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PRC Economy - New Reflections : April 20 2015

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Re: PRC Economy - New Reflections : April 20 2015

Postby Prem » 21 Apr 2016 07:56

http://www.bloomberg.com/news/articles/ ... apan-slide
China Faces Make-or-Break Moment, Says Forecaster of Japan Slide

"China has now arrived at an existential moment after nearly 40 years of extraordinary economic progress," said Smith, who also warned about budding Japan-like financial strains ahead of the Chinese stock rout in 2015. The country’s "increasingly complex and troubled economic and social system with all its scarcities" will make it tougher for Communist cadres to manage, he said.
Rising debt adds to the imperative for reform, as do demands from citizens for higher-quality and more expensive health care, improved education and pensions provision. Smith continues to see parallels with Japan’s build-up of bad loans that ended up hobbling the economy.To be sure, there are plenty of differences too. China is at a much lower stage of development compared with Japan in 1990 and, on a per-capita basis, China’s GDP in 2013 was still just half of where Japan was in 1960, according to World Bank data.Yet overall debt has grown to almost 2.5 times the economy’s size and is showing few signs of slowing down. In Japan’s case, the economy stagnated as banks became impaired by losses in the wake of a property-bubble collapse and manufacturers shifted production overseas. It’s a tale of caution for China, according to the former Goldman Sachs Group Inc. banker."China has followed Japan’s economic development model, and may now too be facing a financial crisis like Japan’s that it may not be able to control, and that could diminish its ability to become the next Asian superpower," said Smith.

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Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 23 Apr 2016 10:10

China 30x Ponzi - David Stockman


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Re: PRC Economy - New Reflections : April 20 2015

Postby Christopher Sidor » 23 Apr 2016 21:10

It would be interesting to see whether PRC would be able to make the transition to a more consumption led economy and consequently a more market led economy or not. Or what path it will take. PRC is going through some tough times. Hope they come out of it in better shape. Another exceptional-ism case falls by the side. First it was Japan, then about 20 years later it was America and its belief in financial powers and now it is PRC. I do miss the Chinese posters. I hope we have not banned or blocked all of them.

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Re: PRC Economy - New Reflections : April 20 2015

Postby Christopher Sidor » 23 Apr 2016 21:12

Anybody recently gone to a trip to PRC or going there? If yes can you give us insights into your trip? How is the sense of an average Joe?

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Re: PRC Economy - New Reflections : April 20 2015

Postby Vriksh » 24 Apr 2016 07:38

A lot of industries under stress in India are making core chemicals or industrial intermediates are under pressure from Chinese manufacturers who have setup plants for the same at scales between 10X-30X size of units that Indians operate. The issue according to them is that the cost of manufacturing is nearly 50% cost of raw materials and 50% cost of environmental compliance. The Chinese manufacturers may have greater competitiveness due to economy of scale, cheaper capital and a more laissez-faire environmental policy when these plants were setup though I have reason to believe (no data as yet) that environmental compliance in China is better than India as of date. Only perhaps Reliance (partly financed by Chinese capital) operates at the scale that the Chinese operate at.

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Re: PRC Economy - New Reflections : April 20 2015

Postby alexis » 02 May 2016 17:13

Despite all the doomsday scenarios predicted, i believe China will be able to control the bubble and will have a soft landing... All these economists think that lessons of Japan are applicable to China while completely ignoring the population of China and the impact of increased productivity. Only time will tell; I for one wont bet against China.

I hope China can reach the "first world" status partly because if China cant, there is no chance for India... and i dont want to believe that.

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Re: PRC Economy - New Reflections : April 20 2015

Postby member_23370 » 02 May 2016 23:51

They will not unfortunately. And it will not affect India's economic progress in any way. India's problems are very different from the ponzi scheme that china created. India's economy will rise or fail based on how Indian govt deals with it.

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Re: PRC Economy - New Reflections : April 20 2015

Postby nandakumar » 03 May 2016 08:15

There was a news report some time last week or perhaps a week earlier. Chinese steel makers had reneged on 65 million tonnes of steel export contracts because domestic prices had shot up due to higher demand. Now how did domestic demand suddenly go up? My guess is the Government has gone back to stimulus programmes of the past unable to bear the pressure of loss of steel jobs from idling steel mills. Rebalncing the demand away from investments to consumption is being given a go by.

