Re: Broken China?
Nothing to do with "bubbles"...well maybe yes maybe not.
Certainly an interesting fellow.
Are there "boulders of shame" in other corporations over the world? Ferrari-Beating Great Wall Shows Wei Forging Next Hyundai
By Bloomberg News - Jul 5, 2013 7:23 AM GMT-0300
Wang Jiangwei recalls spending last summer sweating through a month of military drills conducted by Chinese People’s Liberation Army instructors. Wang isn’t a soldier; he’s a researcher at Great Wall Motor Co.
His Baoding, China-based employer is so profitable, it generates a fatter margin than any listed carmaker in the world. Behind the success is Chairman Wei Jianjun, who has built China’s biggest SUV maker with a leadership style that stands out for its emphasis on discipline and frugality.
Enlarge image
Great Wall Motor Co. represents a rare breed of Chinese automakers independent of foreign partners and government, sparing it from having to split profits and endure extra bureaucracy. Photographer: Nelson Ching/Bloomberg
5:16
July 2 (Bloomberg) -- Erwin Sanft, head of China and Hong Kong equity research at Standard Chartered Bank, talks about the region's stock markets. He speaks with Rishaad Salamat on Bloomberg Television's "First Up." (Source: Bloomberg)
Wei Jianjun, chairman of Great Wall Motor Co., has become Asia’s wealthiest car executive, with an estimated fortune of $6.6 billion as he strives to create China’s first global automotive brand. Photographer: Jerome Favre/Bloomberg
Employees work on the production line of Hover H6 (SUV) at Great Wall Motor Co.'s factory in Tianjin, China. Source: ChinaFotoPress/Getty Images
“The military training is pretty serious and tough,” said Wang. “Not only new hires but people who get promoted, even those becoming department heads, need to redo training.”
Great Wall represents a rare breed of Chinese automakers independent of foreign partners and government, sparing it from having to split profits and endure extra bureaucracy. With the stock surging more than 60-fold (2333) since its 2008 low, Wei has become Asia’s wealthiest car executive, with a fortune of $6.5 billion as he strives to create China’s first global automotive brand.
“Wei is a real professional, a real entrepreneur,” said Bill Russo, formerly vice president of Chrysler Northeast Asia and now president of automotive consultant Synergistics Ltd. in Beijing. “If there’s one or two automakers able to survive all the competition with foreign rivals in the next decades or so, Great Wall will definitely be one of them.”
Next Hyundai
Great Wall could become the next Hyundai Motor Co (005380)., the Seoul, South Korea-based automaker, he said.
The stock rose 6.2 percent to close at HK$34.25 in Hong Kong today after Janet Lewis, a Hong Kong-based analyst at Macquarie Group Ltd., raised her 12 month target price by 37 percent to HK$45.30.
Wei, who’s $1 billion wealthier than Hyundai Chairman Chung Mong Koo on the Bloomberg Billionaires Index, has signaled Great Wall will eventually outsell Chrysler’s Jeep globally and is targeting sales to double over three years to 1.3 million vehicles by 2015.
Though lagging behind major automakers in scale, low costs help its operating margin beat everyone -- even Fiat SpA (F)’s Ferrari. It will probably top the industry this year at 16.4 percent, according to Max Warburton, an analyst at Sanford C. Bernstein.
Asbestos Recall
Chinese automakers are a decade away from delivering their first globally competitive vehicle, though that’s only one or two product cycles in the auto industry, Warburton said. He hired specialists to tear apart and test a Great Wall H5 for a report in February and found the SUV’s gearbox had “truly awful” vibrations and braking was poor, though it drove well. Despite the H5’s shortfalls, it made a “massive leap forward” in quality with the newer H6, he wrote.
While the company has had its share of growing pains -- it recalled thousands of vehicles in Australia last year after regulators found asbestos in parts -- Wei said Great Wall’s ability to develop technology will determine its future.
“We have to own core technologies and make breakthroughs,” Wei said in an interview during a plant tour on May 31. “The biggest risk we’re facing is possible complacency.”
Net income will probably rise 24 percent to 7 billion yuan ($1.1 billion) this year after surging 66 percent in 2012, according to the average of 16 analyst estimates compiled by Bloomberg.
Wei, born in Baoding in 1964, said he was greatly influenced by his father, an artillery soldier who ventured out on his own to make boilers.
Great Deer
After several factory jobs, Wei branched out. At 26, he took over a small car-modification business and turned it into a van maker. He later shifted focus to pickup trucks after witnessing their popularity in Thailand. Small business owners and farmers turned Great Wall’s Deer into China’s most popular pickup brand by 1998.
Then anti-pollution laws restricted trucks in major cities, prompting Wei to switch to SUVs. Today, the company relies on SUVs for almost half its sales and is poised to lead the nation’s crowded SUV market, the fastest growing segment of China’s auto industry, for an 11th year.
