Chinese Economists Fear Deflationary Spiral, Will The PBOC Cut Before the Holiday, or Wait Until the NPC in March?

Liu Shan is looking for another PBOC cut to fight deflationary forces in the Chinese economy:

Prices continued to decline is mainly due to lack of effective demand of the real economy, where consumption of less than obvious signs after Bureau of Statistics data show that in 2014 real consumption growth slower than the previous year.

Consumer slowdown and the economic downturn, it looks more like a "chicken and egg" relationship. Because the private and public consumption decreased, resulting in decreased growth-related investments, thereby increasing the downward pressure on the economy. The lack of economic growth momentum, resulting in personal income and revenue slowdown, thereby inhibiting the private consumption and public spending.

Problems include the broken transmission of the credit system: lack of credit demand, more caution at banks, banks putting capital into their securities division to invest in the market, also debtors don't want new credit, demand is mainly for debtors who need to rollover existing debts.

Liu Shan goes on to the other factors, which include contracting money supply, exacerbated by capital outflows. If the U.S. rate hike expectations firm, capital outflows will intensify. He says, ultimately the bank will have to launch three policies: interest rate cuts, RRR cuts and intervention in the foreign exchange market to defend the yuan.

Finally, he says that the latest meeting of the Leading Group for Financial and Economic Affairs didn't announce anything regarding any of these policies, which means they've already discussed the policies. The meeting was for getting everyone on the same page ahead of a new policy announcement. Liu thought the PBOC would cut interest rates before the weekend, which leaves today.

Source: 第58期：央行何时二次降息？

China is running into the same problems as the Western economies at the end of their credit cycles. There is a limit to the amount of debt an economy can handle and China's under developed financial markets are not capable of supporting higher levels of debt at this time. Securitized debt markets, REITs, mortgage backed securities and more efficient credit allocation will take time to develop. Rate cuts are likely later in the year because the easing cycle has begun.

Western press repeats a similar message to Liu's:

People’s Bank of China stares at another rate cut

Haitong Securities economist Lu Xunlei said the government needed to carefully manage its fiscal policy in the year ahead to reduce the prospect of deflation setting in.

“Deflation is becoming a global issue now. In China we are at risk of deflation but also there is a risk that a high rate of leverage could create a serious bubble,” Mr Lu told Tencent Finance.

“A positive fiscal policy should be enhanced further.”

A growing number of economists believe the central bank will have to cut interest rates again in the next few months to help revive China’s flagging economic growth.

The 2015 official growth target will be revealed in early March at the National People’s Congress and most forecasters believe it will be set at 7 per cent. The Chinese government is also expected to lower its inflation target from 3.5 per cent to 3 per cent at the same time.

This article from iFeng lists opinions from many economists at financial institutions, with most discussing the need for rate cuts to fight deflationary forces. One of the most bearish is Zhu Jianfang, chief economist of CITIC Securities. He said:

Although the CPI still rose and did not technically meet the definition of deflation, all signs point to an economy that is falling into a full deflationary spiral, said Zhu Jianfang, chief economist with CITIC Securities.

A team led by Zhu forecast that the gross domestic product (GDP) deflator in the first quarter of this year could experience a fall, an indicator that the economy has in fact entered a deflationary phase.

In the Chinese article linked below, he also is quoted as saying:

Since October 2014, the Development and Reform Commission has approved a large number of intensive infrastructure projects. In the first half of this year, he expects the increase in infrastructure investment will be more significant.

iFeng: 经济滑向全面通缩 财政货币政策或集体上阵

Handan Residents Afraid to Buy Homes; Market Frozen With Developers on the Brink

Earlier this week I posted Another Credit Guarantee Gone Bust, One Month After Backing A Trust, which covers the latest incident of a debtor fleeing his or her debts. In that case, the debtor is the developer Shi Yubao of Golden Century, who borrowed privately from thousands of people. The result of this episode, and no doubt the defaults earlier in the year that involved similar borrowing practices (see link above for more info), is that Handan residents are now afraid to purchase a home. They fear the others developers could also run away too since many of them have used the similar methods to raise capital.

Many developers in Handan have closed their sales offices and are in no mood to sell homes, they're looking for a way out instead. Besides the home buyers disappearing, the lenders want their money back. Suppliers and contractors want their money too. Normally, they would settle their accounts with developers at year end, but now they want to be paid in advance for fear the developer could skip town.

There is nearly a ￥10 billion black hole of private lending. Dozens of developers have 300 projects underway in Handan, at least half used private money. About ￥6 billion is already in trouble, but it could grow to ￥10 billion as other developers get into trouble. Interest rates on money raised from individuals can exceed 20%, and in order to keep up with debt costs, developers need rising home prices. With the market cooling, the developers can no longer out run their interest costs. According to the article, price growth through August is only 3% since 2012. Back in 2012, the estimated average profit on a home sale was only 19%. With construction costs rising, financing costs piling up and prices barely rising, profits have no doubt tumbled.

Handan developers are intimately tied in with local government and non-local developers avoid the market. Golden Century CEO Yu Shibao, the man who has fled town and precipitated this latest crisis, was appointed to a supervisory position in the Hebei Province People's Procuratorate. The firm also obtained the best pieces of land in Handan at preferential prices. Other developers also have ties to provincial government offices.

某城房企集体违约引崩盘 当地人不敢再买房

Bank Deposits Still Falling In August, Loan Growth Weak

Everyone knows the July data that was out recently: China Record Bank-Deposit Slump in July Erodes Lending Capacity

Yuan-denominated deposits fell by 1.98 trillion yuan ($321 billion) to 111.62 trillion yuan from the previous month, the central bank said today. That’s the biggest monthly decline in figures dating back to 2000.

Deposits are still falling in August, with the Big 4 reporting a decline of ￥530 billion in the first two weeks of August. Loans are also growing slows, with only ￥56 billion in new credit from the Big 4.

8月前两周四大行存款负增长近5300亿

According to the new financial reporter, as of August 17, the four bank deposits negative growth of nearly 530 billion yuan, of which nearly 250 billion reduction in the Bank of China, ICBC reduction of nearly 130 billion CCB reduce 100 billion, the bank reduce 50 billion. Meanwhile, the first two weeks of August, the four lines only 56 billion yuan of new credit scale.

The Hunt For Liquidity: Big Chinese Banks Borrowing From Small Banks; State Owned Mega Bank Sub-Branches Borrow From Rural Cooperatives

Below is the (poorly translated) Google Translation of the article. Many big takeaways, including:

Pressure is coming from the top down; large banks are in worse shape than smaller banks, something we also saw in the U.S. crisis of 2008.

Some sub-branches of the big four state owned banks are borrowing from rural cooperatives.

Deposits were fleeing large banks to the tune of 30%. Small banks serve small and medium businesses, but big banks serve the real estate developers and other firms facing pressure due to government policies.

This credit crunch began in 2011 with the real estate crackdown. This is an intensification and flare up of an ongoing credit event.

The battle for deposits has gone nuclear. Some banks have limits on deposit rates, for example 5.5% in one case cited in the article. Yet many banks are now enticing depositors with 7% interest or higher.

One bank mentioned in the article hit their 2013 lending target in March.

Banks are negotiating in secret in order to get around capital restrictions.


流动性饥渴：大行找小行“借贷”

"Shortage of money is sitting in the office to come out of the word, right? "July 2, Lin Jiandong more than once referred to this recent buzzword. Moreover, each mentioned once, we will send an exaggeration of ridicule voice, "I have been concerned about the situation of this wave of regulation, public information reflected in , and our grassroots banks operating in market conditions, is out of touch for . "Lin said.

Lin Jiandong IICA Zhejiang region of a line of the branch president, where he considers himself a grass-roots small banks did not feel that this volatility on the market. And this year the bank capital position, showing the heat transfer with the current market of "money shortage" totally rebellious 's logic.

