Yes Virginia...It's a Bubble...

[jk]

Re: Yes Virginia...It's a Bubble...

From the FT today:

Last updated: May 19, 2015 1:16 pm

Economists seek to ease fears on China’s record capital outflow

Gabriel Wildau in Shanghai

Capital is flowing out of China at a record pace, sparking fears over financial stability and complicating efforts by the central bank to support a slowing economy with lower interest rates.

China ran a balance of payments deficit of $80bn in the first three months of the year, the largest quarterly net outflow on record, according to official data.

The outflows are all the more striking because China’s trade surplus remained strong over the period. As falling commodity prices slashed the country’s import bill, it recorded a $79bn current-account surplus — the largest in nearly five years.

But this was overwhelmed by outflows on the capital and financial accounts worth a record $159bn. The lure of China's surging stock market also failed to counter the outflow trend...

..."All things considered, [Beijing] would rather not have confidence-sensitive capital going out," said Tim Condon, head of Asia research for ING Financial Markets in Singapore.

By some measures, outflows have been continuing for more than a year. The central bank’s holdings of foreign assets have dropped for seven consecutive quarters — the longest run of declines on record.

But economists say that as yet, capital outflows have not accelerated to a level that would threaten the stability of the financial system...

...They also reflect recent reforms to loosen capital controls and cautiously encourage financial outflows through initiatives such as the Shanghai-Hong Kong Stock Connect, which allows mainland Chinese to invest in foreign equities...

...Nevertheless, capital outflows are complicating efforts by the People’s Bank of China to support the economy through monetary easing. For the past decade, central bank purchases of foreign exchange inflows were the main source of base money creation in China's banking system. Now, with outflows threatening to shrink the money supply, the central bank is turning to new mechanisms to expand it...

...“From the start of this year, capital inflows have been negative. We believe the key factor now restricting effective monetary easing is that the required reserve ratio remains at a high level,” said Liu Liu, macroeconomic analyst at China International Capital Corp.

In addition to RRR cuts, the central bank has slashed benchmark rates three times since November. But lower rates could exacerbate capital flight by making Chinese assets less attractive, especially in comparison to the US, where the Federal Reserve is expected to raise interest rates this year.

Forex traders say the PBoC has drawn down its foreign exchange reserves to head off depreciation of the renminbi. That explains why the exchange rate has been flat this year despite the record-setting outflows.

“As long as the renminbi remains broadly steady, domestic capital outflows are likely to be modest,” Standard Chartered analysts led by Beckly Liu wrote last week.

The PBoC’s signal to the market that it intends to hold the renminbi stable has helped prevent the trickle of outflows from becoming a flood.

well, we know where it's all going, don't we?
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vancouvergoin'up

[GRG55]

Re: Yes Virginia...It's a Bubble...

I doubt this is as binary as we might imagine.

First, there may be explicit approval and some relaxation of funds transfer capability out of China for the well connected wealthy, as part of an effort to find ways to vent the excess private savings into something other than internal property speculation and shadow banking system investment products, both of which are causing concern with the authorities. Buying gold and various luxury goods inside China can only absorb so much...foreign real estate and perhaps other private investment abroad might be carefully encouraged.

But monitoring and controlling the outflows, once started, might also be problematic in a nation as large, populous, complex and corrupt as China. So it is entirely likely that some, shall we say, "unscrupulous and ill gotten gains" are also finding their way out of China, along with their representative owners, through the same conduits?

...

From the FT today:

Last updated: May 19, 2015 1:16 pm

Economists seek to ease fears on China’s record capital outflow

Gabriel Wildau in Shanghai

Capital is flowing out of China at a record pace, sparking fears over financial stability and complicating efforts by the central bank to support a slowing economy with lower interest rates.

China ran a balance of payments deficit of $80bn in the first three months of the year, the largest quarterly net outflow on record, according to official data.

The outflows are all the more striking because China’s trade surplus remained strong over the period. As falling commodity prices slashed the country’s import bill, it recorded a $79bn current-account surplus — the largest in nearly five years.

But this was overwhelmed by outflows on the capital and financial accounts worth a record $159bn. The lure of China's surging stock market also failed to counter the outflow trend...

..."All things considered, [Beijing] would rather not have confidence-sensitive capital going out," said Tim Condon, head of Asia research for ING Financial Markets in Singapore.

By some measures, outflows have been continuing for more than a year. The central bank’s holdings of foreign assets have dropped for seven consecutive quarters — the longest run of declines on record.