The billionaire also knows when to wait, said Russo, recalling when Wei visited Chrysler LLC’s headquarters in 2008. Asked by Tom LaSorda, then CEO of the Auburn Hills, Michigan-based company, why Great Wall didn’t join Chinese carmakers in showcasing vehicles at the Detroit auto show, Wei replied they weren’t ready, Russo said.
“They don’t try to overreach,” he said.
’Boulders of Shame’
As Great Wall grew, Wei recruited Wang Fengying, 43, his top sales chief for the past two decades, who says she doesn’t shy away from telling her boss that he’s wrong.
“We argue all the time,” Wang said in an interview. “Our goals are the same, so we can always find common ground.”
Wang said five years ago she opposed the rollout of a Gwperi endorsed by Wei, who overruled her, only to see the subcompact flop. The debacle is engraved in red at Great Wall’s two “Boulders of Shame,” where one lists major failures in product development and the other identifies officials who have been jailed for accepting bribes from suppliers.
Donkey Burgers
Wei has more eccentricities, according to Zhang Yun, who has advised him for five years on strategy. The billionaire is so frugal he smokes 10 yuan-a-pack Zhongnanhai cigarettes and once scolded a group of dealers for leaving too much food on the table after a meal, Zhang said. He sleeps most nights in a room connected to his office and starts work at 7 a.m. in a gray uniform, Zhang said.
Then there’s the discipline.
In Baoding, famous for donkey burgers and home to the oldest military academy in modern Chinese history, Great Wall makes recruits endure foot drills and push-ups. The idea is for them to build endurance, increase willpower and understand the corporate culture, according its website.
“I have gone to other factories in China and when it’s time for lunch, everybody runs to the cafeteria at the same time,” said Russo. “They don’t do that at Great Wall.”
To contact Bloomberg News staff for this story: Tian Ying in Beijing at ytian@bloomberg.net
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net
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Re: Broken China?
Oooops.
"Exit strategy", "Taper", "Austerity", "Inverted Wealth Creation"...whatever.
As EJ has pointed out, the stock market adjusts immediately. Property markets take a bit longer.
June 24, 2013, 10:37 p.m. ET
Asian Shares Mostly Up; Shanghai Under Pressure
Shanghai stocks continued to fall on Tuesday, at one point pushing Chinese stocks into bear market territory, while rest of Asia was mostly higher after choppy early trading.
The Shanghai Composite Index was down 0.7% at 1950.35 after earlier falling to 1936.77, its lowest level since Jan. 16, 2009. Chinese companies listed outside the mainland were more resilient, with Hong Kong's Hang Seng Index climbing 0.8%.
The focus remained on the liquidity squeeze in China following Monday's 5.3% nosedive in Shanghai. The sharp move was sparked by sustained fears over the banking system, as interbank lending rates remained elevated, pushing down local banking stocks. Market sentiment has been hit by the People's Bank of China's lack of action to relieve funding pressures...
...Banks were weighed, with the China Shanghai Financials index down 1.2%. Medium sized banks were the worst affected: China Minsheng Banking Corp. was down another 4.3% in Shanghai and Industrial Bank Co. lost 2.5%. China Minsheng's Hong Kong listing however, was up 1.9%.
China is the latest market in Asia to suffer from a perilous decline, putting it in the company of regional markets like Japan and the Philippines that have fallen sharply in recent weeks. The Shanghai Composite Index has fallen 15% month to date, the Nikkei Stock Average has slipped 4.1%, and the Philippines has dropped 15.9% over the same period.Leave a comment:
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Broken China?
Where Will It End?
By JONATHAN R. LAING
China's credit growth to back lavish construction and infrastructure projects is similar to that of the U.S. and Japan before they faced financial calamities.
Of all the global economic powers, China would seem the most immune to the threat of a financial crisis.
It sailed through the post-2008 global credit implosion largely unscathed, by pumping up housing construction and infrastructure spending to compensate for slackening exports. First-quarter 2013 growth in gross domestic product, although the weakest in more than two years, rose at a rate the rest of the world would envy, 7.7%. Bad debts inside the Chinese banking system stand at a negligible 1%, compared with 3.4% in the U.S. and double-digit figures in much of the euro zone.
And Beijing seemingly has plenty of additional resources to employ to spur growth. China's economy boasts a debt-to-GDP ratio reckoned conservatively at about 30%, less than half the national debt rate of the U.S. In his recent summit talks with President Barack Obama, China's President Xi Jinping pointedly expressed his satisfaction with the Chinese economy.
But appearances can be deceiving, especially in China. Skeptics always have insisted that China's economic numbers paint too rosy a picture. Now those statistics show a worrisome downshift in growth for both exports and industrial production. Signs of trouble abound.