"This wave of pressure should be from top to bottom of a small row easily than big firms. " is indeed as Lin Jiandong 's judgment, Jiangsu Province branch president of a state accusing him of a Lu Zhen (a pseudonym) said that from his own where the bank Look, like magic, like financial pressure, year after year urgent.

Particularly mysterious is that many banks newspaper survey from Jiangsu and Zhejiang learned from IICA line to the city commercial banks, state-owned big firms, financial pressure is inversely related with bank size, the scale, the more feeling financial pressure; interview to understand that, even with the state accusing him recently to find with the regional branch lines and other basic small rural cooperative financial institutions lending in interesting situations.

Behind The reason is that the big firms and other sources of funds are mostly real estate developers and other large customers, in this wave of austerity is suppressed, customer churn in bank funding constraints; while IICA line and other basic bank savings is the main source of small and micro enterprises, In the current round of austerity in the latter be encouraged.

Branch president of Lanchu pressure

"Is a Stolen Life." June 23, Lu Zhen get a 20 million yuan in the deposit, relieved. And two days ago, Shibor (Shanghai Interbank Offered Rate) rose almost across the board, as a result of a state-owned big firms transferred funds tense and breach of contract, "money shortage" touted up. "The end of June of deposits as well as the second half of the decision in July to lend the amount of deposit is the foundation of the bank of the country, the source of profits. "

"In fact, this wave of pressure from two years ago, began to accumulate." Lu Zhen where the institutions, banking institutions in the region, the total deposits ranked second.

Lu said that this year with previous years, the largest of the difference is that the society 's funds obviously nervous, sources less. While in previous years is competition severe, the community does not lack money.

Lu Zhen introduction, in which he 's banking system, bank deposits total deposits is the main source of funds, of course, non-bank financial services sector 's deposits, including various types of deposits. Non-bank financial services sector, including insurance, securities, trust, small loans and so on.

More so Lu Zhen restless night 's yes, many branch outlets savings amount, even negative growth, "also a lot of negative growth, over 30%."

In fact, this wave of bank liquidity crunch period began in 2011. Deposit ratio was because the pressure, you compete with banks offering short-term or even catch a camel ultra-short-term financial products, Lu Zhen institution 's front-line marketers began to speculate and anticipate this wave of banks tightening now states, "At the time, everyone joked , afraid of trouble you? have central Mom Danzhao it. "

Lu Zhen introduction, but front-line operational staff do not think so much, I felt the head office level, so many experts, there are good reasons to do so naturally, they certainly have the ease way.

"Solicit depositors, financial products such as business assessment index a quarter of a quarter increase, we are just going to finish indicators, however, marketing staff daily morning meeting, as more and more like MLM to boost Manner of brainwashing."

Lu Zhen 's annual assessment of the deposit amount is 200 million yuan, and this time last year at this time, are not yet complete index. End of each month and quarter-end statistical indicators, will feel the tension; course, the end of the year and the year is more like a "battle." The total deposits of negative growth pressure line will often investigate discussion.

"We analyzed all the customers of the loss, and found to reduce the majority of the senior client assets. "Lu Zhen I also have a large customer churn.

"I've been doing a big customer, one that is 100 million is up, the target to complete two on the line. "Lu Zhen said he 's target customers are developers, shareholders have the best government background of the kind. But last year and this continuous loss of several large customers, these are real estate developers.

On the other hand, real estate macro control policies continue to overweight, prospects subtle; mainly rely on these large customers of the state accusing him, Lu Zhen and other personal in which the pressure in a year stronger than one year.

Pressure is not just bank middle. Newspaper learned that not long ago a branch of Agricultural Bank of China Shanghai, newly recruited staff of employees to bear a small yellow deposits indicators pressure, he had to let her husband bought yields unpredictable line of financial products, to complete the index.

IICA line of "loose" Paradox

And Lu Zhen different, as the Zhejiang city IICA line of branch president, Lin Jiandong recent live very easily.

"In fact the current macroeconomic policy should be moderately tight to the central bank squeezed out the water, deleveraging, this policy should be continued. "is also a branch president, as opposed to Lu Zhen, Lin Jiandong in this so-called the

"Money shortage" in, looked calm, "Our system does not have any feeling of pressure."

Lin analysis of their own system of rural cooperative banks where the fund composition. Its deposits, savings accounting for about 98% of the total. Among them, the individual and private and other small farmers and micro-businesses or individuals to deposit characteristics of the decision, the source of these funds are relatively stable, and not national regulatory policies being squeezed, to leverage the investment. Moreover, all these years, the rural social security and other aspects of the improvement in this area of the deposit of funds accounted for more than 2%. "We have to deposit at ease, no water. "

"Like entering the development of the golden path. "Lin case said.

Coincidence of that, as Lin's major customers of small and micro enterprises, rural social security, etc., it is precisely the country in recent years,

Family policy to vigorously support the column. Lin Jiandong where the small micro-financial institutions, deposits form, the basic no other large real estate projects of funding sources, this fluctuation, but seem healthy.

"Actually, we all understand that the central bank 's regulatory purpose of the market is trying to turn over the money driven into the real economy. "Lin Jiandong said.

Forest practitioners in community financial institutions nearly 18 years, he bluntly that he basically does not express any opinion on the media, public opinion, because there is the head office discipline. But this time, he could not suppress a little.

Lin said that after a number of other areas have been lending to the real estate of the capital, it is impossible in such a short span of period gave withdraw, "a policy change, it is impossible banks face immediately after all banks are also enterprises, but also should have the spirit of the agreement. These areas of asset recovery will take time. "

"This is actually not money problems, is the bank of the policy of the miscarriage of justice. "area of a city firm Zhejiang branch president Kim Ho (a pseudonym) on the market 's perception of the same feelings with Lin Jiandong, "before lending fierce put, that the central bank would be relatively Relax. "

In response, Kim Ho and other high-level communication between the often also do this prediction, as long as the release that the deposit reserve 0.5% of the national market will be 600 billion funds released. Unexpectedly, the central bank has pinched tight and hold it.

"In fact, in February we have had a study." He recalled Kim, remember that the M1, M2 fell sharply, mainly due to the slowdown in deposits. Central bank released the data show, M1-M2 negative scissors -5.7% -5.1% qoq to expand, capital activity dropped significantly, deposits continued to increase regular basis, "This is an obvious the tightening signal. "

Tightening the money supply, directly reflected in the bank to solicit depositors business of intense competition. This white-hot, not only in the market, banks and other financial institutions in lending, deposit rates also turn into hurricane.

Dahon find a small line of "lending"?

And now, regardless of Dahon small line, the reporter interviewed clinics, Lanchu actually starts heating up.

"Our line of the provisions of deposit rate can not exceed 5.5%, which gives us a lot of pressure to carry out operations. "He said Kim, joint-stock banks on the market, most of them have reached more than 7%.

According to its introduction, this year, commercial banks are no longer limited to simple way Lanchu 's commitment to "high interest" and "innovation" model also includes tailored financial products, reimbursement of expenses, etc., and even the rapid development in recent years, is called " their own money management artifact " of funds automatic imputation business, but also has become the most relied on bank deposits Running the "Absorbing artifact."

Lu Zhen was washed six deposits assessment, a lot of pressure, "before large customers sometimes low-interest funds back to the bank, to help us through the critical point." But this year, they came back to solicit depositors high interest rates, 6,000,000 yuan deposit a multi-annual increase of 3.5 million.

