China Economy

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

7

The Shanghai mega-bear market

The past 10 years were really the decade of China, those who got into Chinese equities and real estate have struck it rich. Human memory has a recency effect and Chinese have ignored the fact that there are times when equities and real estate valuations come down for a very long period of time after an extreme overvaluation. As

23

China doom mongering

Exclusively from Michael Pettis’ newsletter: The world seems to be rapidly moving away from the China-is-the-most-successful-economy-in-the-history-of-the-world rant to the China-is-weeks-away-from-collapse rant. But repeating a story often doesn’t make it more true. My guess, and it is only a guess, is that China can continue with the current growth model for at least another four or

8

China versus India

Earlier, I read a wonderful book by Yasheng Huang on Chinese growth model.  He is a critic of the Chinese way.  He believes that the current Chinese growth model is more like South American model (old Brazilian way, for example) which ultimately failed. In the below video, he compares China with India, and the gist of his

9

China is not a white knight

The last day or so has seen a string of wild rumours about China buying European bonds.  A hilarity in the whole thing is that in another report, Giulio Tremonti, the Economy Minister, complained that Asian investors just won’t buy bonds because the ECB isn’t buying enough.  So are Chinese really buying?  Probably. There is something

1

China has a good month

Over the last few days, we’ve had an avalanche of Chinese data for August and the results were solid. First off, urban fixed asset investment for Jan-August 2010 increased by 25% compared to the same period a year ago, slightly lower than expectation of 25.5%.  Of which, fixed asset investment from state-owned enterprises increased by

24

The imminent yuan float meme

The kind of attention the Chinese yuan gets is fascinating.  At the height of the debt ceiling nonsense and the subsequent days, the yuan surged to a record high against the $US, and made some of the largest moves on record.  Countless reports told stories that it signaled Beijing’s ambitions for internationalisation, or the use

2

Hong Kong property stall

The Hong Kong government just sold three pieces of land.  The FT reports that the result is quite bearish. The results were actually fairly mixed. The first site being sold was Tseung Kwan O area 66A, which can provide 792,898 sq. ft. of residential space.  The pace of the auction was extremely slow, and the government threatened

5

Much bark, little bite

With somewhat slower economic growth and an increasingly clouded outlook in the global economy, I have been wondering what Chinese policy makers would really like to do amid stubbornly high inflation.  Yesterday, we had Brazil cutting rates, which baffled some analysts, but tells you that some emerging economies are worried about growth. If anyone has been hoping

4

Chinese manufacturing takes a hit from abroad

The just released official manufacturing purchasing mangers index (PMI) for China shows a small rebound in August.  The headline PMI rose from 50.7 in July to 50.9 in August, just slightly below market expectation of 51.1. The new orders index was flat at 51.1, and output rose from 52.1 to 52.3.  Raw materials inventory rose from

5

Hong Kong money supply

The Hong Kong Monetary Authority published its monetary statistics for July yesterday. Hong Kong dollar M1 money supply increased by 3.6% in July on a non-seasonally adjusted basis compared to June after a 3.7% drop in June.  On a seasonally adjusted basis, Hong Kong dollar M1 money supply rose by 4.2% in July.  Hong Kong dollar M2 money

3

Chinese bank arrears rise

Caixin has a good summary for 14 of the Chinese banks which have recently reported their first half results. According to the report, overdue loans have increased 6.35% at the end of the first half compared with the end of last year.  Out of 14 banks, only 3 banks did not report rising overdue loans, and

43

Pettis: 3% growth coming soon to China

From Michael Pettis comes this sobering series of forecasts for Chinese growth. Wake up, Canberra. My basic sense is that we are at the end of one of the six or so major globalization cycles that have occurred in the past two centuries. If I am right, this means that there still is a pretty

33

China will slow

In this week’s China post. I want to direct readers to some interesting recent reports on the Chinese economy. The first report, entitled China’s Empty Apartments, is a fascinating two-part series of posts on China’s housing market, written by freelance writer Michael Gsovski, who is a New Yorker that recently spent a year living in

10

Wenzou’s secret credit

As the People’s Bank of China tightens monetary policy, small and medium sized businesses are having a hard time borrowing from the formal banking system.  As a result, many turn to the underground banking system which basically consists of loan sharks and pawnshops. Last week, I posted on the early phases of run on property assets in Wenzou. Now, a new Caijing report

1

Chinese developers feeling some pressure

    According to Xinhua, half of the listed Chinese real estate developers (roughly 65) have reported their first half result.  And the results are a concern. Within these 65 developers which have reported, revenue surged from from RMB75.139 billion in the first half of 2010 to RMB83.965 billion, an increase of 11.75%.  Profits attributable to shareholders

3

China flash PMI offers hope

From Bloomberg on China, the HSBC ‘flash’ PMI: August PMI preliminary reading at 49.8; output index at 49.4 also rebounds from last month’s 48. July HSBC PMI final reading was 49.3, 1st contraction in yr New orders, new export orders, employment may contract: HSBC NOTE: China reported July manufacturing PMI at 50.7, lowest reading since Feb.

1

Hong Kong inflation bubbling

Inflation in Hong Kong continued to rise in July.  The headline consumer price index rose by 7.9% compared to a year ago, up from 5.6% in June.  Excluding the effect of all government’s one-off relief measures, the core inflation rate was 5.8% vs. 5.5% in June.  The large discrepancy was due to low base effect on public housing