A post-2008 credit bubble in China seems to be yielding increasingly limp GDP growth, as spending on gaudy new infrastructure projects and housing no longer packs the same punch. Miles upon miles of empty apartment buildings rim hundreds of Chinese cities; industries suffer from rampant over-capacity; and largely empty new highways, bridges, shopping malls, railroad stations, and airports more than hint at problems.
A number of observers, including some former China bulls, see the country headed for a potentially serious economic downturn, or possibly a Japanese-style purgatory of anemic growth, with all the baleful side effects. These could include collapsing prices for assets like real estate (stocks already sell at big discounts), diminishing wealth, and, in extremis, frenzied capital flight by rich Chinese.
"I would say that China is now roughly at the stage [of indiscriminate credit growth] the U.S. was in March 2008, when Bear Stearns had to be rescued and the subprime market was unraveling," says David Cui, Bank of America Merrill Lynch China strategist, working out of Shanghai. "What will tip the scale will likely be a major event in China similar to Lehman's bankruptcy six months after the fall of Bear Stearns, which will be some bailout of a major player that Beijing will do everything it can to disguise so as not to shake confidence."
Echoes George Magnus, a London-based economist and independent advisor to UBS who has written extensively about China: "The financial situation in China has become quite alarming. Cracks are appearing all through its financial structure as a result of debt-fueled overinvestment in infrastructure, industrial capacity, housing, and commercial construction. There's likely to be big trouble coming in the next year or two."...
...THE PRIMARY FAULT LINE in the Chinese economy that worries many has been the explosion in the credit-to-GDP ratio since the onset of the 2008 global financial crisis and economic slowdown, as China sought to stimulate its economy in the face of a lag in its longtime growth engine, exports. This total societal debt load has followed a similar growth trajectory to that of the U.S. and British economies in the six years leading up to the 2008 crisis; Japan's credit orgy from 1985 to 1990, a prelude to two decades of stagnant growth punctuated by bouts of deflation, or Korea prior to the Asian financial crisis.
According to a report from analysts at Fitch, China's recent credit bubble has topped them all with total debt (a broad measure which includes business, household and local government debt but not central government debt) rising from 130% of GDP in 2007 to 210% in the first quarter of this year. In Japan, by comparison, during the fateful six-year credit bubble, the jump in the ratio was just 45 percentage points, from about 150% to just over 195%...
...The Chinese credit explosion, however, has sluiced funds into sectors that hold much peril. For example, money has been lavished on giant state-owned enterprises that dominate such key basic industries as steel, cement, electrolytic aluminum, plate glass, coking coal, solar panels, and wind-turbine production. This has created severe overcapacity in these industries that, ominously, has sent China's producer price index into negative territory in the last 12 months, slipping another 2.9% in May, and sharply curtailed corporate profitability.
There has also been a huge surge in infrastructure spending since 2008, primarily on the part of local-government financial vehicles, which are special investment platforms. Many of the projects -- roads, bridges, international ports, and airports -- don't seem to have a good economic rationale...
...In any event, many recent, debt-financed projects won't generate cash flow for years, if ever. They were merely big, splashy projects that temporarily boosted employment and economic growth during their construction phase before sinking into a moribund state. The New South China Mall, twice the size of the U.S.'s Mall of America in Minnesota, has been 99% vacant since its 2005 opening...
...BUT NO CHINA CREDIT STORY would be complete without mention of the real-estate construction boom that has pumped up perhaps the biggest bubble of all. For example, nine times the commercial space sold last year is under construction now. Residential construction has been in a white heat for some time and has attracted much notice in the financial press and elsewhere. Stories about the "ghost city" of Ordos in Inner Mongolia have become a staple, showing the eerie empty streets and deserted modern, high-rise apartment buildings, stores, and public buildings of a megapolis expected to attract more than one million people. It has been empty for the six years since its construction...
...Word came last month that Broad Group, a Chinese maker of central air-conditioning systems, had been green-lighted to break ground this month on the tallest building in the world, near the unprepossessing capital of Hunan Province, Changsha. Sky City, as the project has been dubbed, will include a hospital, school, hotel, and retail and office space in addition to living quarters. And new modular construction techniques pioneered by Broad will enable the company to build the project in just months.
Yet even with the overbuilding, market prices of apartments haven't cracked, at least according to government reports. Developers can still borrow money for new projects even while trying to roll over and carry debt on their inventory of unsold apartments.
Faith remains undiminished that continued migration from the countryside to the cities will cure all housing oversupply. Besides, apartment purchasing has become the No. 1 investment game in China after the stock market crapped out in 2007, with the Shanghai Index falling nearly 70% since.