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Re: PRC Economy - New Reflections : April 20 2015

Postby Suraj » 06 May 2016 05:17

China National Rail’s debt over $600 bn
China’s state-owned rail corporation is more than $600 billion in debt, reports said, almost twice the size of Greece’s obligations.

The China Railway Corporation (CRC) operates the country’s trains, including an already world-beating 19,000-kilometre (11,800-mile) high-speed rail network, with at least another 11,000 kilometres planned.

But according to a recently released financial report, it owed 4.14 trillion yuan ($614 billion) at the end of April, said respected financial portal Caixin.

In comparison, Greece, whose debt crisis has threatened the eurozone and needed repeated bailouts, had an estimated public debt of 311 billion euros ($356 billion) at the end of last year, according to the European Union’s Eurostat.

CRC’s borrowing increased by over eight percent year-on-year, the numbers showed, a rise driven by the country’s fever for expanding the network of super-fast trains, a point of national pride.

But China has seen a decline in rail freight, a major source of CRC’s revenue, the Global Times newspaper reported Thursday.

The debt number “keeps growing”, Zhao Jian of Beijing Jiatong University told the paper, adding: “This business model isn’t sustainable.”

Company losses rose 35 percent year-on-year to 8.73 billion yuan in the first quarter, the paper reported.

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PRC Economy - New Reflections : April 20 2015

Postby Peregrine » 06 May 2016 19:58

China’s financial system

The coming debt bust

It is a question of when, not if, real trouble will hit in China

CHINA was right to turn on the credit taps to prop up growth after the global financial crisis. It was wrong not to turn them off again. The country’s debt has increased just as quickly over the past two years as in the two years after the 2008 crunch. Its debt-to-GDP ratio has soared from 150% to nearly 260% over a decade, the kind of surge that is usually followed by a financial bust or an abrupt slowdown.

China will not be an exception to that rule. Problem loans have doubled in two years and, officially, are already 5.5% of banks’ total lending. The reality is grimmer. Roughly two-fifths of new debt is swallowed by interest on existing loans; in 2014, 16% of the 1,000 biggest Chinese firms owed more in interest than they earned before tax. China requires more and more credit to generate less and less growth: it now takes nearly four yuan of new borrowing to generate one yuan of additional GDP, up from just over one yuan of credit before the financial crisis. With the government’s connivance, debt levels can probably keep climbing for a while, perhaps even for a few more years. But not for ever.

When the debt cycle turns, both asset prices and the real economy will be in for a shock. That won’t be fun for anyone. It is true that China has been fastidious in capping its external liabilities (it is a net creditor). Its dangers are home-made. But the damage from a big Chinese credit blow-up would still be immense. China is the world’s second-biggest economy; its banking sector is the biggest, with assets equivalent to 40% of global GDP. Its stockmarkets, even after last year’s crash, are together worth $6 trillion, second only to America’s. And its bond market, at $7.5 trillion, is the world’s third-biggest and growing fast. A mere 2% devaluation of the yuan last summer sent global stockmarkets crashing; a bigger bust would do far worse. A mild economic slowdown caused trouble for commodity exporters around the world; a hard landing would be painful for all those who benefit from Chinese demand.

Brace, brace

Optimists have drawn comfort from two ideas. First, over three-plus decades of reform, China’s officials have consistently shown that once they identified problems, they had the will and skill to fix them. Second, control of the financial system—the state owns the major banks and most of their biggest debtors—gave them time to clean things up.

Both these sources of comfort are fading away. This is a government not so much guiding events as struggling to keep up with them. In the past year alone, China has spent nearly $200 billion to prop up the stockmarket; $65 billion of bank loans have gone bad; financial frauds have cost investors at least $20 billion; and $600 billion of capital has left the country. To help pump up growth, officials have inflated a property bubble. Debt is still expanding twice as fast as the economy.