But economists say that as yet, capital outflows have not accelerated to a level that would threaten the stability of the financial system...

...They also reflect recent reforms to loosen capital controls and cautiously encourage financial outflows through initiatives such as the Shanghai-Hong Kong Stock Connect, which allows mainland Chinese to invest in foreign equities...

...Nevertheless, capital outflows are complicating efforts by the People’s Bank of China to support the economy through monetary easing. For the past decade, central bank purchases of foreign exchange inflows were the main source of base money creation in China's banking system. Now, with outflows threatening to shrink the money supply, the central bank is turning to new mechanisms to expand it...

...“From the start of this year, capital inflows have been negative. We believe the key factor now restricting effective monetary easing is that the required reserve ratio remains at a high level,” said Liu Liu, macroeconomic analyst at China International Capital Corp.

In addition to RRR cuts, the central bank has slashed benchmark rates three times since November. But lower rates could exacerbate capital flight by making Chinese assets less attractive, especially in comparison to the US, where the Federal Reserve is expected to raise interest rates this year.

Forex traders say the PBoC has drawn down its foreign exchange reserves to head off depreciation of the renminbi. That explains why the exchange rate has been flat this year despite the record-setting outflows.

“As long as the renminbi remains broadly steady, domestic capital outflows are likely to be modest,” Standard Chartered analysts led by Beckly Liu wrote last week.

The PBoC’s signal to the market that it intends to hold the renminbi stable has helped prevent the trickle of outflows from becoming a flood.

[GRG55]

Re: Yes Virginia...It's a Bubble...

Oh, oh...

Markets| Mon May 18, 2015 1:36am EDT

China April home prices fuel hopes of bottoming out, but long road to recovery

REUTERS HONG KONG

China's new home prices fell for the eighth consecutive month in April from a year earlier but were flat from March, adding to hopes that a property downturn which is weighing heavily on the economy is beginning to bottom out.

But analysts warned any recovery in the market will take some time given a huge inventory of unsold homes, and said the property sector remains the biggest risk to the world's second-largest economy, which looks set for its worst year in 25 years.

That will keep pressure on policymakers to roll out more interest rate cuts and other stimulus measures later this year to boost activity.

Average new home prices in China's 70 major cities dropped 6.1 percent last month from a year ago, the same rate of decline as in March, according to Reuters calculations based on official data published on Monday. But nationwide prices steadied from March, further narrowing from a 0.1 percent fall in the previous month.

Beijing saw prices rise, albeit modestly, for the second month in a row, while those in Shanghai rose for the first time in 12 months. But prices in many smaller cities, which account for around 60 percent of national sales, continued to fall...

..."But the big impact for the overall economy is from property investment, where I don't expect a quick rebound in growth...that's why we forecast China will miss its 7 percent target (for 2015)."

Zhao said real estate investment, which comprises around 20 percent of China's GDP, may grow less than 5 percent this year, compared with 10.5 percent in 2014, knocking 1 percentage point off economic growth...

...But real estate investment growth continued to slow in the first four months of 2015 to the lowest since May 2009 as new construction slumped, impacting demand for everything from steel and cement to appliances and furniture...

...China relaxed tax rules and downpayment requirements on second homes in late March. Earlier this month, the central bank cut interest rates for the third time since November to lower companies' borrowing costs and stimulate loan demand...

...Of the 70 major cities the NBS monitors, 48 posted a monthly decline, down from March's 50.

[don]

Re: Yes Virginia...It's a Bubble...

Charged With Graft in China, Some Fugitives Are Finding Luxury in U.S.

By STEPHANIE SAUL and DAN LEVINMAY 15, 2015



Even before his name appeared on the “most wanted” list, holes had emerged in the immigrant success story of Wei Chen.

His business partner sued him last year, alleging that nearly $50 million was missing from their development project in Plantation, Fla. The ensuing litigation revealed that Mr. Chen had changed his name from He Yejun, and that he had once been a top executive in a state-owned beer company in China.

When the Chinese government released a list last month of what it described as its leading 100 fugitives accused of economic crimes — including 40 people believed to be hiding in the United States — there was He Yejun’s name, along with that of his wife.

They were accused of misappropriating funds in China before moving to the United States in the late 1990s. Records show that among Mr. Chen’s luxury purchases since immigrating are a $2 million condo near Miami, a Bentley and a 70-foot yacht owned through a corporation.

