders use various means to deceive or coerce borrowers to take out loans they don’t need or can’t afford and that carry unfair or abusive terms. To find customers and control lending risks, the online lenders leverage data that’s been collected illegally and pay for support services from companies that provide technology, data and payment solutions.


Rehypothecating Excavators

Rorschach test of your China view.

Is China in a building boom or is construction equipment being sold on credit or is it being bought on credit and rehypothecated for bank loans?

Caixin: Sales of Chinese-Made Excavators Hit Record Even as Economic Growth Slows
Sales of excavators by Chinese manufacturers have hit a record high this year as the central government ramps up efforts to bolster the country’s slowing economic growth by boosting infrastructure spending.

From January to October, 25 manufacturers in China sold 196,222 of the dirt-moving machines, which are essential for large construction projects, according to data (link in Chinese) released Friday by the China Construction Machinery Association (CCMA), an industry group. It was an increase of 14.4% year-on-year, although well below 52.5% growth (link in Chinese) for the same period in 2018. About 89% of the excavators, or 174,680, were sold in the domestic market.
I could be wrong about which way the Chinese economy goes, particularly in the short-term, but this is not good news for the health of the Chinese economy. In the best case scenario, it's a stop gap measure that helps the economy until a real recovery or positive black swan comes to bail out the global economy. There are no other good scenarios.

Latin American Currencies Ready To Stumble

All clear for global markets or are Latin American currencies about to light the next phase of the dollar bull market?

Bonus chart USDCNH.


Civil War Makes It Into Mainstream Publication

What has been obvious for years, more like decades, is now being understood by mainstream publications. America is on a seemingly irreversible trend towards either a major political fracture or a civil war, or both.

The Atlantic: How America Ends
Today, a republican party that appeals primarily to white Christian voters is fighting a losing battle. The Electoral College, Supreme Court, and Senate may delay defeat for a time, but they cannot postpone it forever.

...The right, and the country, can come back from this. Our history is rife with influential groups that, after discarding their commitment to democratic principles in an attempt to retain their grasp on power, lost their fight and then discovered they could thrive in the political order they had so feared. The Federalists passed the Alien and Sedition Acts, criminalizing criticism of their administration; Redemption-era Democrats stripped black voters of the franchise; and Progressive Republicans wrested municipal governance away from immigrant voters. Each rejected popular democracy out of fear that it would lose at the polls, and terror at what might then result. And in each case democracy eventually prevailed, without tragic effect on the losers. The American system works more often than it doesn’t.
The problem is what is America becoming? More like Nazi Germany or Soviet Russia. The North and South had competing visions for America, but they were a common group of elites who shared a history, language, much culture and religion. Today, that is not the case.

Campus culture points to extreme racial hatred becoming the norm in corporations and government. Political correctness was a joke in the 1990s, it was an oddity. Today, it is mainstream culture. Thus any hope that moderate Republicans or moderate Democrats can find a new middle, must be tempered by the reality that American universities are a modern-day Hitler Youth or Maoist indoctrination centers, churning out hate at an industrial scale.
I went to Williams for a year before transferring because it was so bad I became severely depressed. It’s worse than you can even imagine. Literally every single class I took had an anti-white, anti-christian professor and agenda.

Economics? We discussed the racist wealth gap & how minorities poverty was due to institutional & structural racism. History of early modern Europe? We did a whole chapter on “minority voices during the slave trade.”
Apart from the anti-white agenda in the entire curriculum, it seeped through into the general discourse and atmosphere on campus as well. There was a gigantic mural of Trayvon Martin hung on the student center...

Despite the school bending over backwards to accommodate every single brown person's desire, they still felt oppressed & launched a “police brutality” campaign against our campus security officers claiming they were being harassed & abused by these half-asleep fat 70 year-olds.

When high schoolers toured the campus, they put up a gigantic mural of all the black people currently attending saying why they should come to Williams. Also, they hung fliers around campus explaining how every protected class would be welcomed to Williams.