In addition, banks have large sums of money by providing tailor-made financial products, as well as additional funds to the line directed to issue high-yield financial products the way funds poaching, "This model is easy to step on regulatory red line, since the second half of financial products frequently made case, that is because the bank 's funding pressures cause. "

"This year we dot the loan amount, in March this year basically put over. "He candidly reveal their payments early in the operating profit, driven by madness loan, you need to head office lending of the loan amount.

Some banks also do not secretly through the financial institutions "borrow deposits" in the "moderately tight" monetary policy trend, the bank 's capital back showing an "interesting" path, "These are not the head office level of borrowing law, accusing the find IICA Bank and other financial institutions to borrow than more basic level. "a joint-stock banks Treasury Department 's responsible person said.

"This transaction is not a fixed price, the two sides negotiated secretly." One line IICA headquarters executives, the current high price of funds of more than 1.2%.

He also revealed that the region a row with a state-owned joint-stock banks of a "polygonal" Auction.

In mid-May, the state bank official asked to borrow 60 million in deposits, period of six months, the interest rate of 0.8%. Although the offer is low, but because the two sides have had before trading IICA line agreed.

The inner circle of the other joint-stock banks of the branch responsible person knows both sides of the "sale", the proposal by the circle of four outlets responsible person participate in the auction. Eventually, the price of money pushed up to 1.2%. This "game" so that the person in charge IICA line turned the music, not only to earn a large sum, but also won a dinner for the small circle.

Cash crunch for local governments in China: Dongguan is Greece

Fiscal Crunch Time in the Nation's Capitals

The Ministry of Finance reported all the nation's local governments took in 3.7 trillion yuan combined between January and July up 13.8 percent from the same period 2011, but the report also said combined spending increased 23 percent to 6.3 trillion yuan.

Year-on-year spending increases for central and local governments were 13.4 percent and 25.6 percent, respectively.

For the first half, national tax revenue increased 9.8 percent to 5.5 trillion yuan. The growth rate was 19.8 percentage points lower than the same period the year before.

How are things in the center of the manufacturing export economy?

The city of Dongguan may have run out of money altogether, according to business executives working for longtime government contractors and suppliers. Some of these companies have stopped taking orders from City Hall for fear the customer may not pay its bills.

Unofficial word on the street is that the Dongguan government may be billions of yuan in the hole. Executives whose companies have yet to be paid for past government orders have talked among themselves and estimate the city government's debt to be "more than 3 billion yuan," said Xiao Gongjun, a local printing plant executive.

Dongguan's 2012 budget plan called for 10 percent revenue growth to 29.2 billion yuan, down from 11 percent last year. But the annualized rate of revenue growth was only 2.5 percent through the second quarter.

What are local governments doing besides holding the line or cutting spending?

Meanwhile, the Hangzhou finance official said local government officials will continue working toward alleviating fiscal problems to keep the cash flowing.

At the same time, he said, local officials "hope the central government will relax its policies and that land prices will turn for the better. Then, the difficulties will pass."

One line untranslated from the Chinese version of the article: "In theory, the city is already broke; Dongguan has become Greece."


地方政府有多缺钱

PBOC can't buy a buck; talk of depleted reserves is not alarmist

China's central bank sees dwindling U.S. dollar purchases as foreign investors stay home, domestic investors go abroad, and exporters hoard their greenbacks. This is slowing the rate of money supply growth, since the PBOC pegs the currency to a basket of foreign currencies.

Mainland slows down forex buying

Foreign exchange accumulation on the mainland decelerated drastically this year, limiting the central bank's alternatives in boosting money supply.

The People's Bank of China's purchases of foreign exchange totalled 298.8 billion yuan (HK$365.79 billion) in the first seven months of the year, a year-on-year slump of 87 per cent, it said.

The currency is a long-way from a crisis, but if the central bank fights deflation now, it will certainly weaken the renminbi in real terms. But while there's continued talk of easing and stimulus in the press, there's still no sign of it.

Here is a Chinese commentary on it, echoing Western opinion, and essentially saying "nothing to see here, move along." 如何看待外币存款较快增长

Were the currency flows reversing during a growth phase for the global economy, this attitude would be correct, but these flows are reversing as the global economy enters a sharp slowdown. The global economy is headed into another recession, and that raises the risk that China's currency inflows, already down 87%, fall more than 100%, i.e. China starts exporting foreign currency. China will experience a major bout of deflation and their policy response at that point could trigger depreciation in the renminbi and exchange rate driven inflation.

Also Sprach Analyst has a post The policy tool PBOC has when China’s economy gets really bad

A large-scale asset purchase programme (a.k.a. quantitative easing) is not without problem for China, and there are many reasons not to expect that to happen any time soon. Despite deleveraging and overcapacity, potential inflation and the resilience of the real estate market remains a concern for many Chinese, including the leaders. Indeed, as the experience in the US shows, despite lack of threat of (hyper)inflation, many people continue to believe that such risk exists. Not to mention that the Chinese central bank has been a champion of “printing money”, and everyone knows and loathes it. As the expectation of Chinese Yuan depreciation is building up, QE-ish operation will only increase that further. In today’s environment, the PBOC can’t possibly do this.

However, given the on-going trend of very weak economic activities and the liquidity tightening arises from outflow and possibly rising bad loans, we suspect there will come a point when even cutting RRR aggressively will not be enough to maintain liquidity condition, and that will necessitate some asset purchases programme in one form or another. The timing of the possible asset purchases in unclear, but we think the probability of such occurrence is increasing, and the market, particularly the bulls, have not been paying enough attention to the existence of such a tool.

It will come in the depths of deflation, as predicted previously by Liu Junluo, see Liu Jun Luo: Six to ten months until Chinese hyperinflation. He wanted the government to create wage inflation (whether it was possible is another question), but things are proceeding as he expected: deflation, to be followed by a currency crisis.

Here's an opinion that one doesn't see much in any press: Chinese are actively discussing the possibility of their forex reserves being depleted. 外汇会耗尽不是危言耸听 (Depleted reserves is not alarmist talk)

This piece is by Tan Yaling, head of the China Research Institute of Foreign Exchange.

She says there was a recent article stating that if the only way China can stimulate the economy is through investment, then China's $3 trillion in foreign exchange reserves will be exhausted within 5 years.

She says speculation is the greatest threat to China's development and this speculation could exhaust China's reserves. Although China has $3.2 trillion in reserves, it isn't enough to protect it from hot money, not when the global forex market trades $5-6 trillion each day. If there is no long-term strategy to defend the reserves, they could be rapidly exhausted.

There's a definite shift in the trend in China and this is a big one that will affect global investors, not only those focused solely on China.

Chinese steel magnate flees debt; solar industry headed for bankruptcy

Only one week ago I wrote in Capital fleeing China; China must float the yuan and slash taxes:

Get ready for more stories of fleeing businessmen who shut down their companies overnight.

Now we have the first story:

Tangshan steel mill owner flees debt of ￥1 billion 河北唐山民营钢企老板被疑跑路 欠款或超十亿元

Chen Zhiqiang, chairman of two privately run steel companies in Hebei and Xinjiang, is suspected of fleeing with over 1 billion yuan still outstanding to creditors of Baoqiang Steel Co. and Xinjiang Jifeng Iron & Steel Co. Two months ago Chen won an award for being an "outstanding private entrepreneur with integrity," but now owes 300 million yuan in private loans and 700 million yuan in bank loans. A Baoqiang Steel creditor said that "a factory in Xinjiang had its funding cut off and Chen Zhiqiang was unable to repay his bank loans, causing him to go into hiding."

H/T Caixin.

The Baoshan Steel Index broke 900 last week and has continued to slide. The last time the index was this low was in 2009, but output is far greater in 2012. That paves the way for far greater losses and even more bankruptcy.

The steel sector isn't alone. Solar may also be headed for bankruptcy, another victim of a central government push to increase output.