The highly publicized release of the most-wanted list comes as President Xi Jinping presses an anticorruption crackdown that has already brought down one of the country’s most powerful former officials and sent scores of security agents on a global chase for economic fugitives and their ill-gotten gains.

Last year alone, 680 fugitives suspected of economic crimes were repatriated from 69 countries and regions in the operation known as Fox Hunt, according to the state news agency Xinhua.

This newest phase of the campaign, named Sky Net, was rolled out last month with the publication in Chinese news media of a collection of Interpol alerts that also included one for Yang Xiuzhu, a former deputy mayor of Wenzhou whose stature earned her the top placement on the list.

Ms. Yang previously owned a five-story building on West 29th Street in Manhattan.

The United States was identified as the leading destination by the Chinese authorities, with Canada second and New Zealand and Australia tied for third. The four countries do not have extradition treaties with China, partly because of concerns about due process of law, human rights violations and excessive punishment in China.

The Chinese authorities say the reluctance of the four countries to hand over suspects has made them especially attractive havens for suspected economic fugitives.


Whether those on the list are truly China’s most wanted is a question of some debate. Chinese news reports say Beijing has handed Washington a far larger list of about 150 fugitives believed to be in the country.

Ding Xueliang, a Chinese politics expert at Hong Kong University of Science and Technology, said Beijing preferred not to publicly identify some suspects for fear that they or their families might retaliate by leaking party secrets. “The biggest targets are not on this list,” he said. “Some of these people could cause enormous political trouble for the party-state system by revealing what they know.” Indeed, some experts suspect the list is intended more as a warning to those whose identities remain secret than to those now widely known.

The zeal with which Mr. Xi and his allies have pursued corrupt officials has sent shock waves through long-untouchable institutions such as the military and the Politburo Standing Committee. Last month, the nation’s former domestic security chief, a retired standing committee member, Zhou Yongkang, was formally charged with taking bribes, making him the highest-ranking party official ever to face corruption charges.

[GRG55]

Re: Yes Virginia...It's a Bubble...

Are Chinese authorities finally about to end "the dilemma"? Will they stay the course and replace ballooning off-balance-sheet debt with structured municipal bonds? Or will they once again get cold feet in the face of a potential drop in property markets and reverse course "temporarily"? Only time will tell.

China Tightening Curbs on Opaque Local Debt Spurs Market Tumble

Dec 9, 2014 6:46 AM MT

Bloomberg News


China stepped up efforts to curb the expansion of opaque local-government debt, sparking a tumble in riskier bonds and fueling the stock market’s biggest retreat in five years...

...While the change caught traders off guard, authorities in the world’s second-largest economy are trying to rein in the use of lightly-regulated LGFVs as they promote the development of a more transparent municipal bond market. Fitch Ratings Ltd. estimates local government liabilities have climbed to about 30 percent of gross domestic product as cities and provinces take on debt to sustain growth amid the nation’s weakest annual expansion since 1990...

Looks like they blinked. Again.
What a surprise
Even the much vaunted central planners in Beijing are having a wee difficulty restructuring the economy towards the ever elusive consumer.


From The Economist in March:

China’s local government debt

Defusing a bomb

EVER since China’s gargantuan stimulus of 2009, which was unleashed to repel the global financial crisis, there have been concerns about how the debts incurred during that spending binge would be repaid. The finance ministry took a big step this week to address the overhang, introducing a programme to restructure the liabilities of local governments, the most indebted of China’s public institutions. China still has a long way to go to fix its finances. But after years of first denial and then dithering, it has at least started the clean-up operation.

To begin with, local governments will be allowed to swap 1 trillion yuan ($160 billion) of their existing high-interest debts for lower-cost bonds. According to the Economic Observer, a credible local newspaper, this may just be the first tranche, with the finance ministry preparing to give local governments a 3 trillion yuan quota for refinancing. It is easy to imagine that such quotas will become a regular feature of China’s fiscal landscape over the next few years. As this chart shows, the combination of new debt issuance plus swaps will help cover what local governments owe this year, but will make only a small dent in their overall liabilities..,

...China’s local-government debt problem has always been twofold. First, there is the sheer amount of money they owe. That has doubled from less than 20% of GDP in 2007 to nearly 40% today. Second, there is the very peculiar and opaque structure of these liabilities. Because local governments can only borrow with the explicit permission of the finance ministry, which has been miserly in the past, they have been forced to use off-balance-sheet entities to raise funds. Those entities (commonly known as local government financing vehicles, or LGFVs) have borrowed from banks and shadow banks alike. As a result, the size of their debts is unclear, but it is certain that the cost of their debts is much higher than would have been the case had they issued bonds in the first place.The debt swap is aimed squarely at the second problem. Lou Jiwei, China’s finance minister, calculates that local governments will save 40-50 billion yuan this year alone in interest costs thanks to the refinancing...

