China Economy

6

China’s property conflict

Yesterday we got a few remarks from China’s Premier Wen Jiabao.  According to Mingpao, Premier Wen said that control of food prices remains an important priority, with the usual problems that have been discussed here and there, including his concern on the supply situation, the costs of logistics (note that moving stuff within China can be

9

Chart of the Day: China GDP composition

Today’s chart comes from EconomPic created from the data and analysis within a recent Michael Pettis newsletter exploring the composition of Chinese GDP, whilst looking at if lower (or negative) interest rates cause higher savings. From 2001 to 2010, consumption has fallen from 45.3% to 33.8% whilst investment has increased from 34.6% of GDP to

0

Cracks appear in Hong Kong property

Yesterday, Sun Hung Kai Properties (16.HK) won the tender for the Nam Cheong station residential project for HK$11.8 billion, well below market expectations.  The price paid implies an accommodation value of HK$4,468 per sq. ft., below the market expectation of about HK$5,500 per sq. ft. The reality about this underwhelming land sale is that the

4

China’s whacky GDP

Here’s a little follow-up on the Chinese GDP numbers. The growth figure produced by the National Bureau of Statistics (i.e. that 9.1% number) is growth in real terms, not nominal terms, one point that some people get confused every now and then.  The nominal yoy change for Q3 GDP was actually 21.3%.  That would mean

16

China still building empty apartments

Yesterday, Zarathustra’s posted another interesting China report, which contained the below chart showing the continued strong growth (25% YoY) of fixed asset investment: Below find a PBS Newshour video report (h/t Hugh Pavletich) from Beijing-based economist, Yoram Bauman, who explores the possibility of a Beijing housing bubble. In the video, Bauman takes viewers on a

3

Chinese banks tighten the screw

Since late last week, the news from Chinese media has been that China Construction Bank has raised mortgage rates for first-home mortgages in Beijing.  Sina confirms that banks in more cities are now increasing interest rates.  And now Mingpao says banks in 14 cities have raised mortgages rates. The latest round of increase in interest rates is happening in Beijing,

11

China still building like bejesus

The National Bureau of Statistics just published the latest set of economic data for third quarter, which sort of disappointed the market. The third quarter GDP grew by 9.1% in real term compared with the same period a year ago, missing expectation of 9.3%.  On a quarter-on-quarter basis, GDP grew by 2.3% in real terms, slightly

3

Credit will find a way

As pointed out here months ago, monetary tightening of China has made credit difficult to come by.  As a result, some companies have had to borrow from the shadow banking system.  Meanwhile, other companies which have access to the Hing Kong banking system have been borrowing there as credit is much cheaper (from the perspective of Hong

0

China’s surplus sinks

I missed this previously. The foreign exchange reserves of China fell in September compared to August, while remaining flat for the quarter. While this is an expected outcome if the economy slows with the trade surplus narrowing and possibly less capital inflow (or even outflow), it is surprising to me that it is already happening

12

China’s inflation set to fall further

The People’s Bank of China published the latest set of monetary statistics, which are no longer reliable… M2 Money supply grew by 13.0% yoy, well below the long-run pre-financial crisis average rate of around 16.8% yoy and slowest in many years, and less than the expected growth of 14% yoy, while M1 rose by 8.9%

5

China wrestles its slowdown

So, after some concerns and worries, the Chinese government has responded with new measures to try to solve the growing problem of tight financing for small and medium sized businesses. I would describe these measures rather as the” how to stop crazy bosses from running away because they have borrowed from loan sharks” policies. Following a meeting

14

China’s imports and exports fall

The General Administration of Custom of China published the latest set of trade figures.  Trade surplus for September decreased 18% from US$17.76 billion in August to US$14.51 billion vs. consensus of US$16.9 billion.  On an year-on-year basis, the surplus decreased by 13.2%. Exports jumped 17.1% from a year earlier to US$169.67 billion vs. market expectation

1

Credit Suisse thumps China’s banks

It’s still at the periphery, but more investment banks are flipping to China bears. Interestingly, this Credit Suisse report (h/t Zero Hedge) projections a huge jump in Chinese banks non-performing loans based upon precisely the two stress test outcomes that I described via the IMF earlier this week, a combined realty and exporters crunch. It

4

Hong Kong relaunches Home Ownership Scheme

So we finally get the confirmation that the government will restart the Home Ownership Scheme (HOS). The HOS began in 1970 as a subsidized-sale programme of public housing that aims to give the poor a chance to purchase as well as rent public housing from the government. Under the scheme, the government sells apartments to eligible low-income residents at

22

Chanos on China (again)

Have you ever wondered why it seems that Jim Chanos always ends up shorting Australia? He’s at it again, persisting in his big short on the ‘Chinese real estate bust’. He returns to interpret Monday’s Chinese purchase of it’s banks as a glowing endorsement of these shorts. It’s always helpful to remember that Mr Chanos

12

Is a rising yuan inevitable?