Sun Setting on China's Solar Sector

In the face of a new government coming to power October 2012-March 2013 and the capital hole facing the solar industry, we believe support at the provincial level—where it has been most prevalent—is at risk. Historical support may have been underpinned by banks' refusal to take losses, but we believe the tables will turn as banks balk at new investment in an industry suffering from steady cash burn and the need for massive future capital investment.

Even as bankruptcy law exists in China, we believe the dynamics of China's command economy make this a less-viable option. While the collapse in profits and cash flow may leave some with no other option than failure, we believe the most viable solution may be recapitalizations, in which banks swap debt for equity, enabling: 1) banks to creatively avoid a write-down; 2) companies to eliminate interest expenses; and 3) provinces to maintain employment. The trade-off, though, is equity dilution that destroys value for current shareholders.

With debt of $3.4 billion translating into a bloated 7.4 times net debt-to-equity, LDK Solar (ticker: LDK) might be considered insolvent by traditional measures at Western banks. While Jiangxi province's support has held firm, a free-cash-flow drain of $1.2 billion in 2011 and the need for further capital investment long term to maintain share leave it with few ways out.

The report goes on to list Suntech (STP) as at risk for bankruptcy or recapitalization.

The macro effect of recapitalization will be overcapacity and deflation. Solar makers around the world will face a new bankruptcy threat as Chinese firms wipe out their debts and maintain production.

Also:

“A gross margin of 4.5 percent indicates a loss, for sure, in the second quarter,” said Meng Xiangan, vice chairman of the Chinese Renewable Energy Institute.

According to Meng, gross margins for China’s ten leading photovoltaic makers were all below 10 percent in the first quarter, led by Canadian Solar, who earned a gross margin of 7.7 percent but still reported a loss of around 20 million U.S. dollars.

What’s worse, cash flows in Chinese solar makers are even tighter as many have rolled their debts over to 120 to 180 days, according to investment firm Helix Investment Management.

These companies can no longer obtain long-term financing.

Speaking of deflation, China continues to disinflate: China's CPI growth slows to 1.8 pct in July

So much for the stealth stimulus

A flurry of big government projects announced in the past two months racked up an impressive ￥4 trillion in value, but hardly any of the plans are coming to fruition.

Changsha is the best example: the city announced an ambitious ￥800 billion investment plan, but at the end of June, the city had only spent ￥5.6 billion, and that amount was less than one-third of the plan for this year. (长沙8000亿投资计划：上半年重大项目仅完成56亿元)

内地部分省市投资超速惹学者质疑

The end of local government land finance in China?

The Ministry of Finance has begun an investigation into local government land revenues, with speculation that it could lead to the end of local government land revenues. (财政部着手摸底地方土地收入 或为土地财政终结信号) It comes as there's speculation that Hangzhou will become the first city in China to miss its finance targets, as it is reporting negative revenue growth. Hangzhou saw land prices rise 10-fold in the previous decade and its land sales revenue surpassed those of Shanghai and Beijing in 2009.

Hangzhou's target for 2012 land revenue is ￥43 billion, but they've only collected ￥10.6 billion through June. (Three years ago, they recorded a national record with ￥120 billion in land sale revenues.) Hangzhou government revenue was only￥46 billion in the first half of 2012, down 2.7% from 2011. The linked article says the government needs to see revenue grow at 29% to hit its ￥86 billion target for the year. I assume that Chinese government revenues are lumpy and front loaded, since they have achieved over 50% of their target with half of the year gone, but revenue growth will slow over the rest of the year. Even Beijing and Shanghai are running below their targets, but the faster growth rates needed aren't as wild as Hangzhou's 29%. Chinese bureaucrats like to collect more taxes in the first half of the year and then push the receipts into the second half as a cushion. If they have excess revenues in the second half, they push them into the next year. This is not unlike a publicly-listed company that shifts revenues and earnings in order to smooth their earnings numbers.

Nation sees fall in land revenues

China posted significant declines in land sale revenues in the first half of this year, according to data from the Ministry of Finance released on Saturday, but the government has vowed not to relax tightening measures imposed on the property sector.

Revenues from land sales tumbled 27.5 percent year-on-year to reach 1.14 trillion yuan ($180.24 billion) in the first six months, ministry data showed.

However, income from land sales still contributed to about 17.8 percent of the country's total fiscal revenue in the first half of this year, which stood at 6.4 trillion yuan, up 12.2 percent from a year earlier.

A year ago revenues were about ￥5.7 trillion, with land revenue about ￥1.6 trillion, or 28% of the total.

For those looking for a stimulus package, the drop in land sales revenue is running at half a trillion yuan, or nearly $80 billion. That much stimulus would need to go to local governments just to keep their spending on target.

China Local Government Finances Are Unsustainable, Auditor Says

About 60 percent of revenue raised last year by 54 counties investigated by the National Audit Office wasn’t derived from taxes, Liu Jiayi, the head of the agency, told a meeting of the legislature yesterday, according to a transcript of his speech on the audit office’s website. Total fiscal revenue at those counties rose 17 percent to 112 billion yuan ($17.6 billion) last year, Liu said.

China shelved a plan earlier this week to allow local governments to sell bonds directly amid concern that the companies they set up to borrow money will default on some loans. Debt racked up by local governments and their entities stood at about 10.7 trillion yuan at the end of 2010, with 17 percent maturing this year and 11 percent next year, according to an audit office report released last year.

“The proportion of non-tax income in fiscal revenue is relatively high at county-level governments, pointing to relatively poor stability and sustainability,” Liu said, without specifying the other sources of revenue.

One can see why the central government may be thinking of reforming the way local governments finance their operations.

China's 3000 wealthiest households lost nearly $100 billion

China's wealthiest 3000 households lost roughly $93 billion in wealth in the past year, with much of the losses blamed on falling stock prices. Most of the list is made up of Internet and real estate company founders.

The top table is the 2012 top 10 wealth figures, with 2011 on the bottom. The first category is their name, the second is their company, the third the percentage of wealth in equities and the last their total wealth. For 2012, I calculated the percentage decline in wealth for those who stayed on the list. Some of the companies on both lists are Sany, Baidu, Suning, Evergrande and Tencent.

Bank run in Fujian province after 1 billion yuan ponzi scheme collapses

A multi-level marketing scam centered in Wuyishan (武夷山), Fujian (福建）has collapsed with perpetrators netting ￥1 billion. Below are Google Translates of two articles. The 10 billion translation is wrong, it is 1 billion. Plenty more errors, but I haven't got time to translate right now. Also below is the Google Translation of the Baidu wiki page for the firm. The company's webpage is dead.

The Fujian rebates network collapse scam involving 23 provinces and cities 福建“返利网”崩盘 骗局涉及23省市

Core Tip: "100 per cent Mall claiming more than 20 million members, involving 23 provinces and cities. one surnamed member said," started when I heard the full mall owners Yao Jianqing and senior have escaped more than 10 billion Pao Lu. "
Empty.

May 31, the edge of the Fuzhou West, Fauci Lake Garden north-floor six-story is a mess, the whole layer of the huge office space only a few grid, ceiling air-conditioning, including all items have been looted. about 300 square meters of space can be seen everywhere damaged ceiling and scraps of paper waste, and even the Office of the Chairman of the glass door was smashed.

"In the middle of the night on the 28th, happened here the mob looting took indoor items is a member of the full mall, an angry crowd smashed the decoration." Fauci Lake Garden security told this reporter.

This is where many members had placed 100% of fortune dream mall stronghold. This reporter saw a full-affected member notice pasted on its door bearing the words: you full members and the victims go to Fuzhou Economic Investigation Team focus, and discuss funeral.