Unsurprisingly whites were not given a reason to be welcome despite making up over half of the student body. I forget what it said but it was something along the lines of “black people, you will not be shot by police here.”
The melding of identity with ideology will be the Rubicon for a united American polity.

Sunspots, Wheat and USD


China Money Supply Contracts in October, Matching Year-Ago Dip

M2 growth was 8.4 percent yoy in October as it fell 0.34 percent for the month, same as in October 2018.
TSF stock was similarly flat at 11 percent growth. The PBoC website says 10.4 percent (a significant slide towards the 10 percent area that accompanied deteriorating data earlier this year), but it's 11 percent based on their reported 2018 data.

Shenzhen Abolishes Luxury Real Estate Tax

iFeng: 深圳取消豪宅税,已有业主捂盘跳价…影响到底有多大?看7问7答
Buying a house and moving hundreds of thousands of "luxury tax", is this day to end? Shenzhen has adjusted the standard of “luxury line” for ordinary housing from today, so that the taxes and fees for most second-hand housing transactions will be greatly reduced.

"From today, the value-added tax standard for second-hand housing transactions in Shenzhen is adjusted. The new levy standard is for residential houses with a plot ratio higher than 1.0 and a building area of ​​144 square meters. The value-added tax is exempted for two years." Shenzhen Local Taxation Bureau 12366 staff The brokerage Chinese reporter said.

Subsequently, the Shenzhen Taxation Bureau also responded to this news and said it is true.

Shenzhen Housing and Construction Bureau also officially responded, "A few days ago, Shenzhen City adjusted the standard of ordinary commodity housing to: parcel floor area ratio of 1.0 or more and housing construction area of ​​144 square meters or less. This is insisting that the house is used to live. It is not used to speculate, to implement the national tax reduction and reduction spirit, and to take full account of the reasonable housing consumption of ordinary residents.

The staff of Lejia Real Estate said that when colleagues took customers to pay taxes and paid taxes, they could not be brushed out. He also said that after hearing the news, some owners have already sold their houses.

Swine Flu Wave Two, Three Underground Vaccines Widely Used

Winter seems to be slowing the spread of swine flu in the north, but there's a rebound of infections in the south. Swine herds, including sows, are still declining nationally.

财新: 特稿|养猪业复产艰难 疫情第二波疑现地下疫苗
Pigs are still decreasing. According to data released by the Ministry of Agriculture and Rural Affairs on October 14, the number of live pigs in 400 monitoring counties in September 2019 decreased by 3% from the previous month, down 41.1% year-on-year; the number of capable sows decreased by 2.8% from the previous month and decreased by 38.9%. This is the third consecutive month of decline in national pig stocks after a non-defeating outbreak.

  The good news is that in the north, the savage African swine fever virus seems to have died down. According to data from the Ministry of Agriculture and Rural Affairs, the number of live pigs in the seven provinces of Liaoning, Shandong, Heilongjiang, Hebei, Shanxi, Gansu and Jilin increased by more than 3% in September, and eight in Gansu, Ningxia, Heilongjiang, Shandong, Tianjin, Shanghai, Beijing and Liaoning. The province's ability to breed sows increased by more than 3%. From a regional perspective, the growth of pigs in the northeast, north, northwest, and parts of the Central Plains has declined.

  However, the southern region is still in the process of bottoming out. On July 14th, Guotai Junan reported that according to Xinmu.com, as of the end of June this year, compared with the number of pigs released in 2018, the national median pig production capacity was 50%, of which Guangdong, Guangxi, Anhui and Jiangsu decreased respectively. 70%, 75%, 70% and 85%.