Let’s face it, China is manipulating its currency.  You can call it whatever you want, but China is manipulating its currency. As part of its trade policy, China has been trying to prevent they Yuan from appreciating quickly.  They have also taken the lesson from 1985 Plaza Accord in which the US and others forced

53

China’s lonely power

Late yesterday, the Lowy Institute released a fascinating new study by John Lee (a former colleague of mine at The Diplomat) into whether or not China will be able to convert its growing economic power into strategic dominance. Regular readers will know that the schism in Australian policy on this topic has been a bugbear

6

China buys its banks

China’s Central Huijin is buying shares of Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China and China Construction Bank according to Xinhua: Central Huijin Investment Ltd, an arm of China’s sovereign wealth fund, bought shares in four major Chinese State-owned banks on the secondary market on Monday, the company told Xinhua.

13

China realty goes BOGOF

The National Day Golden Week is ended in China.  Traditionally, the Golden Week (or more broadly, September and October) has been a peak season for real estate sales for China. No longer. The increasingly tough purchase restrictions in some cities and credit and monetary tightening have crushed the transaction volumes across the country for the

77

Merrill Lynch: China bust upon us

Zarathustra wrote earlier this week: Deutsche Bank is expecting  a 10% correction in home prices because it would be a disaster if prices are allowed to fall by, say, 30%: Those who understand China’s political economy should know that a 15% decline in average property prices in 35 cities within a few months must be accompanied

5

China’s rebalancing act

As we know, China is aiming to rebalance its economy toward internal demand.  Truth be told, exports are less of a growth driver now than they were in 2008 (but do note than nothing can stop it from having negative contribution to GDP growth). But, for the past 3 years or so, investment has become

6

How big are China’s shadow banks?

Société Générale said today that the on-going crisis in the Chinese shadow banking system, as discussed for a number of times here over the past many months, will require a rescue, not surprisingly. While no one knows the exact size of the shadow banking system, it is likely in the order of tens of trillions. 

19

China’s hard landing conundrum

A Chinese hard  is not an option, at least while there are other options. So, I have been asking myself for the past few months how to avoid a hard landing, or to delay it at the very least.  The most popular defence of the bullish camp (or the most popular argument against the bearish camp)

7

Where Chanos is wrong on China

Jim Chanos was among the earliest folks to go short on China real estate developers. Those shares are now being killed.  It is just amazing that there are some people who are still mocking him. If you really want to mock Jim Chanos, it is the long corruption bit, his long bets on Macau casinos

4

China’s manufacturers miss their Xmas bounce

China’s official manufacturing purchasing mangers index (PMI) improved for the second month in September 2011.  The headline PMI rose from 50.9 in August to 51.2 in September, just slightly above market expectation of 51.1. New orders index increased slightly from 51.1 to 51.3, and output rose from 52.3 to 52.7.  Finished goods inventory increased from

5

CDS signaling trouble for Chinese banks

Readers will have noticed that I have no love for the Chinese baking sector.  With huge loans to local governments and others, which probably can’t be repaid as a result of the credit spree after the 2008 financial crisis, it is only a matter of time until problems surface.  Thus we have seen very poor performances by banking

2

S&P warns on Chinese property

Regular readers will be familiar with the on-going real estate bubble and my concern that real estate developers are running into trouble as they bought land at high prices in the boom time and find themselves having difficulties selling the finished apartments. Rating agencies have warned on Chinese property before, so it is not surprising that Standard &

10

The Wenzhou run worsens

I’ve written before about how, as China’s monetary policy tightened, credit from the formal banking system has become difficult for some companies, particularly for the small to medium sized businesses.  As a result, these companies are increasingly relying on underground credit, which includes things like loan sharks and pawnshops.  These underground banking system usually charge very high interest

2

Chinese yuan set to fall

More than once, I have expressed the view that in the face of global slowdown, Chinese policy makers may want throw in the towel on yuan appreciation. Markets too are beginning to price the possibility after the weak HSBC manufacturing PMI flash estimate and the on-going market jitters following the disappointments of Operation Twist and concerns on Europe. Michael

19

Chinese manufacturers slow some more

The flash PMI for China is out this afternoon and shows ongoing contraction, with an acceleration to the downside for export orders: HSBC Flash China Manufacturing PMI™ Manufacturing sector operating conditions deteriorate marginally in September • Flash China Manufacturing PMI™ at 49.4 (49.9 in August). 2-month low. • Flash China Manufacturing Output Index at 49.2 (50.2 in