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THE GREAT BIG CHINA THREAD


winkie
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China buyers defer raw material cargos

Chinese consumers of thermal coal and iron ore are asking traders to defer cargos and – in some cases – defaulting on their contracts, in the clearest sign yet of the impact of the country’s economic slowdown on the global raw materials markets.

http://www.ft.com/cms/s/0/a1f5ddda-a26b-11e1-a605-00144feabdc0.html#axzz1vVO5Ihh2

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A lot of savvy (read cunning) Chinese factory owners have been investing in other companies (which in no way are they the owners of as they are located in some labyrinthine networks) in Africa and other third world countries. Then they have been selling (at a discount for wear of the machinery) their machinery to the new companies and not replacing it. So when the wage demands come in and they hand the keys back to the workers party there is nothing worth handing over.

Interesting eh?

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  • 1 year later...

http://uk.reuters.com/article/2013/05/24/uk-china-economy-idUKBRE94N08C20130524

As evidence mounts that China's economy is losing momentum, economists are fast abandoning their rosy recovery forecasts and bracing for what could be the country's slowest growth rate in 23 years.

In the space of five months, analysts have swung from confidently predicting a modest pick-up in the world's second-biggest economy to pondering the chance that China will miss its own 7.5 percent growth target this year.

Concerns that Beijing's growth target may be under threat came to the fore on Thursday, when a preliminary survey of Chinese factories showed manufacturing activity shrank for the first time in seven months in May after both new domestic and export orders fell.

"Yes, the 7.5 percent target is under threat," said Ken Peng, an economist at BNP Paribas in Beijing.

"China does not have a recession, but there will not be a recovery."

So it's not having a recession nor is it having a recovery.... :blink: Can China cope with stagnation? Surely that in itself would trigger a recession and possible widespread unrest?

Doesn't China need 8% growth just to keep employment stable?

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http://www.nytimes.com/2013/05/25/business/global/beijing-signals-a-shift-on-economic-policy.html?ref=business&_r=0

In a major policy shift, the Chinese government is planning for private businesses and market forces to play a larger role in its economy, the world’s second-largest after that of the United States.

In a speech to party cadres containing some of the boldest pro-market rhetoric they have heard in more than a decade, the country’s new prime minister, Li Keqiang, said this month that the central government would reduce the state’s role in economic matters in the hope of unleashing the creative energies of the nation.

Will this work or just create even bigger inequalities between rich and poor in China?

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  • 2 weeks later...

http://www.bloomberg.com/news/2013-06-07/china-lending-data-may-be-overstated-credit-suisse-says.html

China’s record funding expansion this year may be overstated in part because of double-counting, say Credit Suisse Group AG and Bank of America Corp. analysts trying to reconcile the data with weaker economic growth.

Some Chinese companies may use loans to buy wealth management products that are recorded a second time in another category, Vincent Chan, a Credit Suisse analyst in Hong Kong, wrote in a June 5 report, citing people he didn’t identify at the central bank and banking regulator. Bank of America estimates that double-counting explains 2.7 percentage points of a 12-point gap between first-quarter growth in outstanding credit and nominal gross domestic product.

Double counting your way to growth.

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  • 1 month later...

China's central gov't agencies to cut spending by 5 pct

news.xinhuanet.com/english/china/2013-07/07/c_132519971.htm

BEIJING, July 7 (Xinhua) -- The Ministry of Finance (MOF) has issued a circular ordering China's central government agencies to cut their general expenditures in 2013 by 5 percent, a move to push the frugality campaign launched by the country's new leadership.

According to the circular, a whole slew of fees shall be cut, including money spent on the building and renovation of government offices, meetings, domestic and overseas trips, vehicles and official receptions.

The circular also calls for more efficient uses of money by the government agencies,

BTL Trouble in Little China...

btlt rouble in little china.PNG

post-17-0-71024000-1373217081_thumb.png

Edited by Saving For a Space Ship
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China's central gov't agencies to cut spending by 5 pct

news.xinhuanet.com/english/china/2013-07/07/c_132519971.htm

BTL Trouble in Little China...

btlt rouble in little china.PNG

Is this likely to have a big impact on Chinas GDP? If the GDP forecast figures are likely to be revised downwards it could be a good time to short some commodities?