  What is worrying is that after entering the hot and humid summer, the African pig swine, the number one pig killer, has made a comeback in some areas.
Many farmers aren't waiting for the government sponsored vaccine which is in clinical trials. They've opted for one of at least three underground vaccines.
On September 10, the Chinese Academy of Agricultural Sciences announced that the African swine fever double gene deletion vaccine has completed laboratory safety assessment and effective trials and is about to enter the clinical trial phase. However, many insiders told Caixin reporter that due to the fierce epidemic, the underground vaccine, which has not reached the commercial maturity, is also popular in the industry when the official vaccine is still in the pilot stage. At present, there are at least three kinds of “black market seedlings” in circulation. .

  The aforementioned Jiangsu veterinary experts also said that according to his understanding, the use of underground vaccines is very large. In June and July, large pig enterprises began to use, inoculated with millions of pigs, and pig farms with negative detection of nucleic acid in Africa. The vaccine can achieve a protection rate of at least 70%, but the vaccine itself is very low in safety and can directly cause pig skin necrosis, pig death, sow abortion, abortion rate of 4%-8%; In the farms where the nucleic acid test was positive, the vaccine mortality rate was extremely high and almost disappeared.

All is Well: Regulators Deny Forced Mergers to Stabilize Banking System

Caixin: China Is Said to Mull Wave of Bank Mergers to Bolster Stability
Chinese authorities are considering a sweeping package of measures to shore up smaller lenders, escalating efforts to contain one of the biggest risks facing the world’s largest banking system.

Problematic banks with less than 100 billion yuan ($14 billion) of assets would be urged to merge or restructure under a plan being discussed by financial regulators, people familiar with the matter said. Local governments would be held responsible for dealing with troubled lenders, with the central bank providing liquidity support if necessary, the people said, asking not to be identified discussing private information.
Later in the day, also from Caixin: Banking Regulator Denies Sweeping Plan to Force Mergers
Zhou Liang, a vice chairman of the China Banking and Insurance Regulatory Commission, told Caixin on Sunday the regulator would instruct some small banks to shrink their interbank businesses and those outside their registered region and industry. But he said it would be impossible to take the kind of comprehensive measures reported.


Mortgage Slavery Outweighs Wealth Effect for Chinese Homeowners

Analysts at Oriental Securities compare China's real estate market to the U.S. and see parallels. Although they find China hasn't yet reached the levels of financialization seen ahead of 2008, many households are already constrained by their mortgages such that they do not experience a wealth effect from rising prices.

iFeng: 被金融裹挟的房地产:房奴效应大于财富效应
From the dynamic path of leverage in China's physical sector, the resident sector has been increasing leverage since 2008. In 2008, the debt leverage ratio of the resident sector was 18.77%, and it rose to 55.30% in the second quarter of 2019, an average annual increase of 3.3 percentage points.

The most important reason for the rise in housing prices is the rise in housing prices. People only talk about the wealth effect, but they ignore the “house slave effect”. The latter refers to the increase in housing prices and the increase in residents’ housing and rental expenses.

Empirical studies show that China is a house slave effect greater than a wealth effect. While rising house prices have increased the debt burden of the residential sector, they have also suppressed consumer demand and squeezed out investment in the physical sector, hindering productivity. It is the realization of the negative effects brought about by the excessive expansion of the real estate market. The "7·30" Politburo meeting not only re-emphasizes the positioning of "staying and not speculating", but also for the first time clarifying that "real estate is not a means of stimulating the economy in the short term." But from the latest data on real estate transactions and prices, market inertia is still significant.

From the analysis of this paper, we can see that from the perspective of realizing the policy objectives of real estate regulation, one way to refer to is to constrain the financial properties of real estate. The commercialization and financialization of China's real estate began in 1998. If China's real estate market is compared with the United States, China is still in the early stages of financialization. If real estate is left with financial development, then the story of the United States in 2008 is likely to repeat itself in China.