Apartments are now more than living space -- they have become a store of value and an insurance policy against penury in old age. Living in them or even renting them out is deemed to diminish property value should someone ever show up to lease one. So they remain vacant. Press reports recently said a party official was busted for, among other things, secretly owning some 50 apartments...
...The past five years has seen the explosion of China's shadow banking system that largely operates in a regulatory realm outside the direct control of Beijing, and yet last year was estimated to have accounted for more than 45% of China's credit creation...
...A credit crisis would likely begin somewhere in the shadow banking system with a large credit default or the bankruptcy of a major player, observes Charlene Chu, Fitch's senior banking analyst in Beijing. "In China, trouble starts on the fringes of the system and then moves into the core," she says.
Signs of financial trouble abound even in China's official numbers, which many say are designed to obscure problems. The post-2008 credit surge, for example, seems to be losing its ability to generate actual growth. During the boom period of 2005 up to early 2008, statistics show that one yuan of credit yielded nearly one yuan of GDP growth. But no more. Last year, it took four yuan to generate just a single yuan of increased GDP, according to government-based figures.
This collapse in capital efficiency indicates several things to China watchers. Much of the money was being wasted, going into projects that weren't generating sufficient ongoing revenues or, possibly, any revenues at all. Likewise, many suspect that much of the new credit went to "evergreen," or roll over, old loans gone bad, or at least coverage of the debt service and operating expenses of debtors with cash-flow problems...
...Debt is building up with particular speed in the corporate sector just as revenue growth is flagging. According to GK Dragonomics researcher Andrew Batson, corporate debt jumped from 108% of GDP to 122% just between 2011 and 2012.
Much of that rise is occurring in accounts receivable, or unpaid bills by customers, that reside on the asset side of corporate balance sheets. Official numbers put that total at CNY8.5 trillion in April, up 13% from a year ago. Yet many private estimates claim that the increase may be as high as 20% or more. Zoomlion, China's biggest heavy-construction-equipment maker, has seen its accounts receivable leap to CNY2.7 billion in 2012 from CNY912 million the year before and just CNY106 million in 2008.
At a minimum, the surge in receivables indicates growing liquidity problems in Corporate China. A lot of companies aren't generating enough cash to meet their financial obligations, no matter the degree to which uncollectible receivables might artificially inflate corporate revenues and profits on paper...
...How much debt will go bad is anybody's guess, but the total is much higher than the 1% that Beijing officially reports in the Chinese banking system. Some estimate the eventual total, including sources outside the banks, could be as high as 20% of 2012 year-end total debt of about CNY100 trillion. Losses of just CNY6-7 trillion would wipe out the capital of the state banking system...
...China doesn't have to look too far for a cautionary tale. Japan in the late '80s and early '90s faced a similar slowdown in economic growth. Like China today, it sought to compensate by first unleashing a flood of credit, creating a real-estate bubble, and then engaging in infrastructure spending on the proverbial bridges to nowhere.
"But it didn't work, despite the fact that Japan, like China today, boasted a high savings rate, plenty of fiscal capacity, and little foreign debt," says Patrick Chovanec, who spent a decade doing private-equity deals in China and teaching business at Tsinghua University in Beijing, before becoming a strategist at Silvercrest Asset Management, a New York money manager. "The flaw is that sometimes it takes so much capital to fill an existing hole that there's not enough money left to promote growth."
That could be the case for China and its flawed economic model. It is fast running out of effective responses to the iron law of diminishing returns.Leave a comment:
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Re: Yes Virginia...It's a Bubble...
China Manufacturing Contraction Deepens Amid Cash Pinch: Economy
By Bloomberg News - Jun 19, 2013 9:52 PM MT
China’s manufacturing is shrinking at a faster pace this month, adding to stresses in the economy and financial system after interbank borrowing costs surged to the highest in seven years.
The preliminary reading of 48.3 for a Purchasing Managers’ Index (EC11FLAS) released today by HSBC Holdings Plc and Markit Economics compares with the 49.1 median estimate in a Bloomberg News survey of 15 economists. May’s final reading of 49.2 was the first below 50 since October, indicating contraction.
Manufacturing weakness, along with the money-market cash crunch, will further test how far Premier Li Keqiang is willing to go in sacrificing short-term expansion for more-sustainable long-term growth. After record credit in the first four months of the year failed to stoke growth, China’s State Council, led by Li, said last night that the financial system needs to do a better job of supporting the economy.
“If market rates remain at such high levels, the only scenario for the Chinese economy is a hard landing,” said Xu Gao, chief economist with Everbright Securities Co. in Beijing. “That possibility is growing now -- it seems the leadership is deliberately taking a wait-and-see stance to see how low China growth can be.”...
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Re: Yes Virginia...It's a Bubble...