"Full mall claimed more than 20 million members, covering 23 provinces and cities." Member surnamed Chen, told this reporter, "the causes of things heard the full mall owners Yao Jianqing and senior have escaped more than 10 billion Pao Lu. "

On the evening of May 31, the reporter learned from the Fuzhou police, Yao Jianqing was the same day was five brigade of the Fuzhou Public Security Bureau of Economic Investigation Detachment from the field and arrested and brought to the suspected charges of illegal deposits from the public, within a short time the police have registered the cheated amount of tens of millions million.

Involved in this case the number and amount, is still the legend diverse. Since the filing due May 29, made a report people are doing it, has not yet specific statistics on the amount involved and the victim number.

May 28 night in Fuzhou, looting, and has rapidly spread to northern Fujian Wuyishan City.

The Wuyishan banks a run

Hundred percent rebate comes from Fuzhou mall collapse event, but soon make waves in Wuyishan City, 356 kilometers away.

"In the evening of May 30, there are rumors that the relevant state departments to rectify rebate network, it may freeze the personal bank account." Number of Wuyishan local residents confirmed to this reporter, "so people flocked to the bank teller, 31 withdrawals crowd formed the climax, are overcrowded urban areas, Construction Bank, Agricultural Bank of China, ICBC even Wuyi University, backdoor teller machines. "

"Wuyishan public Ma told the reporter, the evening of May 31, downstairs are loud call notification queue to take money out noise, thunder kept the motorcycle on the streets," Wuyishan crazy, "she said, her husband is 100% rebate mall members.

"Rebate network the country's most active areas of Wuyishan." A local source revealed to him every day to listen to friends and colleagues talk about rebate network, earn money to buy a car also. March to April this year, most people throw money to rebate network, buy tens of thousands of people, or even hundreds of thousands of millions to buy. "

Many local people said hundred percent rebate mall development in the Wuyi mountains of many shops and became an "investment" for quick profits, and slowly evolved over time and some people operating mode, to attract more to the more ordinary citizens to join.

The reporter learned from multiple sources, Following the Wuyishan whole city crazy, Jian'ou, Shaowu, Shunchang, Pucheng counties belong to northern Fujian, a variety of names, "Money begets money" rebate "riches" game the same hot.

But because of a sudden the same thing, and increasing number of withdrawals and report the number of people involved and the amount of these places is also not specific statistics.

"Money begets money" riches game

In, Fauci Lake Garden looting has been the passage of time, but until the afternoon of May 31, not when someone thirty-five together to come here to find out the full rebate mall situation.

While in front of a piece of paper "announcement", said the arrears of rent, the landlord has the right to use recovery.

Property of the building told reporters the full rebate Mall to move into here at the end of the original tenants of the housing Yao Yuan, Fujian Jianou.

The reporter learned that operate 100% rebate Mall enterprise Fuzhou Yi Health Science and Technology Development Co., Ltd. (hereinafter referred to Yi Johnson).

Trade and Industry data show that Yi Health was founded on December 23, 2011, 10 million yuan of registered capital, is the software industry, business scope is very heterogeneous, including daily necessities, building materials, dozens of industries. The legal representative of the company for the original Yao Jianqing, March 31 and May 24 this year has changed to Feng tour wang, Weiping. The shareholders have also gone through two changes the Yao Jianqing, how to spend months changed to swim Wang, Feng, Fan Baoyu, and then change Weiping Gao and Ke Qimin.

The reporters found that the friendship born on December 25 last year, the Company changed to its present name by the the Jian'ou full E-Commerce Co., Ltd. ", founder of Yao Jianqing Department of Fujian Jian'ou, aged 39.

May 7 to 8, Yi Johnson held in Fuzhou West Lake Hotel, a national dealer meeting, a member of more than 500 from all 23 provinces and cities, agents, distributors attended the meeting. A percentage rebate mall dealers said.

According to its disclosure, in the so-called National Dealer Meeting

Publicity, only the 8th to the 14th week of May, Yi Johnson absorption member of several hundred million of funds. The same month on the 14th, the old site of the "100 per cent rebate of friendship Johnson Close, 18, named" 100 per cent Mall "website, suction gold numerous two-day promotional activities.

The reporter learned from more than members mouth, Yao Jianqing began in May 2011 through the network of shopping malls full, to receive a 5% fee the way development agents and franchisees, and to absorb the member funds, commitment to 100 days back to this, net profit in 400 days of high returns, "Money begets money" profit mode.

The Fujian rebates network collapse scam involving 23 provinces and cities

The initial approach, Member Shopping 1 million in the franchisee, to pay 1600 yuan Yi Johnson, Yi & Johnson $ 20 per day rebate to members, for a total rebate of 500 days. With a membership of more and more, later converted to 1600 dollars you can get $ 20 per day rebate paid directly to the friendship Johnson, Yi Johnson received from members daily 20 yuan rebates 5% fee.

Yi Health wantonly take the model of development of the regional agency "offline" to grow the membership team. "Agents of the initial fee is $ 10,000, and promotional activities during the price is 5000 yuan, Fujian Province, one agent said. According to the odd members, full mall agents to join more than 6000 in the country.

The reporter May 31 the bank bills and customer information display, Yi Johnson call the members of the rebate a few hundred to several thousand dollars, the amount of remittance Join majority for a few thousand to several million .

More involved in the amount of Fuzhou, Fuqing City, under the jurisdiction of, a few people together tens of millions of dollars. "A member said," after the outbreak of the fuse is also a few people be informed of the change of friendship born shareholders. force new legal representative Weiping return of investment funds, resulting in the collapse of 100% rebate Mall. "

Fujian "rebate network" crash pull MLM scam 福建“返利网”崩盘牵出传销骗局

REVIEW: online shopping, win rebates. Net Fujian "rebate" collapse triggered a bank run events, scam involving 23 provinces and cities. Suspected pyramid selling, high-level running, the rebate site model itself if there are loopholes? Riches legend of the "money begets money," burst, investors why also followed one after another? 　

Zhongguang Wang Beijing, June 1, according to the economic voice of "CNR Financial Review reported this a few days, the high-level of a" Fujian hundred percent rebate to bring more than one billion to escape the post circulated on the Internet, has fueled a wide range attention. Media reports, Fujian 100% rebate Mall office has been an angry crowd ransacked an empty triggered a bank run events in Wuyishan City. 　　

According to reports, the cause of the matter is heard to full mall owners and executives have escaped and over 10 billion on foot. Informed sources said that Fujian full shopping mall network boasts more than 20 million members, covering 23 provinces and cities. Mode of operation of the site is a 5% handling charge agents and franchisees, and absorption of member funds, commitment 100 days back, the high returns of the net profit of 400 days, "Money begets money" profit model. 　

Today, escape triggered the collapse of high-rise with money by the Fuzhou hundred percent rebate in Wuyishan City triggered a bank run event. Culminate in yesterday withdrawals population and the Wuyishan teller machines throughout the urban area are overcrowded. Local sources, Fuzhou hundred percent rebate the country's most active region is in Wuyishan City, from March to April this year, most people throw money, buy tens of thousands of people, or even hundreds of thousands, millions of buy . 　　

100% rebate Mall Network developed in the Wuyi mountains of many shops and became an "investment" for quick profits, and slowly evolved over time and some people operating mode, to attract more and more ordinary the public to join. In some neighboring counties and cities, a variety of names, "Money begets money" rebate "riches" game is the same hot. At present, the local police was in full swing detection of the case, some of the people involved have been controlled, the case is under further investigation hearing. 　　

The rebates network this model first appeared in foreign countries, the corresponding proportion of the rebate through the rebate site in online shopping, you can enjoy. It should be said that a good business model, are also a lot of such sites. But some people use this rebate network, the name of the banner of the rebate network evolved into a new Network Marketing model. In this case, the regulatory system should be established as soon as possible. And investors should also keep in mind that flourishes impossible, the sky will not fall out.