Chinese CPI Starts Soaring As Porkflation Hits and Comparables Bite

China's headline CPI spiked to 3.8 percent in October as pork prices jumped and unfavorable year-on-year comparisons started showing up. First the food, alcohol and tobacco category spiked 2.7 percent in October and up 11.4 percent year-on-year. Pork alone spiked 20.1 percent in October from September. Even though it has been talked about and prices rose over the past year, pork prices were actually relatively stable in late summer. This latest spike is a new round of increase and it took the year-on-year increase to 101.3 percent and 29.7 percent YTD. Overall meat prices are up 66.8 percent yoy and 20.5 percent YTD.

The next two month's comparisons are against negative 0.3 percent and 0.0 percent. If food inflation ran at similar levels for the next two months,the headline CPI could be pushing 6 percent by December.
As for the PPI, it was stable with a 0.1 percent increase from September. The headline number cratered to negative 1.6 percent because of higher inflation (crude oil) from this time in 2018 dropped out of the calculation.


Pivot Time: Another Bank Run, This Time in Troubled Liaoning

Another bank run, this time in Liaoning. The authorities have arrested people on charges of spreading rumors. After seeing China bottle up its troubles, it's unclear whether China's banking system is finally cracking or whether these are isolated incidents. Chinese culture has more herding than Western culture. A bank run is like a Black Friday sale in the USA, in that the crowd itself attracts more people. However, they are connected by one sure thing: social mood. Rumors of bank runs can happen anytime, but they only become serious when people have a reason to think they might not get their money back.

Sina: 辽宁营口沿海银行遭“挤兑” 回应:现金充足
On the afternoon of the 6th, the official microblog of the Public Security Bureau of Yingkou Economic and Technological Development Zone, the Public Security Bureau of Yingkou Development Zone, issued a notice saying that today’s online rumors of false rumors about the financial crisis in Yingkou’s coastal banks have led to a large number of The depositors went to the bank to cash in, and the staff gathered, causing the normal business order of the bank outlets to be disordered, and the surrounding security environment was unstable. After receiving the police, the Public Security Bureau of Yingkou Development Zone dispatched the police force to the six Yingyingkou coastal banking outlets in the district for security order maintenance, and brought a leading troublemaker suspected of disturbing public order to the Public Security Bureau for investigation. deal with.

  On the evening of November 6, the staff of Yingkou Coastal Bank Gaizhou Branch said to the news that at present all the outlets of the bank are in normal business operations, and there are still a large number of customers coming to withdraw funds, but the bank's cash is sufficient, "the special period is overtime. Avoid causing panic, let everyone know that they are doing business normally.
Yingkou is a city covered here before. About 18 months ago, the AA-rated port defaulted on its debt.

IICS: Update: AA+ Rated Yingkou Port Defaulted on ¥530 Million, Has ¥78.1 Billion in Debt

Way back in 2014, Liaoning was the epicenter of the real estate bust.

IICS: In Yingkou, Liaoning Unfinished Buildings Stretch For 50 Square Kilometers; Real Estate Graveyard

Later that year, I posted Liaoning Sounds Warning on Chinese Economy

If China's problems a systemic, it isn't surprising to see issues pop up in Liaoning.

FT: China’s small lenders suffer bank runs as economy slows
This week, police in Yingkou, a city of 2.5m people in the north-eastern province of Liaoning, arrested nine residents for posting “inappropriate remarks” on social media that Yingkou Yanhai Bank, a local lender, was in a “deep financial crisis”.

The online comments prompted local residents to flock to the bank’s branches to withdraw their savings. “Everyone says YYB is running into trouble,” said a Yingkou resident. “There must be an element of truth in it.”
Zhuang Bo, an economist at TS Lombard, a research firm, said YYB exemplified the difficulties faced by China’s small lenders that had expanded their footprint by issuing shadow banking products, which could include off-balance-sheet lending, peer-to-peer transactions and credit extended by asset managers.