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  • 4 weeks later...

http://www.nytimes.com/2013/08/04/business/global/coin-of-realm-in-china-graft-phony-receipts.html?ref=business&_r=0

To begin to comprehend China’s vast underground economy, one need only visit this city’s major transportation depots and watch as peddlers openly hawk fake receipts.

“Receipts! Receipts!” calls out a woman in her 30s to passers-by as her two children play near the city’s south train station. “We sell all types of receipts.”

Buyers use them to evade taxes and defraud employers. And in a country rife with corruption, they are the grease for schemes to bribe officials and business partners. Making them and using them is illegal in China. Some people have been executed for the crime. But demand is so strong that a surprising amount of deal-making takes place out in public.

It is so pervasive that auditors at multinational corporations are also being duped. The British pharmaceutical company GlaxoSmithKline is still trying to figure out how four senior executives at its China operation were able to submit fake receipts to embezzle millions of dollars over the last six years. Police officials say that some of the cash was used to create a slush fund to bribe doctors, hospitals and government officials.

What an economy, you can even buy fake receipts. I wonder if there is an export market for them?

It's going to be interesting to see what happens in China once the economic wheels fall off, it certainly looks like any correction could be more damaging than the 30s depression in America with a far larger population.

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http://www.zerohedge.com/news/2013-08-09/if-you-build-it-they-wont-come-and-china-they-are-now-leaving

..

Here is where central-planners everywhere should learn a valuable lesson: what makes sense on paper theoretically, almost never works out as predicted in the real world.

..

But all that was needed for jobs to flows, thriving businesses to flourish, and the urbanization myth to be perpetuated was even more empty cities: after all not only the Politburo but the Stephen Roaches said precisely this time and time again. Could so many well-respected people pardon academics, have been wrong?

Why, absolutely. Presenting Tieling New City:

When this small city in northeastern China launched a plan to build a satellite city six miles down the road, it got off to a promising start.

Urban planners spent millions of yuan to clean up surrounding marshland that had become a dumping ground for the city's untreated sewage. A pristine environment, they hoped, would help attract the businesses that would raise incomes and swell the population.

Four years later, Tieling New City is virtually a ghost town.

Clean waterways weave among deserted residential and government buildings. Housing blocks that won recognition from the United Nations for providing good affordable homes are almost empty. The businesses that were supposed to create local employment haven't materialized. Without jobs, there is little incentive for anybody to move here.

Tieling symbolizes the enormous challenges Chinese Premier Li Keqiang faces as he touts urbanization—a process analysts expect will see 250 million people move from rural areas to cities over 20 years—as the force that will ensure his country's economy keeps growing well into the future.

"Urbanization will not only drive tremendous consumption and investment demand, and create employment opportunities, but directly affect the well-being of the people," Mr. Li said in March during his first news conference as Chinese premier.

Mr. Li has yet to present a detailed vision of how to achieve his economic goals.

Clearly they need to force people to move there and take on large debts to get the economy moving. Central planning is falling because they aren't following through, they need to tell people what to do and the wealth will flow. Easy.

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  • 1 month later...

http://www.bloomberg.com/news/2013-09-12/china-statistics-chief-says-no-tolerance-for-fake-data.html

China’s statistics-bureau chief said the agency has “zero tolerance” for falsified data after it publicized cases of manipulated local numbers and the customs bureau cracked down on fraudulent export invoices.

Incidents exposed by the statistics agency are isolated and won’t affect the broader quality of data, Ma Jiantang, head of the National Bureau of Statistics, said today at a media event in Beijing.

China’s government has struggled to win the trust of investors and economists for data ranging from gross domestic product to trade. Ma said in June that China would start an investigation to ensure the accuracy of numbers filed by companies and that those found submitting inaccurate information for major statistics may be “severely punished.”

