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THE GREAT BIG CHINA THREAD


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Chinese Home Prices Decline In Record Number Of Cities, Average Sale Price Has Biggest Drop Since Lehman

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China’s new-home prices fell in a record number of cities tracked by the government as developers cut prices to boost sales volume. Prices fell in a record 55 of the 70 cities last month from May, the National Bureau of Statistics said in a statement today, the most since January 2011 when the government changed the way it compiles the statistics. What's worse, and as can be seen on the chart below, prices in Shanghai and the southern city of Guangzhou fell 0.6 percent each from May, the biggest drop since January 2011, while they declined 0.4 percent in Shenzhen. Prices fell 1.7 percent in the eastern city of Hangzhou, the largest monthly decline among all the cities. At the national level, China recorded a 0.48% sequential decline in home prices: the largest since at least 2010. And slamming the nail in the Chinese housing market, at least for now, is that the Average Sale Price dropping by 1.5% Y/Y, the biggest drop since Lehman!

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Chinese Home Prices Decline In Record Number Of Cities, Average Sale Price Has Biggest Drop Since Lehman

NBS%20china%20prices%20June_0.jpg

China’s new-home prices fell in a record number of cities tracked by the government as developers cut prices to boost sales volume. Prices fell in a record 55 of the 70 cities last month from May, the National Bureau of Statistics said in a statement today, the most since January 2011 when the government changed the way it compiles the statistics. What's worse, and as can be seen on the chart below, prices in Shanghai and the southern city of Guangzhou fell 0.6 percent each from May, the biggest drop since January 2011, while they declined 0.4 percent in Shenzhen. Prices fell 1.7 percent in the eastern city of Hangzhou, the largest monthly decline among all the cities. At the national level, China recorded a 0.48% sequential decline in home prices: the largest since at least 2010. And slamming the nail in the Chinese housing market, at least for now, is that the Average Sale Price dropping by 1.5% Y/Y, the biggest drop since Lehman!

1.1% Y/Y in nominal terms, how much in real terms? I know inflation is much higher in China that the west.

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China June bank loans beat expectations as Beijing steps on the gas

BEIJING - Beijing stepped up efforts to re-energise China's economy in June and avert a sharper slowdown, pumping more money into the system and pressing banks to extend more loans, but analysts say more stimulus will be needed to ensure a sustained recovery.

Sounds familliar.

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China will revive mortgage-backed debt sales this week after a six-year hiatus, as the government extends help to homebuyers in a flagging property market.

Sounds familiar.

What caused the 2007 collapse of the banking system ?

Thankfully the bankers can be trusted and this is all very sensible.

WW3 to follow.

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http://www.zerohedge.com/news/2014-06-27/chinas-replica-manhattan-results-yet-another-ghost-city

China's Replica Of Manhattan Results In Yet Another Ghost City

While the growth of China's ghost cities of entirely derelict and unlived-in residential real estate have become anathema; the story of the nation's 'if we build it they will come' commercial real estate bubble has been less exposed but is no less incredible. As Bloomberg reports, China’s project to build a replica Manhattan is taking shape against a backdrop of vacant office towers and unfinished hotels, underscoring the risks to a slowing economy from the nation’s unprecedented investment boom. Stunningly, the development has failed to attract tenants since the first building was finished in 2010 leaving one commercial real estate investor to proclaim, "Investing here won’t be better than throwing money into the water... There will be no way out - it will be very difficult to find the next buyer."

China's own Big Apple may be rotting from the core. A new central business district modeled after New York City is going up in Tianjin...but the nation's slowing economy is exacerbating the risks from its unprecedented credit binge...and that's putting China's Manhattan project in jeopardy. Bloomberg TV's China Correspondent Stephen Engle reports.

As Bloomberg explains,

The skyscraper-filled skyline of the Conch Bay district in the northern port city of Tianjin has none of a metropolis’s bustle up close, with dirt-covered glass doors and construction on some edifices halted. The area’s failure to attract tenants since the first building was finished in 2010 bodes ill across the Hai River for the separate Yujiapu development, which is modeled on New York’s Manhattan and remains in progress.

“Investing here won’t be better than throwing money into the water,”
Zhang Zhihe, 60, said during a visit to the area last week from neighboring Hebei province to look at potential commercial-property investments. “There will be no way out -- it will be very difficult to find the next buyer.”

This is slowing growth dramatically as the realisation of building stuff that no one wants is not sustainable...

Tianjin, a city of 14.7 million people whose center is about 125 kilometers (78 miles) southeast of Beijing’s, saw its
economic growth cool to 10.6 percent in the first quarter of 2014 from a year earlier, from 17.4 percent in full-year 2010,
compared with a moderation in national expansion over the same period to 7.4 percent from 10.4 percent. An annual pace of 10.6 percent would be the weakest for Tianjin since 1999.
CHART

And Default risk is mounting...

“Both the central and local governments clearly know that a big slump in the property market will significantly magnify financial system risks, and they know it’s a delicate balance,”
said Liu Li-Gang, chief Greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. The government will try to do everything to ensure an “orderly de-leveraging,” Liu said.

As the streets remain deserted... Ghost offices...

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Rather ominously Stephen Green, head of Greater China research at Standard Chartered Plc in Hong Kong concludes,

“There will have to be a reckoning,”
as sales of bonds by local-government vehicles to repay bank loans are just “buying time,” he said.
“The people will pay” for it through bank bailouts, recapitalization with public money or inflation.