At the same time, as our special report this week shows, the government’s grip on finance is slipping. Despite repeated efforts to restrain them, loosely regulated forms of lending are growing quickly: such “shadow assets” have increased by more than 30% annually over the past three years. In theory, shadow banks diversify sources of credit and spread risk away from the regular banks. In practice, the lines between the shadow and formal banking systems are badly blurred.

That creates two risks. The first is higher-than-expected losses for the banks. Hungry for profits in a slowing economy, plenty of Chinese banks have mis-categorised risky loans as investments to dodge scrutiny and lessen capital requirements. These shadow loans were worth roughly 16% of standard loans in mid-2015, up from just 4% in 2012. The second risk is liquidity. The banks have become ever more reliant on “wealth management products”, whereby they pay higher rates for what are, in effect, short-term deposits and put them into longer-term assets. For years China restricted bank loans to less than 75% of their deposit base, ensuring that they had plenty of cash in reserve. Now the real level is nearing 100%, a threshold where a sudden shortage in funding—the classic precursor to banking crises—is well within the realm of possibility. Midsized banks have been the most active in expanding; they are the place to look for sudden trouble.

Pandamonium

The end to China’s debt build-up would not look exactly like past financial blow-ups. China’s shadow-banking system is big, but it has not spawned any products nearly as complex or international in reach as America’s bundles of subprime mortgages in 2008. Its relatively insulated financial system means that parallels with the 1997-98 Asian crisis, in which countries from Thailand to South Korea borrowed too much from abroad, are thin. Some worry that China will look like Japan in the 1990s, slowly grinding towards stagnation. But its financial system is more chaotic, with more pressure for capital outflows, than was Japan’s; a Chinese crisis is likely to be sharper and more sudden than Japan’s chronic malaise.

One thing is certain. The longer China delays a reckoning with its problems, the more severe the eventual consequences will be.
For a start, it should plan for turmoil. Policy co-ordination was appalling during last year’s stockmarket crash; regulators must work out in advance who monitors what and prepare emergency responses. Rather than deploying both fiscal and monetary stimulus to keep growth above the official target of at least 6.5% this year (which is, in any event, unnecessarily fast), the government should save its firepower for a real calamity. The central bank should also put on ice its plans to internationalise the yuan; a premature opening of the capital account would lead only to big outflows and bigger trouble, when the financial system is already on shaky ground.

Most important, China must start to curb the relentless rise of debt. The assumption that the government of Xi Jinping will keep bailing out its banks, borrowers and depositors is pervasive—and not just in China itself. It must tolerate more defaults, close failed companies and let growth sag. This will be tough, but it is too late for China to avoid pain. The task now is to avert something far worse.

Cheers Image

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Re: PRC Economy - New Reflections : April 20 2015

Postby Shankas » 10 May 2016 06:30

The World's Most Extreme Speculative Mania Unravels in China

From the Dutch tulip craze of 1637 to America’s dot-com bubble at the turn of the century, history is littered with speculative frenzies that ended badly for investors.
But rarely has a mania escalated so rapidly, and spurred such fevered trading, as the great China commodities boom of 2016. Over the span of just two wild months, daily turnover on the nation’s futures markets has jumped by the equivalent of $183 billion, outpacing the headiest days of last year’s Chinese stock bubble and making volumes on the Nasdaq exchange in 2000 look tame.

they traded enough cotton in a single day last month to make one pair of jeans for everyone on Earth and shuffled around enough soybeans for 56 billion servings of tofu.

Nobody knows for sure how much of the trading surge has been driven by individuals, but the evidence suggests retail punters are playing a big role. More than 40 percent of the volume in rebar futures last month came during the night session, when it’s more convenient for people with day jobs to trade. The average holding period for contracts including rebar and iron ore was less than 3 hours in April, according to data compiled by Bloomberg.

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Re: PRC Economy - New Reflections : April 20 2015

Postby JE Menon » 18 May 2016 02:55

The Chinese love to gamble.... This is just another form.