Economic Voice of Commentator Lin Yun brought their own point of view. "Rebate," in Fujian collapse events are loopholes because the the rebates network model itself? 　　

Lin Yun: the rebates network mode or rationality of the existence, on the one hand, it helps businesses to do web promotion, scattered buyers together, forming buy the power, coupled with the promotion of electricity providers in the Internet, will relatively large investment, in which the number of rebates, and rebate and then return to the buyer, logically, can still pass. Some experience from overseas, including the site in terms of domestic specialize in rebate services, there are a number of successful experience, I think this model can be established. 　　

I also noticed that there are some companies or individuals, the name of the the rebates network mode in which to fish in troubled waters, there is a big loophole. Once the individual consumer has been deceived, held up the cost is very high, but Fujian this is a naked power, pyramid schemes, deceived Taibuyinggai in this event, because it models, there's return can not benefit later became a direct money, and then waiting for the day rebate, such an approach is clearly could not sustain.

This occurs because of the lack of investment channels now illegal scam and low cost? 　　

Lin Yun: I think in terms of his early, rebates mode, purchase goods, and then give rebates. To later become accumulated a certain number of clients on the network, the formation of a certain operator basis, the advantage of the "viral" spread of the process, to the latter is a typical pyramid schemes. Think about it, he has omitted the link to buy goods, you have the money, and a daily rebate of 20, I think he is using pre-made effects, some people have tasted the sweetness, and really give the money and get the rebate, these people would become his living advertisement. 　　

There are other people in the proxy process, I guess we got the reward money will give him the agent involved, but also to pull the head of the. In addition, he also used the time difference, because it looks like 500 days of principal, if not buy goods, 1600 dollars and 100 days on the back more than a, there exist the obvious time difference. Because you have to have time to wait until lobbied for 500 days to get enough money to hit a quick-fix marketing activities in the last operation, a short period of time identified enough members, and then take the money and run. In late March, he replaced the shareholders and legal persons can be said that the preparatory work is spared. 　　

So many people deceived the one hand, many investors in the country, many consumers make money eager, pyramid schemes such behavior in the country despite repeated prohibitions, there are those who will be deceived. Second, the fraudster escalating through the guise of trick to attract new participants, including this as a gimmick by rebates, deceptive practices is not wise, as long as little understand the point of common sense is not at the meeting when Again, our lack of effective supervision, so he was able to put this thing made. He can make so many people fall into the trap, with the omission of the business supervision departments also have a great relationship.

百分百商城

100% Mall Profile

　　100 per cent Mall was established in March 2010, the operating radiation suit Maternity and radiation series, yoga clothes, all kinds of brand men and women and children's clothing, Korean dress, full dress, bags, footwear, with ornaments. The Mall is headquartered in Guangzhou Jinbi Garden , set up in Dongguan , Hangzhou , Hunan act Processing Agency is committed to creating a "one-stop online shopping mall with Chinese characteristics!

Full mall was founded

　　For the majority of shoppers gradually increasing demands of the product cost, full mall must have a sound procurement distribution system, in order to constantly improve product quality while reducing product prices, thus reducing the cost of product sales of intermediate links increase imperative. Thus was founded a full online shopping mall site, the products directly to consumers on the site, on the one hand, the site provides more detailed shopping information, history, and customer reviews, customer from need the product quickly check out an array of all kinds of goods; the other hand, greatly reducing store operating costs, and affordable for sale to customers.

Hundred percent of store merchandise positioning

　　All goods landed by the mall is the result of carefully selected boutique, each commodity has its own characteristics, each product before landing site edit the layers of screening, this will be throughout a firm service principles.
　　Women's positioning :18-38-year-old all kinds of different sectors of women
　　:18-35-year-old men locate all kinds of different class male
　　Kids positioning :2-13-year-old boys and girls
　　Personnel exposure to radiation sources of radiation series product positioning: pregnant women, and computer workers.
　　Yoga clothes Positioning: yoga and other comfortable Women
　　Footwear location: All kinds of men and women
　　Bag positioning: all kinds of stylish women

Hundred percent mall business philosophy

　　Integrity management: extension, therefore, not fraud, the customer first. Self-discipline, conscious, standardized service, honest.
　　Quality assurance: guarantee the procurement of goods off, refusing to sell all the low-quality high prices, low price of low-quality goods.
　　Law-abiding norms: fair competition, trading standards, strict compliance with the network of sales regulations and industry standards.
　　Business Services: to provide consumers with professional, caring, personalized service, creating a one-stop security, fast, happy online shopping mode.
　　Service tenet: quality of goods hundred percent clearance, after-sales service satisfaction, customer satisfaction is our happiness.

Chinese banks see drop in demand; why are FX deposits up in China?; the copper carry trade

One news story and one analysis today.

China Banks May Miss Loan Target For 2012, Officials Say

This month may be worse. The four biggest banks -- which account for about 40 percent of lending -- had advanced only 34 billion yuan as of May 20, Liu Yuhui, a director at the government-backed Chinese Academy of Social Sciences, said in an interview this week, without saying where he got the data. The lenders may rush to boost credit in the last few days, mainly through short-term notes, he said.

China hasn’t officially announced the quotas set for each bank or the total loan target for 2012.

Still, as recently as last month, policy makers were indicating the target was 7.5 trillion yuan to 8 trillion yuan. Lenders in China’s eastern province of Zhejiang, for instance, will aim to increase new loans to about 670 billion yuan, accounting for 8.4 to 8.9 percent of the nation’s total increase, the government-backed Securities Times newspaper reported on April 26, citing Liu Renwu, head of the PBOC’s Hangzhou branch.

Failing to meet the annual loan target would mark a turning point for Chinese banks, which have reached or exceeded the central bank’s goal every year that such quotas have been in place since at least 2006.

Inflationists of the world, wake up! Even the Chinese government has met the force of the market. If people do not want to borrow, monetary systems that rely on credit creation (almost all of them today) cannot increase money supply. The Chinese public still have inflation expectations though, so if the government wants to make a bold move and reignite the housing bubble, the public will likely borrow and load up on homes and gold bars. And toilet paper and garlic, and any other commodity that can be purchased in bulk.

The next article is from the graduate student econ and finance blog at Beida (Peking University):
Why FX deposits surge in China

China’s monetary statistics for April 2012 showed weakness in both loan and deposit growth. In particular, Renminbi deposits fell by 465.6bn yuan, compared to a 342.4bn increase in April 2011. However, bank deposits denominated in foreign currencies (FX deposits) in China have been surging since the beginning of this year. FX deposits increased by 32.5% in the first 4 months of 2012, compared with 6% growth in the first 4 months of 2011. Every month there is about 20bn USD added into the banks’ deposit accounts.

From the news above, we know that those loans are even weaker in May. One factor for the growth in dollar deposits is coming from a decline in dollar borrowing:

Also, dollar loan growth has been faster than dollar deposit growth since 2005 and the amount of dollar loans was twice as much as the amount of dollar deposits by the end of 2011. However, the trend started to reverse in the fourth quarter of 2011 and continued to accelerate this year, when the new dollar deposits were larger than new dollar loans and the FX loan-to-deposit ratio has declined from 200% to 154%.

Here's your commodity strength in a nutshell:

The strict lending quota (compared with 2009) made it very difficult for some companies to borrow from banks. To get around the quota, the demand for letter of credits increased rapidly as it is not counted in the lending quota, though it has the function of short-term financing. Some companies imported lots of coppers in order to get the letter of credits, despite their business having nothing to do with copper. What’s more, some banks even cut the interest rate for letter of credits to attract more clients.

The Chinese used the U.S. dollar for a carry trade to buy oil into 2008, but since 2009 they've been stockpiling copper.