A friend just took a train from the south of China to the North. He said "Imagine taking a train from Miami to Boston and along the entire route every phase of it, 20 story high condominiums being built."Originally posted by GRG55 View PostApparently urban China property prices still going strong
Blow-off phase? Or just another normal year in the effervescent Chinese property markets because...well..."China is different"...
By Bloomberg News - Jun 17, 2013 10:57 PM MT
Chinese property prices rose at the fastest pace in more than two years in major cities, defying tougher government curbs and constraining the ability of policy makers to ease credit in response to weakening economic growth.
New home prices in Beijing, Shanghai and Guangzhou posted the biggest gains in May since at least January 2011, and 69 of the 70 cities tracked by the government showed increases, the most since August 2011, National Bureau of Statistics data showed today in Beijing. Inbound non-financial investment rose 0.3 percent in May from a year earlier, the weakest in four months, according to the Ministry of Commerce.
The property gains limit the ability of Premier Li Keqiang to counter an economic slowdown that showed signs of deepening in May. The central bank today refrained from adding cash to the financial system and money-market rates reached the highest level in seven years this month, a liquidity squeeze that Fitch Ratings says may accelerate a banking crisis.
“The government is in a dilemma right now,” said Zhang Zhiwei, Hong Kong-based chief China economist at Nomura Holdings Inc., who previously worked at the International Monetary Fund.“It’s difficult for China to tighten the property market, while it also needs to bolster the economy, which has a strong reliance on property.”
China’s one-year interest-rate swaps rose to a 21-month high today. The yuan weakened 0.1 percent, the most since June 6, to 6.1291 per dollar, as of 11:25 a.m. in Shanghai. The MSCI Asia-Pacific Index of stocks fell 0.5 percent...
...Local governments are reluctant to enforce policies aimed at cooling the housing market, Zhang said. Former Premier Wen Jiabao in March ordered central bank branches to raise down-payment requirements for second mortgages in cities with excessive cost gains and told local governments with the biggest price pressures to tighten home-purchase limits and set price-control targets.
Today’s data showed the southern city of Guangzhou posted the biggest gain with prices rising 15 percent from a year earlier. Beijing prices climbed 12 percent, while they advanced 10 percent in Shanghai. All three cities had their biggest advance since the government changed its methodology for the data in January 2011.
The only decline in new home prices last month was in the eastern city of Wenzhou, where they fell 3.6 percent from a year earlier, according to the data.
Home prices in China had the biggest quarterly gain among 55 countries globally in the first three months of the year, based on Beijing and Shanghai prices, broker Knight Frank LLP said in an e-mailed report yesterday...
...Agricultural Development Bank of China Co. scaled back the size of two bond offerings today by 31 percent after the Finance Ministry failed to sell all of the debt offered at an auction for the first time in 23 months last week.
“We are starting to see some issues emerging” in liquidity, Charlene Chu, Fitch’s head of China financial institutions, said in an interview today with Zeb Eckert on Bloomberg Television in Hong Kong...
...Inbound non-financial investment increased to $9.26 billion, the Ministry of Commerce said today in Beijing, after a 0.4 percent gain in April. China’s outbound investment rose 20 percent in the first five months of the year to $34.3 billion, compared with a 27.4 percent pace in January-April.The dreaded "B" word rears its ugly head again...
The investment report follows data indicating capital inflows slowed last month while growth decelerated in exports,industrial production and lending. Confidence is fading in an economic rebound this quarter, with investment banks from Morgan Stanley to Barclays Plc cutting their 2013 expansion forecasts.
Shen Danyang, a Commerce Ministry spokesman, said at a briefing today that China’s economic situation is stable while the trade situation is “grim” for this year...
...China’s property market faces the risk of a “bubble,” and it isn’t “light,” Wang Shi, chairman of China Vanke Co., the nation’s biggest developer, said at a conference in Shanghai on June 6...
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Re: Yes Virginia...It's a Bubble...
Apparently urban China property prices still going strongOriginally posted by GRG55 View PostRepeat after me:
China property is a "cash market";
The Chinese government "won't let" the property market crash;
China has 1.1 Billion people that need homes so all the empty apartments will get filled;
It's different in China because a centrally planned economy and a totalitarian government can make and implement good economic decisions so much more quickly and effectively than the USA or any other democracy...
(feel free to add your own China myth to the list)
Misallocation of capital? In China? Perish the thought...
Last updated: April 16, 2013 5:32 pm...
Blow-off phase? Or just another normal year in the effervescent Chinese property markets because...well..."China is different"...
By Bloomberg News - Jun 17, 2013 10:57 PM MT
Chinese property prices rose at the fastest pace in more than two years in major cities, defying tougher government curbs and constraining the ability of policy makers to ease credit in response to weakening economic growth.