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Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 18 May 2016 09:44

China's Debt Bomb: No One Really Knows The Payload

Image

http://www.zerohedge.com/news/2016-05-1 ... ws-payload

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Re: PRC Economy - New Reflections : April 20 2015

Postby Shankas » 19 May 2016 02:30

Interesting video from George Friedman on how wealth is distributed in China

http://www.businessinsider.com/real-george-friedman-han-south-china-sea-islands-china-politics-2016-5

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Re: PRC Economy - New Reflections : April 20 2015

Postby amritk » 21 May 2016 01:29

http://www.recode.net/2016/5/13/1159257 ... con-valley

Some positive comments about India as well.

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Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 22 May 2016 10:39

Chinese Bank Pledges to Allot Some $460Bln to Fight Poverty in Next 5 Years

Read more: http://sputniknews.com/asia/20160522/10 ... z49MYG5OSP

BEIJING (Sputnik) — Within the framework of China's five-year plan, which outlines the country's economic development goals for the 2016-2020 period, Beijing plans to improve the prosperity of some 70 million Chinese nationals, whose wealth is below the poverty line, according to the government data.

According to the People's Daily, money allocated by the ADBC are expected to fund education, infrastructure construction in the rural areas, resettlement programs, support corn farming and tourism.The newspaper added that the proposed measures could improve the wealth status of the poorest citizens of China.


The ADBC is China's bank which aims at the development of the country's rural areas and agriculture by means of raising and allocation of special funds to support the sector, as well as agriculture-related business operations in line with Chinese legislation, according to the bank's website.

Read more: http://sputniknews.com/asia/20160522/10 ... z49MYPFEg7

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Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 25 May 2016 15:55

China Weakens Yuan to 2011 Low, Stirring Currency War Concern

http://sputniknews.com/business/2016052 ... z49fNSrWGa

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Re: PRC Economy - New Reflections : April 20 2015

Postby TSJones » 25 May 2016 19:08

jeez I thought China was going to set the new gold standard. :)

and whut about that Shanghai Cooperation Organisation?

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Re: PRC Economy - New Reflections : April 20 2015

Postby panduranghari » 26 May 2016 12:53

http://uk.reuters.com/article/uk-china- ... KKCN0YF2YS

Perhaps aware of growing wariness about shadow bank lending, some trusts are using creative methods to get investors to part with their cash. In Tibet, where shadow bank lending rose 50 percent in 2015, trusts are offering leased BMWs as an inducement to invest in one- and three-year products.


https://read.atavist.com/sunk

A growing number of American studios and producers came to believe that the solution was coproductions. Filmmakers on both sides of the Pacific would combine forces and use Hollywood and Chinese talent to make movies in China that would capitalize on the mainland’s booming box office while circumventing the quota. But cultural differences plagued the sets, and filmmakers struggled to find a formula that appealed to both audiences while also appeasing the censors.


http://en.people.cn/n3/2016/0525/c90000-9063036.html

Chinese leadership is in trouble. Serious trouble. The following for Karl Marx is insane.

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Re: PRC Economy - New Reflections : April 20 2015

Postby DavidD » 28 May 2016 22:30

amritk wrote:http://www.recode.net/2016/5/13/11592570/china-startup-tech-economy-silicon-valley

Some positive comments about India as well.


Very nice article, but a bit overly rosy of a view. Reading articles about the Chinese economy is like listening to the blind men describing an elephant. Manufacturing has gone from being the largest share of GDP to a whopping 10% less than Services in just 3 years (40% manufacturing, 50% services, 10% agriculture in 2015), yet you still have idiots like those at Goldman Sachs proudly declaring their usage of electricity use, freight transport, etc. to gauge the Chinese economy. On the other hand, the manufacturing sector employs far more people still, so when you have guys visit a few tier-1 cities and talk to some startups primarily in the tertiary sector, you guys get who completely miss the looming social unrest that'll surely follow the job losses resulting from a slowing secondary sector.



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Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 09 Jun 2016 22:58

China central bank says economy will still grow 6.8% this year

https://www.rt.com/business/345960-chin ... st-growth/

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Re: PRC Economy - New Reflections : April 20 2015

Postby Shanu » 11 Jun 2016 09:57

^^
China's economy is like a gambler on a dope. They cannot slow down fearing public backlash and cannot grow further as there is simply no demand - overseas or domestic. So the paper growth continues.