This blog also broke the story of the renminbi rising during interday trading as the PBOC moved the midpoint higher, while it fell interday during trading. An earlier post this week, PBoC against the market on USDCNY, shows that the yuan continues to plunge intraday.

Below is a Chinese news story on the copper pileup in Shanghai; it's the first increase at the ports in several years.

Link if video doesn't play: 铜需求下滑 折射国内经济增速放缓 东方新闻 120524

Below is the chart of the intraday yuan trade:

Here is copper over the past three years:

Professor Lang goes viral; China is in recession, banking system broke

Last week, a friend of mine sent me the YouTube audio of his speech from October 22 in Shenyang. I've been busy and did not have time to listen to the 250 minute (!) speech. However, the Epoch Times, which seems to exist only as an anti-Communist party mouthpiece for the persecuted Falun Gong, has reported on the newsworthy items. Chinese TV Host Says Regime Nearly Bankrupt

Despite Lang’s polished appearance on his high-profile TV shows, he said: “Don’t think that we are living in a peaceful time now. Actually the media cannot report anything at all. Those of us who do TV shows are so miserable and frustrated, because we cannot do any programs. As long as something is related to the government, we cannot report about it.” He said that the regime doesn’t listen to experts, and that Party officials are insufferably arrogant. “If you don’t agree with him, he thinks you are against him,” he said.

Lang’s assessment that the regime is bankrupt was based on five conjectures.

Hat tip to Mish Shedlock, where I first saw the article. Mish's response is similar to mine, "so what else is news?" However, let's look at it from a social mood perspective. His speech is incredibly negative, delivered to a mainland audience (Lang is a professor in Hong Kong) and other Chinese have "jumped the wall" to listen to it on YouTube, which is how I found out about it. Part of Lang's popularity is due to his use of over-the-top language and hyperbole, something that Liu Junluo is fond of and one can find no shortage of on U.S.-centric blogs such as ZeroHedge. The only difference is the Americans think their leaders are bozos and the Chinese are wise technocrats, while Chinese believe their leaders are bozos and the Americans are led by wily masters of realpolitik. Perhaps the former is true in both cases......either way, social mood in China is low and declining.

China's subprime mortgage crisis

中国式次贷危机 A Chinese website is tracking what the Chinese are dubbing China's subprime crisis. Bookmark it if you want to stay on top of the news.

Liu Jun Luo: Six to ten months until Chinese hyperinflation

Liu Jun Luo has a new blog post up. He's notorious for not laying out all the details, so I will set this up a bit. The following is my interpretation of what he's writing, filling in some spaces. You can read his writing below in Chinese or English. The Chinese economy is unbalanced with far, far too much investment directed by government owned companies or government bureaucrats. Government investment is often negative in and of itself (relative to a similar private investment) since it tends to be less efficient, and while there were good infrastructure projects before, a lot of the recent spending only fueled real estate. China desperately needs to rebalance as fast as possible, and one way to do that is to create wage inflation. In this article Liu Jun Luo talks about how on a battlefield, you destroy some areas to slow the enemy. There's a depression in the West that's about to become more severe, exports are going to drop and Chinese will become unemployed. Defending this sector of the economy makes no sense. The bigger threat is that deflation takes hold in China because of the credit bubble. When investment bubbles in Asia burst, it's the currency that gets annihilated. Mr. Liu's advice is that China create the inflation itself, rather than suffer the "super" inflation that will result from a currency collapse that will wipe out stocks, real estate and the savings of ordinary Chinese. 回复刘军洛新浪微博粉丝提问

正确的预期是非常重要的，目前全球债务膨胀，美国、德国、英国的长期债券收益率全部下降的创记录低点，这已经说明全球大量私人资本正在大规模退出劳动力市场和资本市场。

中国目前的通货膨胀现象是一个严重的假现象，这就好像2008年3月份中国通货膨胀达到当时的高峰，结果，在2008年9月份的世界外部冲击打进了大萧条。

所以，目前正确的方式是中国中央银行要制造通货膨胀，就是大幅度提高工资。因为，如果我们再被外部像2008年9月份打进了大萧条，那么，中国将用6~10个月时间演变成真正的超级通货膨胀。这是，人民币汇率崩盘的通货膨胀，那么，这就是不可救药失控的通货膨胀。

目前，如果我们大幅度提高工资后的通货膨胀是不会危害的汇率的，但是，我们错误的选择了大萧条，那么，人民币汇率就必定崩盘。
这就好像战场，你必须选择局部地区的大量牺牲，因为，这也意味着大量敌人被你也严重拖延在局部地区。中国现在最失败的地方就是没有居民免费食品券机制。

你需要明白我们实际是在谈论人民币汇率问题。中国大萧条后演变的超级通货膨胀是迅速消灭所有人的股市资产、房地产资产和储蓄资产。

现在，中国的宏观层面无法理解我们真正问题是人民币汇率上面，所以，中国普通人只能自保，因为，这是一场中国普通人的人生灾难。

同时，世界的套利者也把这个事件看的清清楚楚，他们会顺应市场的趋势，把这场大规模的灾难变成更大数量级的灾难。

Below is the Google translation, which I touched up a bit.

Correct expectations is very important, the current expansion of global debt, the United States, Germany, the UK's long-term bond yields fell to a record low point, which has indicated that a large amount of private global capital is a large-scale withdrawal from the labor market and capital market.

China's current appearance of inflation is a serious false appearance, similar to China in March 2008 when inflation reached a peak as a result, in September 2008 global external shocks turned into the Great Depression.

So, now the proper way to create inflation is for China's central bank to substantially increase in wages. Because, outside shocks similar to September 2008 again bring the Great Depression, then, in 6 to 10 months China will evolve into a real super-inflation. This is the collapse of the RMB exchange rate inflation, then, this is hopelessly out of control inflation.

Currently, if we significantly increase wage inflation it is not harmful to the exchange rate, but we wrongly choose the Great Depression, then, the RMB exchange rate will collapse. It's like the battlefield, you must choose to sacrifice a large number of local areas, because this also means that a large number of enemies are seriously delayed in some areas. China most failed area now is that there are no food stamps.

You need to understand that we are actually talking about the RMB exchange rate issue. After China's Great Depression, the evolution of super-inflation will mean the rapid annihilation of all stock market assets, real estate assets and savings assets.

Now, China's macro level cannot understand our real problem is that of the RMB exchange rate, so all the Chinese ordinary people can do is protect themselves, because this is a catastrophe for the lives of ordinary Chinese.

Meanwhile, the world arbitrageurs also clearly see this event, they will follow the market trend, the large-scale disaster of this magnitude will become an even greater disaster.