But apart from that... and the residential real estate bubble.. and the commodsity financing ponzi scheme... and the promise of no major stimulus... we are sure China wil have a soft landing.

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http://www.bloomberg.com/news/2014-07-22/ethiopia-becomes-china-s-china-in-search-for-cheap-labor.html

Ethiopian workers strolling through the parking lot of Huajian Shoes’ factory outside Addis Ababa last month chose the wrong day to leave their shirts untucked.

Company President Zhang Huarong, just arrived on a visit from China, spotted them through the window, sprang up and ran outside. The former People’s Liberation Army soldier harangued them loudly in Chinese, tugging at one man’s aqua polo shirt and forcing another’s shirt into his pants. Nonplussed, the workers stood silently until the eruption subsided.

Shaping up a handful of employees is one small part of Zhang’s quest to profit from Huajian’s factory wages of about $40 a month -– less than 10 percent the level in China.

“Ethiopia is exactly like China 30 years ago,” said Zhang, 55, who quit the military in 1982 to make shoes from his home in Jiangxi province with three sewing machines and now supplies such brands as Nine West and Guess?. “The poor transportation infrastructure, lots of jobless people.”

China seeking to reduce wages and gain competitive advantage.

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Insolvent Chinese Construction Company Gets Last Minute Bailout, Avoids China's Second Bond Default

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Those keeping track and hoping the second default would finally hit have to hold their breath again after yet another last minute bailout has now made a complete mockery of China's "deliberate" intentions to clear up the rot plaguing its bond market. As Reuters reports, Huatong avoided a "landmark bond default at the last minute on Wednesday, raising enough funds to pay off both principal and interest on a 400 million yuan ($64.51 million) bond." Who bailed it out? Why the same government which continues to say one thing and do something totally different.

Friends in high places? Or are the owners of this debt part of the communist elite and they'd be out of pocket in a default?

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Insolvent Chinese Construction Company Gets Last Minute Bailout, Avoids China's Second Bond Default

chaori%20default.jpg

Those keeping track and hoping the second default would finally hit have to hold their breath again after yet another last minute bailout has now made a complete mockery of China's "deliberate" intentions to clear up the rot plaguing its bond market. As Reuters reports, Huatong avoided a "landmark bond default at the last minute on Wednesday, raising enough funds to pay off both principal and interest on a 400 million yuan ($64.51 million) bond." Who bailed it out? Why the same government which continues to say one thing and do something totally different.

Friends in high places? Or are the owners of this debt part of the communist elite and they'd be out of pocket in a default?

Desperate.

A country with a billion people won't let one relatively small company fail then it must be desperate. What happens if another 10, 100 or a thousand companies go bust?

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China Seals Off Yumen City After Outbreak Of Bubonic Plague

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With Colorado suffering from pneumonic plague, and the dreadfully sad report of Sierra Leone's chief Ebola doctor contracting the virus, it appears China is taking no chances. As Yahoo reports, Chinese officials have blocked off parts of Yumen, a city in northwest China, preventing about 30,000 of the city's people from leaving after one resident died from bubonic plague. About 150 people who had contact with the plague victim have been placed under quarantine but US experts are perplexed at the response, "there's something here that we don't know, because this seems a very expansive response to just one case."

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picture-5.jpg
Where China Goes To Outsource Its Own Soaring Labor Costs

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30 years ago, the great outsourcing wave took millions of US low-skilled jobs and planted them right in the heart of China, which was about to undergo the fastest industrialization-commercialization-financialization experiment in history. $26 trillion in bank assets later, the world's biggest housing bubble, and a teetering financial system that every day depends on Beijing making the correct central-planning decision (of kicking the can one more day, of course) or else the biggest financial collapse in history will take place, all lubricated by years of inflation in everything and most certainly wages, and suddenly outsourding jobs in China is not all that attractive. In fact, it has gotten so bad that China itself is now forced to outsource its own labor to cheaper offshore markets. Such as this one.

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China unemployment rate steady at 4.08 percent at end of second quarter

BEIJING - China's urban unemployment rate was 4.08 percent at the end of June, identical with the level in March, the labour ministry said on Friday.

I wonder how reliable this unemployment stat is?

Still as outsourcing increases could be an interesting figure to watch.

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China Seals Off Yumen City After Outbreak Of Bubonic Plague

20140723_Bubionic.jpg

With Colorado suffering from pneumonic plague, and the dreadfully sad report of Sierra Leone's chief Ebola doctor contracting the virus, it appears China is taking no chances. As Yahoo reports, Chinese officials have blocked off parts of Yumen, a city in northwest China, preventing about 30,000 of the city's people from leaving after one resident died from bubonic plague. About 150 people who had contact with the plague victim have been placed under quarantine but US experts are perplexed at the response, "there's something here that we don't know, because this seems a very expansive response to just one case."

If you click on the link below the page can hang for a bit

Panic over - all is well

24 Jul 2014 - 3:29pm
Quarantined Chinese town reopens after plague death
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China's Solution To “Property Companies Facing Huge Debt Burdens”: Much More Debt

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“Property companies are facing huge debt burdens,” said Sun Binbin, a bond analyst at China Merchants Securities Co. in Shanghai. “If the regulator hadn’t eased, there probably would have been more defaults.” Or, translated: if the companies weren't allowed to "fix" their huge debt burdens with even more debt, it would have been a complete catastrophe.

The solution to debt is more debt.

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