This is like the old Bollywood villain joke - nitrogen will not let you live, oxygen will not let you die.

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Re: PRC Economy - New Reflections : April 20 2015

Postby A_Gupta » 12 Jun 2016 07:59

^^^ Liquid oxygen - you won't be able to breath because of liquid, you won't die because of oxygen.

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Re: PRC Economy - New Reflections : April 20 2015

Postby Shanu » 12 Jun 2016 09:13

^^^ Thanks for the correction A-Gupta ji. :mrgreen:

But having said that, I think China makes a good case study. In all the previous cases of such explosive paper growth, the bust came soon enough. If this was Japan or some other 'Asian tiger' economy, the huge stock market collapse and forex flight would have forced the Government to change direction. But China is still holding on - benefits of the 'command economy' and the ability to control the Global manufacturing supply chain.

So it will be interesting to see what breaks the camel's back. and what is its impact on the global manufacturing supply chain. 10 years from now, the Economics and Management schools will be teaching this as a case study. :twisted:

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Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 16 Jun 2016 13:41

IMF urges China to control 'high' corporate debt

SHENZHEN, China, June 11 (UPI) -- China is facing serious risk to its economy if it doesn't control soaring corporate debt, an International Monetary Fund official said on Saturday.

"Corporate debt remains a serious – and growing – problem that must be addressed immediately and with a commitment to serious reforms," David Lipton, the IMF's first deputy managing director, said in a speech to the China Economic Society Conference on Sustainable Development in China and the World in Shenzhen.

China's corporate debt, at approximately 145 percent of gross domestic product, is "very high by any measure," Lipton said.

"Mounting corporate debt is a key fault line in the Chinese economy," said Lipton, a former U.S. Treasury and White House official.

China's debt includes an estimated $1.3 trillion in loans to borrowers without enough income to cover interest payments.

Lipton said that China's state-owned enterprises account for about 55 percent of corporate debt but only 22 percent of economic output. State-owned profits fell 6.7 percent yearly as total revenue fell 5.4 percent, according to Chinese government data.

China's total debt of around 225 percent of GDP is not out of line with other countries, Lipton said, but said China's corporate debt could lead to "dangerous detours" on the road to becoming an advanced economy.

He suggested enhanced laws, transparent accounting systems and improved balance sheets at companies and banks.

Macquarie Capital Ltd. said in a report Wednesday that China's debt is troubling but unlikely to result in a crisis and that the central bank could intervene.

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Re: PRC Economy - New Reflections : April 20 2015

Postby habal » 22 Jun 2016 10:49

China Gives 'Tough Response' to George Soros’ Attempts of Currency War

Billionaire investor George Soros has a new enemy as the businessman with a net worth of $24 billion has recently engaged in an information war against the Chinese government,
an article on the French news and analytics website Boulevard Voltaire read

http://sputniknews.com/business/2016062 ... y-war.html

George Soros declared war on the Chinese currency at the World Economic Forum at Davos and his influence has already affected fluctuations at global financial markets.

Soros said he would bet against Asian currencies, predicting a "hard landing" for the Chinese economy, according to Bloomberg.

However, in response, Beijing recommended not to take Soros’ predictions seriously
.

On June 7, the Chinese government warned the billionaire from starting a currency war against yuan. In a press-release, the government said that attempts by Soros to take on the renminbi and Hong Kong dollar were "doomed to fail."

Recently, the well-informed American website ZeroHedge published an article which stated that the US is suffering from a "Dutch disease" and "financial predators."

The article was in response to Soros who last week once again predicted an economic collapse in China.

In 1992, Soros dealt a blow to the British pound, bringing the Bank of England to its knees. The British government had to withdraw its national currency from the European exchange system. This is enough for the Chinese government to be alarmed over Soros’ predictions, the article read.

Beijing’s response to Soros is part of China’s tough measures against those trying to provoke a meltdown in the Chinese market, it added.