Has zero tolerance but will continue to use them as it's the only way to keep making up the GDP figures and getting growth?

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http://www.bloomberg.com/news/2013-09-11/diabetes-ailing-114-million-chinese-risks-ravaging-health-budget.html

Diabetes may consume $22 billion, or more than half of China’s annual health budget, if all those afflicted with the condition get routine, state-funded care.

The disease is putting an “overwhelming burden” on the country, according to the International Diabetes Federation, which says China spent $17 billion, or about $194 a patient, on diabetes last year. A study released last week found China has 114 million diabetics or 21.6 million more than the Brussels-based federation estimated in November.

Extending average care to the enlarged population of diabetes sufferers would wipe out all of China’s additional investment in health. The government budgeted spending 260.25 billion yuan ($42.5 billion) this year, a 27 percent increase, on basic medical services and subsidies for a state-run health insurance program. China’s diabetes costs will balloon, with almost 500 million Chinese at risk of developing the disease.

That means even more money needs spending to boost GDP!

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  • 4 weeks later...

http://www.bloomberg.com/news/2013-10-10/li-sees-china-growth-topping-7-5-in-first-nine-months.html

Chinese Premier Li Keqiang said the nation’s economic growth probably exceeded 7.5 percent in the first nine months of the year, a sign the government will next week report success in arresting a two-quarter slowdown.

The economy has “shown stronger momentum of steady growth” in the past few months, with indicators that reflect market expectations such as the Purchasing Managers’ Index (CPMINDX) improving, Li said. He made the comments in a speech today at an Association of Southeast Asian Nations summit in Brunei.

Well when you are rigging the figures anything can happen...

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  • 2 weeks later...

The other thread - Merge

http://www.zerohedge.com/news/2013-10-23/asian-markets-slide-china-braces-loan-defaults-telegraphs-another-liquidity-tapering

Following the past two days of reports in which we noted that both the broader Chinese housing market was overheating and reflating at an unprecedented pace as 69 of 70 cities posted Y/Y home price gains, while a separate report showed a blistering 12% price increase in Shanghai new homes in one week, it was only a matter of time before the PBOC resumed its tighter policy posturing, which infamously sent short-term repo rates to 25% briefly in June and nearly led to a collapse of the already fragile local banking system, in an attempt to pretend it is still in control of what is now the world's fastest growing credit bubble and of course, Chinese inflation which is now impacted not only by record domestic credit production but by hot money flows from both the Fed and the BOJ.

Predictably enough, as reported overnight by the Global Times, the PBOC suspended its open market operations Tuesday without injecting money as usual, a move that analysts said was in response to a surge in foreign capital inflows in September. It was only the second time since July 30 that the People's Bank of China (PBOC), the central bank, has abstained from injecting liquidity into the market, and follows the last liquidity injection operation which took place last Thursday: since then the Chinese Cental Bank has been strangely quiet.

The PBOC normally conducts reverse repurchase (or repo) operations Tuesday and Thursday, injecting liquidity into the market by partially offsetting maturing bills. It injected 10 billion yuan ($1.63 billion) worth of seven-day reverse repo contracts on October 15, and then withheld the 14-day reverse repo on Thursday (October 17), the first time it had done so since late July. This drained a net 44.5 billion yuan from the market last week, according to Reuters calculations.

The central bank's move was in response to a surge in foreign capital inflows last month, which resulted in increasing liquidity in the market, Hao Yijun, a Shanghai-based bond trader at China Guangfa Bank, told the Global Times. The PBOC purchased 126.4 billion yuan worth of dollars in September amid large dollar inflows, an increase of 99 billion yuan from August, the PBC's data showed Monday.

Withholding from open market operations and draining funds indicates a moderate tightening of monetary policy, Hao said.

And just like the last time the PBOC proceeded to "surprise" the market with its own tapering intentions, overnight funding rates soared, with the one-day repo rate surged 67 bps, most since June 20, to 3.7561%; while the seven-day repo rate rose 42 bps, most since July 29, to 4.0000%.