From the FT in April:

China mulls plan to boost demand for local government debt

April 28, 2015 1:29 pm

China’s central bank is considering extraordinary measures to boost credit flows to heavily indebted local governments, according to local media reports, as Beijing struggles to recapitalise the provinces after years of unsustainable borrowing and investment.

China’s local debt has surged since the 2008 financial crisis as regional governments borrowed to finance infrastructure projects in an effort to stimulate the economy. Economists have warned the debt poses a risk to the banking system.

China’s economy is growing at its slowest pace in six years, according to official figures. Policy makers want to enable local governments to maintain infrastructure spending to cushion the impact from a slowdown in the property and manufacturing sectors...

...China’s finance ministry last month announced a plan for provincial governments to refinance Rmb1tn in maturing debt by selling bonds. The goal is to lower debt-servicing costs and extend maturities by converting short-term, high-interest bank loans to low-interest, long-term municipal bonds.

But this month at least two Chinese provinces were forced to postpone scheduled bond auctions due to insufficient demand from commercial banks. Allowing local bonds to be used as collateral would stoke demand for the paper.

Loans from China’s central bank to commercial banks would expand the People’s Bank of China’s balance sheet, increasing the base money supply...

From the WSJ today:

China Backtracks on Local Government Debt

Beijing reopens ‘back door’ that allowed local governments to load up on debt


By LINGLING WEI

Updated May 15, 2015 8:23 a.m. ET
China is reversing course on a major effort to tackle its hefty local government debt problem, marking a setback for a priority reform aimed at getting its financial house in order.
The move could provide the economy with some short-term help. But it restores a backdoor way that enabled local governments to load up on debt in recent years, providing a drag on growth at a time when Beijing is looking for ways to rekindle it.
According to an announcement made Friday by the State Council, China's cabinet, the authorities relaxed controls on the ability of local governments to raise money by allowing them to tap government-sponsored financing companies -- the very entities that have been blamed for the rapid run-up in China's local debt load over the past few years.
The move undermines an October policy intended to prevent those financing firms from taking on new debt.
It comes as China's long push toward financial reform -- part of its broader effort to make the economy rely less on big investments but more on consumer spending -- increasingly bumps up against a more pressing national goal: boosting growth. The latest move comes as the world's second-largest economy endures slower-than-expected growth. A barrage of monetary easing measures since last year has proved insufficient to counter a real estate downturn and flagging factory output...

[Southernguy]

Re: Yes Virginia...It's a Bubble...

TSLA at 30,9 B is "cheap"....but steadily playing catch up...

[santafe2]

Re: Yes Virginia...It's a Bubble...

reminds me of when priceline's valuation was higher than that of all the u.s. airlines combined.

I worked in the search engine business in those days and my personal favorite was inktomi, valuation $25B or about $240 a share. And if I remember correctly, sold to Yahoo a few years later for around 25 cents a share.

[jk]

Re: Yes Virginia...It's a Bubble...

reminds me of when priceline's valuation was higher than that of all the u.s. airlines combined.

[don]

Re: Yes Virginia...It's a Bubble...

a brown bubble . . . .

While we have written before about both the epic bubble in private valuations as well as how tech company valuations are "completely made up", one has to see the following table showing Uber's current, past and future valuations in context, just to get a sense of the furious valuation scramble currently taking place in the tech sector which has long since put the dot com bubble to shame.

[don]

Re: Yes Virginia...It's a Bubble...

Is the Sino Schadenfreude moment at hand?

[GRG55]

Re: Yes Virginia...It's a Bubble...

"... any significant reverse for China’s corporate sector could quickly spread to other countries."

My theory is that the eventual collapse of the Great Wall of Money will cause:

1. A global finished goods supply crash as tens of thousands of businesses in China shut down (inflationary)
2. Global recession and output gap (deflationary)
3. An explosion in unemployment and political unrest in China and an attendant need to externalize the crisis (inflationary)
4. A collapse in demand for UST from China that results from trade (USD-negative and inflationary)
5. Elimination of "America's IMF" as China loses its ability to finance the U.S. federal budget deficit that will explode during the resulting global economic crisis as outlays rise and tax receipts decline (USD-negative and inflationary)

The ultimate "Ka" event that leads to "Poom" via a failed reflation of the reflation of the reflation of the original 1995 to 2000 asset bubble.