"Currently, there is a downturn in the Chinese economy. Neocons are trying to use the situation to destroy everyone threating to American hegemony, including China," the author wrote.

http://sputniknews.com/business/2016062 ... y-war.html

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Re: PRC Economy - New Reflections : April 20 2015

Postby habal » 22 Jun 2016 10:51

Rothschild, Soros warn of Brexit doom; Osborne threatens with “suspending” market

The big guns are officially out

https://www.intellihub.com/soros-rothsc ... ng-market/

Just yesterday, we recounted the story of “Black Wednesday” when on September 16, 1992, the UK was forced out of the EU’s exchange-rate mechanism, or ERM, when the BOE tapped out and allowed the British pound to float freely, leading to 15% losses in the sterling. As we noted, this was George Soros’ infamous trade which “broke the Bank of England” and made the Hungarian richer by over $1.5 bilion.

24 years later Soros is back, and this time he is warning against the kind of devaluation that made him a billionaire and which he believes will be unleashed by Brexit, when in a Guardian Op-Ed he wrote that U.K. voters are “grossly underestimating” the true costs of a vote to leave the EU, saying that there would be an “immediate and dramatic impact on financial markets, investment, prices and jobs.”

He predicts that the pound would decline “precipitously”, seeing a gargantuan drop of at least 15% and possibly >20% to below $1.15. Considering it has now become trendy for analysts to come up with ever “doomier” forecasts of just how low cable would plunge in case of Brexit, we are surprised Soros stopped there.

Here Soros makes the distinction how the collapse in cable would be different from the one that made him richer by saying that this devaluation wouldn’t be “healthy” like the one in 1992 because BOE wouldn’t cut rates, U.K. has large current account deficit and devaluation unlikely to improve manufacturing exports this time. Just don’t tell that to the BOJ, which would gladly leave the EU – twice if it had to – if it meant a 20% devaluation.

“Brexit would make some people very rich – but most voters considerably poorer”; “there are speculative forces in the, markets much bigger and more powerful” than the speculators that profited from the 1967 devaluation at Britain’s expense. “A vote to leave could see the week end with a Black Friday, and serious consequences for ordinary people.”

Here is the gist of Soros’ scaremongering, from the Guardian op-ed titled “The Brexit crash will make all of you poorer – be warned“:

https://www.intellihub.com/soros-rothsc ... ng-market/

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Re: PRC Economy - New Reflections : April 20 2015

Postby Christopher Sidor » 25 Jun 2016 07:48

^^^^^^^^
This is a variant of the tactic that was tried during the recent Scottish Independence. FUD is being spread throughout not only by the Remain campaign but by the Leave campaign too. Observe how the Leave campaign invoked the shrill siren call about Turkey's joining the EU and how 80 million Turks would just roll into the EU and consequently into UK as part of the open borders and so on. They did the same thing during the Scotish Independence referendum too. Scotland will not be able to use the Pound, EU membership is not assured and there is a waiting line into which an Independent Scotland would get into, the Debt and bailout cost of RBS and other Scottish banks would be transferred immediately to the newly Independent Scotland and so on. Though one topic I could never grasp. How come Scots who speak the same language, have the same history, have the same legal system with their other British cousins, seem to think that they have more in common with Brussels, the Germanic and French speaking EU mainlanders.

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Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 15 Aug 2016 17:44

IMF tells China: Fix your debt problem now

http://money.cnn.com/2016/08/12/news/ch ... index.html

China needs to tackle its corporate debt problem before it spirals out of control.

That's the message from the International Monetary Fund, which warned China about its debt levels on Friday.

"China's medium term outlook is clouding because of high and rising corporate debt," said James Daniel, IMF's mission chief in China. He said the world's second biggest economy must "urgently address the problem."

At $25 trillion, China's debt stands at about 254% of GDP, according to data from the Bank for International Settlements. Even though that's high, it's actually pretty close to some other indebted countries in the world.


The U.S., for example, has similar levels of debt as China. What's alarming about China's mountain of debt is the speed at which it's been growing in recent years. It has quadrupled between 2007 and 2014, according to a report by McKinsey.