New home prices in Beijing, Shanghai and Guangzhou posted the biggest gains in May since at least January 2011, and 69 of the 70 cities tracked by the government showed increases, the most since August 2011, National Bureau of Statistics data showed today in Beijing. Inbound non-financial investment rose 0.3 percent in May from a year earlier, the weakest in four months, according to the Ministry of Commerce.
The property gains limit the ability of Premier Li Keqiang to counter an economic slowdown that showed signs of deepening in May. The central bank today refrained from adding cash to the financial system and money-market rates reached the highest level in seven years this month, a liquidity squeeze that Fitch Ratings says may accelerate a banking crisis.
“The government is in a dilemma right now,” said Zhang Zhiwei, Hong Kong-based chief China economist at Nomura Holdings Inc., who previously worked at the International Monetary Fund.“It’s difficult for China to tighten the property market, while it also needs to bolster the economy, which has a strong reliance on property.”
China’s one-year interest-rate swaps rose to a 21-month high today. The yuan weakened 0.1 percent, the most since June 6, to 6.1291 per dollar, as of 11:25 a.m. in Shanghai. The MSCI Asia-Pacific Index of stocks fell 0.5 percent...
...Local governments are reluctant to enforce policies aimed at cooling the housing market, Zhang said. Former Premier Wen Jiabao in March ordered central bank branches to raise down-payment requirements for second mortgages in cities with excessive cost gains and told local governments with the biggest price pressures to tighten home-purchase limits and set price-control targets.
Today’s data showed the southern city of Guangzhou posted the biggest gain with prices rising 15 percent from a year earlier. Beijing prices climbed 12 percent, while they advanced 10 percent in Shanghai. All three cities had their biggest advance since the government changed its methodology for the data in January 2011.
The only decline in new home prices last month was in the eastern city of Wenzhou, where they fell 3.6 percent from a year earlier, according to the data.
Home prices in China had the biggest quarterly gain among 55 countries globally in the first three months of the year, based on Beijing and Shanghai prices, broker Knight Frank LLP said in an e-mailed report yesterday...
...Agricultural Development Bank of China Co. scaled back the size of two bond offerings today by 31 percent after the Finance Ministry failed to sell all of the debt offered at an auction for the first time in 23 months last week.
“We are starting to see some issues emerging” in liquidity, Charlene Chu, Fitch’s head of China financial institutions, said in an interview today with Zeb Eckert on Bloomberg Television in Hong Kong...
...Inbound non-financial investment increased to $9.26 billion, the Ministry of Commerce said today in Beijing, after a 0.4 percent gain in April. China’s outbound investment rose 20 percent in the first five months of the year to $34.3 billion, compared with a 27.4 percent pace in January-April.The dreaded "B" word rears its ugly head again...
The investment report follows data indicating capital inflows slowed last month while growth decelerated in exports,industrial production and lending. Confidence is fading in an economic rebound this quarter, with investment banks from Morgan Stanley to Barclays Plc cutting their 2013 expansion forecasts.
Shen Danyang, a Commerce Ministry spokesman, said at a briefing today that China’s economic situation is stable while the trade situation is “grim” for this year...
...China’s property market faces the risk of a “bubble,” and it isn’t “light,” Wang Shi, chairman of China Vanke Co., the nation’s biggest developer, said at a conference in Shanghai on June 6...
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Re: Yes Virginia...It's a Bubble...
One of the other things I have posted a few times in the past is my firm belief that, contrary to popular political opinion in the USA, the Chinese currency is OVERvalued, and if it was allowed to free float it would decline, not rise, against the US$.Originally posted by GRG55 View PostRepeat after me:
China property is a "cash market";
The Chinese government "won't let" the property market crash;
China has 1.1 Billion people that need homes so all the empty apartments will get filled;
It's different in China because a centrally planned economy and a totalitarian government can make and implement good economic decisions so much more quickly and effectively than the USA or any other democracy...
(feel free to add your own China myth to the list)
Misallocation of capital? In China? Perish the thought...
Last updated: April 16, 2013 5:32 pm...
Excerpt of an interview with Stanley Druckenmiller:
Stan Druckenmiller is Chairman and Chief Executive Officer of Duquesne Family Office. He founded Duquesne Capital Management in 1981, which he ran until he closed the firm in 2010. Previously, he was a Managing Director at Soros Fund Management, where he served as Lead Portfolio Manager of the Quantum Fund and Chief Investment Officer of Soros
Q: What are the risks of investing in China that are not well understood in your view?