Quick history lesson

Liaoning suffers from protracted industrial/commodity slowdown that starts in 2011
Liaoning goes all in on real estate development to boost growth
Liaoning real estate model implodes in 2014
Liaoning banks moved into shadow banking, WMPs to fuel growth
Liaoning banks hit a wall in 2018
Liaoning banks are going bust

Yes, Yingkou isn't the first Lianoning bank in trouble. The other was Bank of Jinzhou. It IPO'd in late 2015 as China's last round of stimulus was starting to have a positive impact. As I wrote then:
My curiosity got the better of me when I saw the bank is growing 50%+ yoy. I want to see how the bank increased assets to over 300 billion yuan with only 90 billion in loans. What are these assets? They're listed as debt securities classified as receivables. A look at the notes: wealth management products. The bank, as of June 30, had 90 billion lent out in normal banking and 125 billion lent out through shadow banking. Also from the notes: the average yield on their assets rose from 6.04% in the six months ended June 2014 to 7.80% in the six months ended June 2015.
And then in spring of 2019: PBoC Steps in to Support Bank of Jinzhou

Back in July I wrote China Credit Growth and Risk of Financial Crisis. Nothing has materially changed. Right here, right now, it looks like an important pivot point for the global economy and global financial system. If things progress in the direction of the past 8 weeks or so, then maybe the bank issues is overblown for now. "Trade talks" and the Fed's decision to grow the balance sheet will hit the pause button, at least until the Fed stops increasing its balance sheet in 1H 2020. If this is a pullback within a larger move, the denouement of central bank efforts since 2009, markets will deteriorate quickly given the widespread expectation (myself included) of at least a year-end rally in equities.


Real Estate Rage Returns

WSJ: China’s Housing Market Is Finally Cooling. Some Homeowners Are Furious

青岛新闻网:济南楼市:房价降了 每平米1万元出头的房明显多了 (Jinan property market: the price dropped, 10,000 yuan per square meter seen)

Aside from falling prices, what's notable about Jinan is existing-home listings are at an all-time high and rising as prices drop:
According to the transaction data of the chain home, the number of listed houses in Jinan reached 43,313 sets. In recent months, the number of new homes in the chain has been on the rise. In May, the growth of listings reached a peak of 6,617.

Although the number of second-hand houses listed is high, the house prices are falling silently. According to the data of the chain home, the average price of second-hand houses in Jinan in September was 18,411 yuan, and the average price was 16386 yuan/square meter. In October 2018, the price of second-hand houses in Jinan was 20,915 yuan / square meter.

"Some second-hand houses are obviously cut in price, but in fact, the price that was previously hanged is also high, and there is no market for price." Chu Xin told the Economic Herald reporter that many of the second-hand houses that are now sold are constantly adjusting prices. Only when there is a deal, there is basically room for bargaining.

iFeng: “银十”以量换价 房企降价冲刺将成普遍趋势
From the sales model, most of the housing companies increased their supply in October. At the same time as the pace of the push-up increased, the trend of price reduction promotion was obvious. Industry insiders expect that under the pressure of annual performance targets, the final two-month price sprint of real estate enterprises will become a general trend.

...In this regard, Zhongda Real Estate Principal Analyst Zhang Dawei said that compared with the data for the same period in 2018, the sales of housing enterprises continued to differentiate in the first 10 months of 2019. In the same period of 2018, the sales amount of real estate enterprises increased by more than 50% year-on-year, while in 2019, the sales of most enterprises were relatively stable, and the growth rate of some enterprises slowed down noticeably.
The average selling price has been lowered

From the average selling price, the average selling price of some real estate enterprises in October was lower than that in September. Taking China Evergrande as an example, the company's October sales brief showed that in October 2019, the company's contracted sales average price was 9336 yuan / square meter, and the average contracted sales price in September was about 10054 yuan / square meter.

The industry generally believes that from the sales performance, many housing companies have harvested "Golden September and Silver 10", but most of the housing enterprises have increased the supply, and some companies have significantly adjusted the price promotion. In order to scale up, the possibility of looting will not be ruled out in the last two months of the housing business.