It has also spooked many global institutions and investors.

"Investors are right to be worried: dealing with the unsustainable build-up of debt is one of the biggest long-run challenges that policymakers face," said Julian Evans-Pritchard, China economist at Capital Economics.


Related: China's sluggish economy continues to drag

The massive lending spree was designed to provide a shot in the arm to China's slowing economic growth after the financial crisis. That's not necessarily a bad thing -- governments around the world encourage companies to borrow in order to invest and build to keep the economic engines spinning.

But Evans-Pritchard said the trouble with China is that the credit is often poorly allocated, generating much weaker economic returns.


Rating agencies and international economic organizations have long warned China about the rising level of debt, especially among stalling state owned companies. The IMF said Friday, China should tackle this "zombie" debt problem and write off bad loans and recognize losses.

Related: S&P warns of increasing risks in China

China is starting to get tougher with some of its state-owned heavy industry giants. Beijing announced earlier this year that it would cut 1.8 million coal and steel jobs and invest 100 billion yuan ($15.3 billion) in restructuring and training to find new employment for the laid off workers.


But the IMF said China needs to broaden this effort to other industries and focus on more productive and innovative parts of the economy.

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Re: PRC Economy - New Reflections : April 20 2015

Postby A_Gupta » 15 Aug 2016 23:53

From August 12: http://www.nytimes.com/2016/08/13/busin ... -risk.html

"Trillions in Murky Investments Could Rock China’s Economy"

SHANGHAI — The deal could be hard to resist.

A Shanghai investment firm is offering a fat return of up to 10 percent a year, handily beating both the local stock market and the paltry payouts from bank accounts. It requires a minimum deposit of about $15, making it accessible to just about anyone. Investors can pull out in as little as seven days. Best of all, the money is guaranteed.

There is just one catch: Investors know surprisingly little about what they are buying.

The firm, State Gold Treasure, said the money would be plowed into a real estate company building a luxury serviced-apartment complex here in Shanghai. But it will not release details, including the complex’s address.

The offering is just one of a spate of barely regulated, highly opaque investments that are posing a growing threat to the Chinese financial system. As the country’s economy slows, experts increasingly worry that many of the investment funds could fail — and the government may not know how to handle the shock to its financial system.

Over the last five years, Chinese investors have plowed at least $2.8 trillion into buying such funds from banks alone. After quintupling since 2011, these investments, known as wealth management products, now total an amount roughly equal to more than one-third of the country’s annual economic output. Their growth has increased as China’s economy has slowed.

That is just the funds distributed by banks. Reliable data on wealth management products sold by other types of firms, like State Gold Treasure, is hard to come by.

The problem for China is that a big chunk of the money is going into troubled industries like construction and real estate. Further slowdowns in those areas could result in major blowups.


Wealth management products are part of a huge but shadowy system of unregulated investments and underground banks that many Chinese people depend on for the loans that keep their businesses humming. Increasingly, the debate inside and outside China is focusing on what will happen if that system falls apart — and how quickly the government might be able to respond.

“There is a risk building up in this regard, and on top of that, the tricky issue is that there are many triggers that could wake up this sleeping lion,” said David Daokui Li, a prominent Tsinghua University economist who is a member of the Chinese central bank’s monetary policy committee. “Most likely, this issue will emerge as a crisis. The question is whether it is a small crisis or a big crisis.”

China’s wealth management products are neither stocks nor bonds nor mutual funds. A typical wealth management product offers a fixed rate of return over a set period. Many Chinese investors treat them like bank savings deposits because many are sold by state-controlled banks that give the funds the appearance of government backing.

But unlike bank deposits, they are uninsured. They are also typically structured so that the banks are not responsible if the investments fail.


The shift in money away from bank deposits leaves China’s financial system on less solid footing. China withstood the Asian financial crisis in 1997 and 1998 and the global financial crisis in 2008 and 2009 in part because its financial system depended on highly stable household and corporate deposits parked mainly at four huge, government-controlled banks.

But smaller banks combined are now almost as large as the four main banks combined. Wealth management products account for up to a third of money raised at many midsize and smaller banks.