Sun May 10, 2015 9:21am EDT

China cuts interest rates for third time in six months as economy sputters

China cut interest rates for the third time in six months on Sunday in a bid to lower companies' borrowing costs and stoke a sputtering economy that is headed for its worst year in a quarter of a century...

...The People's Bank of China (PBOC) said on its website it was lowering its benchmark, one-year lending rate by 25 basis points to 5.1 percent from May 11. It cut the benchmark deposit rate by the same amount to 2.25 percent."China's economy is still facing relatively big downward pressure," the PBOC said.

"At the same time, the overall level of domestic prices remains low, and real interest rates are still higher than the historical average," it said.

Sunday's rate cut came just days after weaker-than-expected April trade and inflation data, highlighting that China's economy is under persistent pressure from soft demand at home and abroad.

While the PBOC acknowledged the difficulties facing China's economy, it said in its statement accompanying the announcement that it wants to strike a balance between supporting growth and deepening structural reforms...

...Economists had said it was a matter of when, not if, China eased policy again after economic growth in the first quarter cooled to 7 percent, a level not seen since the depths of the 2008/09 global financial crisis...

...With China set to publish more key economic data on Wednesday, including industrial output and investment, the timing of the rate cut could add to worries that figures may disappoint across the board again, as they did in March...

...A cooling property market and slackening growth in manufacturing and investment have weighed on the Chinese economy. Annual growth is widely forecast to sag to 7 percent this year, down from 7.4 percent in 2014.

In an attempt to energize activity, the PBOC has now lowered interest rates and relaxed the reserve requirement ratio (RRR) five times in six months, and many economists believe more policy loosening is in store.

This is partly because despite the steady drum roll of policy easing, there are indications it has not benefited the real economy. Some data suggests banks are not passing on lower interest rates to borrowers, and credit is still not flowing to the sectors in most need of the funds...

...Banks are also struggling as the economy founders. Lending has slowed, bad loans are piling up, and profits margins are getting squeezed as China liberalizes its interest rate market. Banks' earnings reports last month showed profit growth hit a six-year low in the first quarter...

...And with the prospect that borrowing costs may stay stubbornly elevated, government economists told Reuters earlier this month authorities may ramp up state spending to shore up growth, in the hope that fiscal policy would work where monetary policy hasn't.

But Li Huiyong, an economist at Shenwan Hongyuan Securities, cautioned against thinking that lower borrowing costs would not trickle down to businesses and consumers at some point.

"Don't underestimate the cumulative effect of the cuts in interest rates and RRR," Li said. "This won't be the last cut. "The rate could be lowered to 2 percent at least, and we expect the economy to gradually stabilize in the coming two quarters."

[GRG55]

Re: Yes Virginia...It's a Bubble...

Question: How do you make a million dollars following this expert?
....start with two million.

Yup, the market should be just right by then...er....now.

Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it.
Will Rogers

[santafe2]

Re: Yes Virginia...It's a Bubble...

Question: How do you make a million dollars following this expert?
....start with two million.

Yup, the market should be just right by then...er....now.

[GRG55]

Re: Yes Virginia...It's a Bubble...

I doubt this is as binary as we might imagine.

First, there may be explicit approval and some relaxation of funds transfer capability out of China for the well connected wealthy, as part of an effort to find ways to vent the excess private savings into something other than internal property speculation and shadow banking system investment products, both of which are causing concern with the authorities. Buying gold and various luxury goods inside China can only absorb so much...foreign real estate and perhaps other private investment abroad might be carefully encouraged.

But monitoring and controlling the outflows, once started, might also be problematic in a nation as large, populous, complex and corrupt as China. So it is entirely likely that some, shall we say, "unscrupulous and ill gotten gains" are also finding their way out of China, along with their representative owners, through the same conduits?

It's just another cycle repeating...well perhaps rhyming in a new variation might be a better description?

The lesson of Bo Xilai is probably not lost on anyone with some wealth in China:

Bo Xilai found guilty on all charges, sentenced to life in prison

updated 7:11 AM EDT, Mon September 23, 2013

Beijing (CNN) -- A court in eastern China sentenced Bo Xilai -- the former rising star of the ruling Communist Party who fell from power amid a scandal involving murder, betrayal and financial skullduggery -- to life in prison Sunday.