Stan Druckenmiller: The growth in credit at a time when GDP growth is slowing is a problem for China. And I think this is the 2009-11 stimulus coming back to bite. I understand that it had to be done to fund entrepreneurs and the private sector, but it’s easier said than done if you’re channelling funds through local government investment vehicles. I’m a believer in markets. A few men sitting around a table and deciding how to allocate capital goes against everything I’ve ever believed. Not only are they not great at capital allocation, such an exercise also needs to deal with a lack of property rights and corruption. In essence, the frantic stimulus China put together at the end of 2008 sowed the seeds of slower growth in the future by crowding out more productive investments. And now, the system’s building enough leverage and misallocation of resources to warrant risks of a financial crisis, but the timing of that is still uncertain in my mind. What we’ve seen in China since 2009 is similar to what happened in the US in 2005, in terms of credit growth outpacing economic growth.
I think ageing demographics is a bigger issue in China than people think. And the problems it creates should be become evident as early as 2016.
You also need to keep in mind that for China to grow and evolve further, it will need to compete with a more innovative Korea and now a more competitive Japan. I don’t think China can do that with where its exchange rate is today. I think productivity is a key concern too. And I think that could be one of the reasons why the US has been so supportive of Abenomics.
People mention lack of infrastructure as a constraint. But when I go over there, it looks like they have a lot of infrastructure. It seems ahead of the population, not behind. I see expensive apartments in empty cities that 300 mn rural Chinese are expected to migrate to. That looks very unbalanced to me. Nobody’s ever had investment to GDP at 47%. Japan and Korea peaked at 36%-38%, so as a result I think capacity is way ahead of demand in some areas in China...Last edited by GRG55; June 14, 2013, 09:31 PM.Leave a comment:
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Re: Yes Virginia...It's a Bubble...
There are inflection points that occur virtually every month, but their management by CBs and political entities have been successful. I don't foresee the possibility of any large crises for a while, but think there will be some large bumps later this year.Originally posted by GRG55 View Post
"It's all good" is getting long in the tooth.Leave a comment:
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Re: Yes Virginia...It's a Bubble...
The 2nd article you list notes 'surprise' interest rate cuts in South Korea and Australia. Surprising how given Abenomics?Originally posted by GRG55Still going strong apparently.
Even the much vaunted "centrally planned world beating" Chinese economy is having difficulty figuring out how to get off the mercantile + cheap-credit investment driven growth model treadmill. Too many vested interests, too much corrupt money being made.
I agree China has all sorts of venal reasons why it won't easily shift out of its existing model, but then again, even if they didn't - there would be simple inertia to overcome. Be that as it may, the splash going on right now is due to Japan's contribution to the latest 'beggar thy neighbor' round.Leave a comment:
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Re: Yes Virginia...It's a Bubble...
Originally posted by bart View PostRecent SHIBOR rates sure aren't in the "safe" zone.
The recent gyrations in various currency crosses, the mini bond market rout in May, the rollercoaster known as the Japanese stock market, now visible cracks appearing in the few remaining real estate bubble markets (notably Australia and Canada) and your chart above would suggest that we are losing the enjoyment of the low volatility, "no immediate negative consequences" phase of global QE.
Do you think we're at an inflection point in this grand monetary experiment?Leave a comment:
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Re: Yes Virginia...It's a Bubble...
Recent SHIBOR rates sure aren't in the "safe" zone.
Leave a comment:
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Re: Yes Virginia...It's a Bubble...
China Credit-Bubble Call Pits Fitch’s Chu Against S&P
Chinese banks are adding assets at the rate of an entire U.S. banking system in five years. To Charlene Chu of Fitch Ratings, that signals a crisis is brewing.
Total lending from banks and other financial institutions in China was 198 percent of gross domestic product last year, compared with 125 percent four years earlier, according to calculations by Chu, the company’s Beijing-based head of China financial institutions. Fitch cut the nation’s long-term local-currency debt rating last month, in the first downgrade by one of the top three rating companies in 14 years.
“There is just no way to grow out of a debt problem when credit is already twice as large as GDP and growing nearly twice as fast,” Chu, 41, said in an interview.
Chu’s view puts her in a minority among those charting the future of the world’s biggest nation. She questions how long China can maintain the model of growth driven by bank lending that has allowed its economy to sidestep the global financial crisis...
...Amid the global credit crunch of 2008, China ramped up lending by state-controlled banks to prevent an economic slowdown. The assets of Chinese banks expanded by 71 trillion yuan ($11.2 trillion) in the four years through 2012, according to government data. They may increase by as much as 20 trillion yuan this year, Chu said April 23. That will exceed the $13.4 trillion of assets held by U.S. commercial banks at the end of last year, according to the Federal Deposit Insurance Corp.
Chu says companies’ ability to pay back what they owe is wearing away, as China gets less economic growth for every yuan of lending...
...Some loans, often for real estate, are bundled together and sold to savers as so-called wealth-management products, while other assets are sold to non-bank financial institutions, including trusts, to lower the lenders’ bad debt levels, according to Chu. Wealth management products and trusts are sold to investors eager to get more than the government-mandated benchmark of 3 percent annual interest on bank savings accounts.