Mr. Li, the central bank adviser, and other officials and economists say the Chinese government has the resources to cover big losses if wealth management products fail. They also say China’s increasingly tough enforcement of limits on sending money abroad will ensure that enough cash remains in the country in the event of a big failure.

“With the Chinese system, it’s easier to deal with a liquidity issue — the money can’t go out,” said Chang Chun, the executive dean of the Shanghai Advanced Institute of Finance at Shanghai Jiao Tong University.


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Re: PRC Economy - New Reflections : April 20 2015

Postby Christopher Sidor » 28 Aug 2016 15:01

PRC followed the Japanese text book for growth. In fact most of the East Asian countries did. Now PRC is facing the same issue as Japan has been facing for the past decade.

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Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 31 Aug 2016 16:58

Economic Math In The Red Ponzi: 2016 GDP Up 7%, Rail Freight Down 7%

http://davidstockmanscontracorner.com/e ... ht-down-7/

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Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 08 Sep 2016 10:00

Chart Of The Day: China’s Bad Loans Rise To 11-Year High

Image

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Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 10 Sep 2016 09:11

In this episode of the Keiser Report, Max and Stacy discuss the new m-SDR and ask will the dollar live to die another day? And are SDRs forever? As the G20 in China concludes they ask whether the new Special Drawing Right is the first step toward one world currency. In the second half, Max interviews Dan Collins of ChinaMoneyReport.com about yuan internationalization and China’s quantum satellite.


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Re: PRC Economy - New Reflections : April 20 2015

Postby panduranghari » 22 Sep 2016 18:06

https://www.bis.org/publ/qtrpdf/r_qt1609e.htm

Covered interest parity (CIP) is the closest thing to a physical law in international finance. It holds that the interest rate differential between two currencies in the cash money markets should equal the differential between the forward and spot exchange rates. Otherwise, arbitrageurs could make a seemingly riskless profit. For example, if the dollar is cheaper in terms of yen in the forward market than stipulated by CIP, then anyone able to borrow dollars at prevailing cash market rates could profit by entering an FX swap - selling dollars for yen at the spot rate today and repurchasing them cheaply at the forward rate at a future date.


LIBOR 0.9%
HIBOR 23.7%

USD-CNY is more or less fixed by pboc.

I suspect Kyle Bass will be ready to pounce. Like Soros-Druckenmiller broke the bank of england in 1992, it wont be surprising if Kyle Bass will break the PBoC.

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Re: PRC Economy - New Reflections : April 20 2015

Postby NRao » 26 Sep 2016 11:37

China slowdown is global economy's biggest threat, Rogoff says

Ken Rogoff said a calamitous "hard landing" for one of the main engines of global growth could not be ruled out.

"China is going through a big political revolution," he said.
"And I think the economy is slowing down much more than the official figures show,"

Mr Rogoff added: "If you want to look at a part of the world that has a debt problem look at China. They've seen credit fuelled growth and these things don't go on forever."

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Re: PRC Economy - New Reflections : April 20 2015

Postby NRao » 30 Sep 2016 01:34

Oh, boy oh boy. This is getting to be a real fun time.

China may be stockpiling more oil than anyone realized

Now a satellite imaging firm called Orbital Insight claims to have an answer. It says that in May, Chinese inventories stood at 600 million barrels, substantially larger than commonly thought and nearly as big as the U.S. Strategic Petroleum Reserve. Chinese storage capacity, which includes working inventory, is four times greater than widely used estimates, the firm says, adding that it has not only been able to count storage tanks, but it has also used imaging techniques to figure out how much oil is in the tanks.

The issue could influence expectations in oil markets. If China has built larger reserves than previously estimated, that means much of what looked like oil demand over the past couple of years was not a result of higher consumption but of strategic planning. It would make OPEC’s task of cutting output to drive up prices more difficult. And it could provide a buffer for China in the event of a sudden disruption in imported supplies.


:rotfl:

Analysts and Chinese behavior. Whom to believe and not to.

So, how real is the Chinese economy and should India still subscribe to BRICS?


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