...

Many of China's Most-Wanted Graft Suspects Have Taken Refuge in the U.S.

10:28 PM MDT
April 22, 2015

From “Lord Ringtone” to a banker accused of authorizing $1.6 billion in illegal loans, China’s list of most-wanted fugitives offers an illustrated guide to the Communist Party’s breathtaking variety of official graft.

The online rogue’s gallery of 100 top overseas corruption suspects was released by Chinese authorities to pressure the U.S. and other governments to help track down and return them. The list includes Li Xiangdong, who’s accused of taking bribes while running China Mobile Ltd.’s regional digital music and ringtone business in Sichuan and absconding to Canada.

There’s also Liu Changming, a former governor of the Bank of Communications’ Guangzhou branch, accused of approving illegal loans of more than 9.8 billion yuan ($1.6 billion) between 2005 and 2007, according to the Legal Evening News. Liu vanished in 2008 before traveling to either Singapore or the U.S., according to the government’s list.

The list spans China’s industries, from finance and property to oil and car manufacturing. There are former representatives of the state-controlled news media and one ex-history professor. The campaign to repatriate financial fugitives -- dubbed “Sky Net” -- is key to President Xi Jinping’s nationwide corruption crackdown, with some 40 people on the list released Wednesday thought to be in the U.S...

...Nine suspects on the list hail from the banking industry, with a former president of Bank of China Ltd’s Hainan provincial branch being the highest ranking...

...Almost one-quarter of people on the list are believed to have multiple identities, with two possessing at least five passports. Among those with two passports was Qiao Jianjun, a former director of China Grain Reserves Corp., who’s suspected of illegally transferring 300 million yuan to the U.S., the official China Daily reported last month.

In March, the U.S. Justice Department indicted Qiao and his ex-wife, accusing them of channeling stolen funds into the country and fraudulently obtaining U.S. visas.

Canada, with 26 former officials, was the second-most popular destination for fugitives on the list, which was released by the Ministry of Public Security and the Central Commission for Discipline Inspection, the Communist Party’s graft-busting agency. New Zealand was third, with as many as 20...

...Among the better-known cases cited was that of Yang Xiuzhu, a former Zhejiang province property official, who fled to the U.S. in 2003 with estimated assets of 253 million yuan, the official Xinhua News Agency reported. Her family bought a five-story Manhattan building as early as 1996 for $5 million, the report said.

[GRG55]

Re: Yes Virginia...It's a Bubble...

...There are several economic levers that may be pulled over the next few years in China and depending on which ones you believe will be thrown, you can argue that Chinese real estate is a bargain or that it is over valued. It looks to me like the over supply of product is causing the contraction in prices more than a raw over valuation.

http://www.economist.com/blogs/daily...l-house-prices

China suffers from the same thing I saw in the Middle East when I lived there. The parallels are much closer than one might guess on casual observation.

In both cases the governments own and control an overwhelming share of the economy. This leaves private investment few alternatives but to be funneled and concentrated - residential property and retail (apartments, family restaurants and mobile phone accessory stores for the masses, luxury villas, shopping malls and auto dealerships for the wealthy and well connected) or the stock markets. As private incomes and savings rise in greater Asia this inevitably leads to some pretty spectacular results. The post 9/11 concentration of building cranes in Dubai between 2002 and 2009 is one example. Another, the insane Gulf stock markets which culminated in a frenzy of IPOs of minority interests in family held construction and property firms circa 2006 (at the time I was resident in that region and posted on this forum describing those markets as "Arabs with little understanding of markets borrowing heavily to buy poor quality stocks at astronomical prices").

The mainland China and Hong Kong markets today are similar to the Gulf markets back then. They are not about capital investment in sound, productive enterprises. They are forums for pure speculation. To a degree that far exceeds the much maligned present day USA stock markets.

Edit added: The exodus of capital from China also has a parallel in the Middle East. Much of it is rushing to purchase overvalued property in Singapore, Australia, Vancouver and Toronto. The value of a safe haven escape alternative outweighs the cost of property in those markets to someone of means in mainland China. It is the same with the Arabs who have revived the Dubai property market in spectacular fashion since the start of the Arab Spring, and have moved their families there seeking a safe haven from the turmoil in Egypt, Syria, Palestine and Iraq.