“The data may be somewhat accurate for the on-balance-sheet loan portfolios of the banks, but banks have substantial off-balance-sheet positions for which there is no asset-quality information,” she said...
...A jump in the ratio of credit to GDP preceded banking crises in Japan, where the measure surged 45 percentage points from 1985 to 1990, and South Korea, where it gained 47 percentage points from 1994 to 1998, Fitch said in July 2011. In China, it has increased 73 percentage points in four years, according to Fitch’s estimates.
Reliable Predictor
“You just don’t see that magnitude of increase” in the ratio of credit to GDP, Chu said. “It’s usually one of the most reliable predictors for a financial crisis.”...Leave a comment:
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Re: Yes Virginia...It's a Bubble...
Still going strong apparently.Originally posted by GRG55 View Post
Even the much vaunted "centrally planned world beating" Chinese economy is having difficulty figuring out how to get off the mercantile + cheap-credit investment driven growth model treadmill. Too many vested interests, too much corrupt money being made.
So there's every reason to believe they'll just keep coming back to it over and over again until something finally breaks...
BEIJING | Sat May 18, 2013 4:28am EDT
(Reuters) - China's housing inflation accelerated to its fastest pace in April in two years, driven by a jump in prices in Beijing and Shanghai, complicating the task of policymakers trying to cool the property sector while supporting economic expansion.
Average new home prices rose 4.9 percent last month from a year ago, after a year-on-year increase of 3.6 percent in March, according to Reuters calculations from data released by the National Bureau of Statistics(NBS) on Saturday.
The rise was the sharpest since April 2011.
Rising home prices have reignited concerns about property inflation, adding to pressure on policymakers who are struggling to curb house prices and still spur a strong economic recovery...
...Worried about a rebound in home prices, China's government unveiled a fresh round of measures in March to try to cool the sector, though those measures were less stringent than market expectations.
New home prices in Beijing rose 10.3 percent in April from a year earlier and Shanghai's prices were up 8.5 percent in April from a year ago...
...China's fight against property speculation has headed into its third year but many middle-class Chinese are still priced out of the urban housing market...
...Home prices rose month-on-month in 67 of 70 major cities monitored by the NBS in April, down from 68 in March.
The accelerating year-on-year home price gains were mainly caused by low bases last year as over 60 percent of 70 cities saw month-on-month price drops last April, said Liu.
China's home prices began their latest climb in mid-2012 when the central bank started expanding monetary easing as part of Beijing's growth-supporting policies...
China inflation data shows central bank policy dilemma
BEIJING | Thu May 9, 2013 7:53am EDT
(Reuters) - China's annual consumer inflation accelerated more than expected in April while factory prices fell for a 14th consecutive month, highlighting the dilemma facing the central bank as it balances support for the economy against the threat of rising prices.
With global growth sputtering, China's central bank has limited room to move, unlike counterparts in South Korea and Australia which both made surprise rate cuts this week.
Any easing could fuel property market risks, while tightening would hurt a nascent recovery after economic growth unexpectedly slowed to 7.7 percent in the first quarter from 7.9 percent in the previous three months. .
Instead the onus may be on the government to push structural reforms to help sustain long term growth in the world's second largest economy.
"We cannot rely too much on the central bank to support the economy," said Xu Hongcai, senior economist at China Centre for International Exchange (CCIEE), a top government think-tank in Beijing.
The government will instead rely on fiscal policy by boosting infrastructure investment and cutting taxes to underpin the economy, said Xu, a former central bank researcher...
...Tightening, meanwhile, is unlikely given a series of factory and services PMIs issued earlier this month that signaled tepid economic activity in April.
Chinese factories are saddled with excess capacity due to weak demand, putting downward pressure on producer prices that in turn erodes their profits.
"On policy, the priority now is industrial reform to tackle the problem of excess capacity...
...The National Bureau of Statistics said that China's producer prices dropped 2.6 percent in April, the 14th consecutive month of year-on-year declines and sharper than a drop of 1.9 percent in March.
China's biggest listed steelmaker, Baoshan Iron & Steel (600019.SS), said on Thursday it would cut its main steel product prices for June bookings, its first reduction in nine months, underscoring demand worries amid a fragile economic recovery...
...Consumer inflation quickened to 2.4 percent in April from March's 2.1 percent due to higher food costs, data from the National Bureau of Statistics, showed on Thursday...
...Food prices rose 4.0 percent in April from a earlier, quickening from the 2.7 percent rise in March...
..."Monetary policy is likely to stay relatively accommodative as China's economic recovery remains fragile."
Last edited by GRG55; May 20, 2013, 02:58 AM.Leave a comment:
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