China getting closer to a banking implosion?

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http://uk.reuters.com/article/2013/10/24/uk-markets-global-idUKBRE9920LO20131024

Chinese shares slipped in volatile trade on Thursday as a further spike in China's money-market rates tempered the effect of a survey showing a pick-up in manufacturing.

China's benchmark seven-day repo rates opened up nearly a full percentage point at 5 percent after the central bank let cash drain from the money market for a second week.

The Chinese central bank declined to inject cash for a third day as regulators showed signs of concern that loose liquidity might again be fuelling risky credit growth.

Just think what will happen to shares if the Fed tapers.

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  • 1 month later...

http://www.zerohedge.com/news/2013-11-26/chart-day-how-five-short-years-breakneck-liquification-china-humiliated-worlds-centr

The short story is far simpler.

In order to offset the lack of loan creation by commercial banks, the "Big 4" central banks - Fed, ECB, BOJ and BOE - have had no choice but the open the liquidity spigots to the max. This has resulted in a total developed world "Big 4" central bank balance of just under $10 trillion, of which the bulk of asset additions has taken place since the Lehman collapse.

How does this compare to what China has done? As can be seen on the chart below, in just the past 5 years alone, Chinese bank assets (and by implication liabilities) have grown by an astounding $15 trillion, bringing the total to over $24 trillion, as we showed yesterday. In other words, China has expanded its financial balance sheet by 50% more than the assets of all global central bank combined!

China%20banks%20teaser_1_0.jpg

Still I'm sure it's only magic money and there won't be a problem....

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http://www.telegraph.co.uk/news/showandtell/10484993/Why-Chinas-boom-may-be-coming-to-an-end-and-the-50-million-women-shortage-is-to-blame.html

A preference for boys – not least because they can earn more to support their parents – means endemic illegal sex-selective abortions and the abandonment of baby girls. The sex ratio is estimated at 120 boys for every 100 girls, far above the global average and leaving the country with 50m fewer women than men.

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Worst raw material slump since 2008 seen deepening into New Year as the Chinese economy continues to slow.

http://www.bloomberg...ommodities.html

By Elizabeth Campbell - Dec 2, 2013 8:12 PM GMT

The commodity slump that spurred bear markets in everything from gold to corn to sugar this year will deepen by the end of December as prices head for their first annual loss since 2008, if history is any guide.

The Standard & Poor's GSCI Spot Index of 24 raw materials fell in December 83 percent of the time since 1971 when the benchmark gauge was posting losses for the year through November, data compiled by Bloomberg show. The average December loss was 3.9 percent, which if it happened this time would mean a 7.8 percent drop for the year.

Investors pulled a record $34.1 billion from commodity funds since the end of December, according to EPFR Global, which started tracking the flows in 2000. Ample rains boosted global crops, increased mine output spurred supply gluts in metals and the U.S. is extracting the most crude oil since 1989. Economic growth in China, the biggest user of everything from soybeans to zinc to cotton, is poised to slow for a third year in 2013, according to economist estimates compiled by Bloomberg.

"It's likely that the trend will hold through the end of the year," said Michael Cuggino, who manages about $11 billion of assets at Permanent Portfolio Family of Funds Inc. in San Francisco.

"Investors see anemic or slowing economic growth in the world's mature and emerging-market economies, while there's more supply on hand. That translates to lower prices."

2013 Losses

Fourteen members of the S&P GSCI are heading for annual losses, with grains and precious metals leading the declines. Corn tumbled 39 percent, on track for the biggest annual slump since the data begins in 1960. Gold is heading for the first yearly retreat since 2000 and silver is poised for the worst rout in three decades.

The commodity index fell 3.5 percent this year, while the MSCI All-Country World Index of equities jumped 18 percent. The Bloomberg U.S. Dollar Index, which tracks the currency against 10 major peers, gained 3.8 percent. This is the first time that commodities are trailing both shares and the dollar since 2005, when the data begins.

Edited by zugzwang
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