A medium-sized housing enterprise executive told the China Securities Journal that in the current environment where the profit margin of the industry is squeezed, the profitability of future housing enterprises will depend more on the company's own refined operations and product strength.

It is worth noting that since October, some third- and fourth-tier cities have seen an increase in the property market and the average price has increased. 58 City and Anjuke data show that in October 2019, the national key monitoring 67 city online new home average price of 16,491 yuan / square meter, up 0.47%, the second-hand housing listing price of 15,432 yuan / square meter, up 0.08%. The price of first-tier cities is at a high level, the fluctuations are small, the prices are stable, the second-tier cities are basically flat, and the heat of the third- and fourth-tier markets is slightly higher, and the chain trend has changed from a decline in September to a rise of 3.7%.

In response to the trend of the property market in the later period, many industry insiders pointed out that the follow-up market is expected to continue to be stable. From a national perspective, in October 2019, the overall sales data of real estate enterprises is not low, but it is expected that the sales pressure of real estate enterprises in the next two months will remain very large. From the policy expectation, policy tightening expectations are apparent, and policies such as credit will curb the market, and the follow-up market may continue to decline.

Land market volume fell

The Kerry research report pointed out that in October, new homes, second-hand houses and land markets continued their downward trend in September, and they all continued to turn cold. The volume of new houses in key cities was down year-on-year and the chain was down. The transactions in Hangzhou, Ningbo and Xuzhou were significantly reduced. The volume of second-hand housing transactions fluctuated within a narrow range, and the chain also fell slightly. The volume and volume of the land market fell, but the land auctions in key cities have improved significantly, and the number of shots has decreased significantly from last month.

Ke Errui pointed out that the transaction volume of the land market fell again in October. However, under the support of the increase in the supply of high-quality land in Beijing and Wuhan, the transaction heat did not continue to fall, and the average premium rate was roughly the same as last month. Although the urban land market of all energy levels shows the same volume and price, the market heat is completely different. Among them, the transaction premium rate of first- and second-tier cities has rebounded from the previous month, while the third- and fourth-tier cities have continued to fall due to the market's continued coldness. The premium rate has also declined for many consecutive months, and this month has fallen to a low level below 10%.
Sohu: 原创楼市开始“煮温水”,两大明确信号已出现,李嘉诚、潘石屹不谋而合?
From the perspective of regulatory attitudes, it is highly probable that housing and housing will not become a social consensus, and the regulation of the property market will continue to deepen. According to statistics, in 2018, the regulation was issued 450 times throughout the year. By 2019, only 415 times were released in the first nine months, with an average of 1.5 times a day. The intensity has once again set a new record, and the number of times over 2018 is obviously a high probability event. It is worth noting that this year, the central bank lowered the release of 900 billion yuan, the loan interest rate also entered the LPR era, and the environment for reducing financing costs gradually formed, but the mortgage interest rate did not fall, but the housing finance continued to tighten. This means that the use of financial leverage to spur the land price and housing prices has greatly reduced, the country will obviously not rely on real estate to stimulate the economy, the property market regulation will continue to deepen.

...In fact, in the face of the changes that have occurred in the property market and possible changes, many real estate giants have smelled the taste early and have already acted. Take Li Ka-shing, who is most familiar with everyone, from the large-scale layout to the choice to leave, as early as 2013, the process of selling real estate began. This year, the project of Dalian, which has been held for 8 years, was sold again for 4 billion yuan. . In this regard, in an interview, he said that he would not risk to make the last copper plate. There is no such thing. News about the real estate giant Pan Shiyi’s “selling a house” is also constantly appearing. According to several authoritative media reports, SOHO China is selling core assets. The total value of these 8 projects in Beijing and Shanghai is between 50 billion and 60 billion yuan. In this regard, the industry believes that following Li Ka-shing, SOHO China's core assets in China will be almost empty. Then, in the face of Li Ka-shing and Pan Shiyi’s “selling house” behavior, how should buyers choose?