Liu Jun Luo expects deflationary forces

美元、人民币、黄金、常识+公告

今年最后一天的2010年12月31日，将是小布什先生的美国历史上最大的十年期减税政策的自动到期。如果，美国国会和奥巴马先生不能再签署新的减税政策，那2011年1月1日，美国世界就将进入中性的紧缩财政时代。2001年本人上书中国高层及中国媒体呼吁，中国必须建立由石油、黄金、农田、水资源、稀缺矿藏、煤、森林等等的——次级金本位，来对抗美元的大规模贬值周期的出现。因为，道理是一个简单的常识，就是2001年美国历史上最大规模财政赤字周期的开动。在过去十年中，中国官方外汇储备是全力大规模持有美元，这场的大背景是美国的高财政赤字与接近零的储蓄率，高财政赤字与接近零的储蓄率必然衍生出高贸易赤字。所以，中国官方外汇储备是在美国政策主导的美元大贬值周期中，作出英勇的无私牺牲。2010年，美国世界出现了史无前例的转变，美国的储蓄率上升至6.5%与7800万婴儿潮的大规模退休的启动，包括美国在2011年1月1日的中性紧缩财政时代的开启。2010年，更让我困惑的是中国央行的全力官方外汇储备多元化政策，难道我们是“伤疤未好痛已忘”。

The last day of the year on Dec. 31, 2010, Mr. Bush will be the largest in U.S. history a decade of tax cuts automatically expire. If the U.S. Congress and Mr. Obama can not sign new tax cuts, that January 1, 2011, the United States will enter the world of tight fiscal times neutral. In 2001 I released a letter to top Chinese and Chinese media have called for China to establish oil, gold, farmland, water resources, scarcity of minerals, coal, forests, etc. - and secondary gold standard, to confront the dollar's massive devaluation of the emergence period. Because reason is a simple common sense, that is, in 2001 the largest deficit in U.S. history, the start cycle. In the past decade, China's official foreign exchange reserves are large-scale effort to hold dollar, this is a great background of high U.S. fiscal deficit and near-zero savings rate, high fiscal deficit and near-zero savings rate must rise to the high trade deficit. Therefore, China's official foreign exchange reserves in the U.S. dollar devaluation policy-led cycle, to heroic and selfless sacrifice. 2010, the United States and the world of unprecedented change, the U.S. savings rate rose to 6.5% and the 78 million baby boomers start to retire a large scale, including the United States in January 1, 2011 the neutral era of tight finances. 2010, made me confused is the full official central bank reserve diversification policy, should we be "a wound hurts not been forgotten."

The inflation happened in the 2000s, the U.S. dollar was devalued and now the U.S. is facing demographic headwinds and political forces that will tighten fiscal policy. Liu appears not to anticipate a tea-party led victory for the GOP, but at this point it seems that if the GOP picks up enough seats, even the tax cuts for the wealthy will be on the table. However, if the tax cuts do expire, it would be massively deflationary because it would cut twice. First, it would take money out of the pockets of taxpayers and shift it to the less efficient government sector, reducing the impact of this spending by some factor. Second, it would reduce the need for U.S. borrowing, which would also reduce the amount of credit creation in the system. Since private credit would also tighten, as consumers had less disposable income, this would be overall deflationary.

Liu Junluo: We have already entered the economic depression

This is a short post from Liu Junluo, he's been busy writing a book. I'm not sure how much this squares with Prechter and the other deflationists, but this is close to my own view, that first we have deflation and then inflation. Marc Faber has been more inflationist in his arguments, but he has said he holds that position because if the market or economy have a severe decline, the response will be money printing.

世界已快进入了真正的大萧条期

本人今年3月14日在北京讲课时，是谈今年底美元指数会站在85，年内很可能上冲90，当时也指出这是非常非常保守的估算。现在，故事已进入秦国统一战争的最后时刻，这个时刻对秦国是万马平川、轻松自如。所以，美元是不是会走出让全世界人与全体中国人都一辈子也看不懂的宏大行情呢！请你设想一下，当秦国最后统一六国的那个时刻，是怎么样的暴风骤雨。黄金现在与美元同步上涨，是世界上有几个人用黄金创新高来鼓励全体中国人相信“通货膨胀”快来了，是掩盖美元即将爆发的真正的壮观行情。这个时代是伟大与贫富严重分化的时代。今天的保存，才会有明天的生长。相信“通货膨胀”的中国人都快要死了。本人再说一遍，中国是先“恶性通货紧缩”，再“恶性通货膨胀”，美国人现在要把中国市场防“通货膨胀”的人，先用“通货紧缩”吊死，而后再使中国爆发“通货膨胀”。

My synopsis: Liu Junluo says that at a March 14 lecture in Beijing, he said the U.S. Dollar Index would be at 85 by the end of the year, maybe 90, but this was his conservative estimate. He says the U.S. dollar is about to make its greatest move in our lifetimes. He compares the current situation to that of state of Qin, which conquered the other six states to unify China in the Warring States period, that this was a very violent period. He says that gold and the U.S. dollar rising together is seen as a sign of coming inflation by most people, but that in fact it conceals the U.S. dollar's spectacular move. He says that today's savings are tomorrow's growth and that those Chinese who believe in inflation will soon want to die. He reiterate that first their will be horrible deflation, and that will be followed by hyperinflation.

Baosteel Deflation—宝钢通货紧缩

In September, Baosteel cut October prices. (宝钢下调10月钢价)
In October, Baosteel is cutting November prices:

Baosteel Group, the parent of Baoshan Iron & Steel Co., cut its prices of steel products for November delivery by 250 to 500 yuan per ton from October, a company official told Caijing on Oct. 12.

The country's biggest steelmaker cut medium steel plate prices by 400 yuan per ton, and cut the price of cold and hot rolled steel by 400 to 500 yuan a ton, the official said.

The special 100 to 300 yuan discounts on hot and cold steel plate for October orders was extended.

宝钢11月碳钢出厂价格继续下调

10月10日，宝钢出台钢产品11月新价格政策。在10月价格基础上，中厚板价格普遍下调400元/吨；热轧品种中普碳钢价格下调400元/吨，机械用钢等品种钢价格下调500元/吨，增加优惠100元/吨；酸洗价格下调250元/吨，增加优惠300元/吨；冷轧及热镀锌的价格普遍下调400元/吨，同时分别增加优惠300元/吨和200元/吨。其中，普碳钢和酸洗的价格是继10月下调之后继续深调。

通货紧缩.

Chinese credit, real estate in trouble

Credit card debt on which payments are delayed by six months or longer totalled 5.8 billion yuan at the end of June, up 131.3 percent year-on-year and up 16.2 percent from the end of March, the People's Bank of China said in a Sept. 16 statement. Credit card payments are closely watched during weak economies for signs of distress among consumers. At the end of June, about one Chinese out of eight owned a credit card, the statement said.

Elsewhere:

In Shanghai, sales in the second week of September fell 10 percent week-on-week, while supply rose 84 percent, according to property consultants Centaline China.
In Guangzhou, sales dropped 30 percent in the second week of September, while supply grew by 73 percent, Centaline said.

“金九”落空 一线城市住房成交量继续下滑

另据中原住宅监测系统数据显示，9月第二周，全国一线城市成交量环比继续下滑，广州、上海两地分别下降了三成和一成。同时，上海、深圳、广州三个城市商品住房存量环比均微幅上涨。其中上海、广州新增商品住房供应面积分别比上周增加了73%和84%。

Baosteel cuts October prices

Deflation?

Baosteel said hot-rolled carbon product prices were cut by 300 yuan a ton, with hot-rolled low-carbon products falling by 200 yuan and, and cold-rolled prepainted steel sheet down 350 yuan.

Steel plate and most cold-rolled products remained unchanged, traders who work with Baosteel told Caijing.

Hu Yanping, an analyst from consultancy Umetal, told Caijing that the price cut reflects growing competition in the hot-rolled steel segment which is used mostly by the machinery industry, a sector which has not yet fully recovered from the economic downturn.

The company raised prices for three consecutive months beginning June.

However, the market has been on a downward slide since early August. The MySpic Index, consultant Mysteel's weekly monitor of domestic steel prices, fell from 165 on Aug. 7 to 134 on Sept. 4.

Mysteel analyst Xu Xiangchun said Baosteel still has room to cut prices further, as its prices are still far higher than the average market rate.

通货紧缩?宝钢下调10月钢价

《财经》记者从宝钢贸易商处获悉，9月7日，宝钢出台2009年10月碳钢产品出厂价格政策，在9月价格基础上，热轧品种中普碳钢下调300元/吨；低碳钢下调200元/吨；热轧酸洗下调300元/吨；彩涂普遍下调350元/吨；冷轧、热镀锌、电镀锌、镀铝锌、电工钢以及宽厚板的价格维持不变。