End of the China bull?

[notting]

China lies again.

Whilst Xi was making speeches to the world saying China was not expansionist -

The incursion bids by the Chinese People's Liberation (PLA) came even as Prime Minister Narendra Modi and Chinese President Xi Jinping emphasized on the need to find a solution to the Boundary Question during their meeting in Fortaleza in Brazil yesterday on the sidelines of the BRICS summit.

http://www.newindianexpress.com/nation/2014/07/16/Chinese-Troops-Make-Two-Incursion-Attempts-in-Ladakh/article2333610.ece

Don't forget whilst China was calling for an end to the world hacking the very next day the Chinese were caught red handed hacking into Austalia's Reserve bank.

 

[notting]

China faces what would be the second default in the nation’s onshore bond market after a builder said it may fail to make a payment next week, the latest sign of stress in the world’s biggest corporate debtload.

Huatong Road & Bridge Group Co, based in the northern province of Shanxi, said it may miss a 400 million yuan ($US64.5 million) note payment due July 23, according to a statement to the Shanghai Clearing House yesterday.

Chairman Wang Guorui is assisting authorities with an official investigation, it said, without elaborating. Wang was removed from the Chinese People’s Political Consultative Conference Shanxi Committee on July 9 for suspected violations of the law, according to an official statement and media report last week.

Read more: http://www.smh.com.au/business/mark...s-investors-20140718-3c4xs.html#ixzz37mY9PDPX

More cracks

 

[notting]

New home prices down in 55/70 cities last month.
Just like the 2008 Down turn pattern evolving but with a lower high to 2010 similar down turn.

Yikes!

 

[waterbottle]

New home prices down in 55/70 cities last month.
Just like the 2008 Down turn pattern evolving but with a lower high to 2010 similar down turn.

Yikes!


View attachment 58722

Why the "Yikes!"?

Why can they just stimulate again like they did on the past 2 occasions?

 

[notting]

Why the "Yikes!"?

Why can they just stimulate again like they did on the past 2 occasions?

The Chinese dictators have been stimulating for the last 6 months, by stealth. Trying not to be seen doing it. Not working so well, but today's results are better on factory output.
The point is there is no transformation going on it's the same old tiger.

 

[DeepState]

More cracks

I think this is really important. So, a challenge for you (and anyone else with an interest)...to take the opposite perspective. Please tell me why it might be possible for the Chinese Government to hold this together as the banking system is slowly transformed into something less cosseted and more reflective of a real mechanism for transferring assets around in service of a more market-driven economy. I have already been bathed in the disaster scenarios, so there's no need to go there.

 

[notting]

I think this is really important. So, a challenge for you (and anyone else with an interest)...to take the opposite perspective. Please tell me why it might be possible for the Chinese Government to hold this together as the banking system is slowly transformed into something less cosseted and more reflective of a real mechanism for transferring assets around in service of a more market-driven economy. I have already been bathed in the disaster scenarios, so there's no need to go there.

OK here is a brighter look on the situation than what I normally give -

I am a Chinese working as a China analyst at a think tank. It is becoming more and more apparent to many people, that the ruling Chinese Communist Party (CCP) knows it is on its last straw of survival.

The party is facing severe and endlessly increasing systematic stress on all fronts:

1. Increasing external oppositions from all other countries in the world including all of China's neighbours. They are forming more and more alliances and becoming more outspoken with rising strengths against China, in addition to increasing anti-China sentiment from people in all other countries. Many countries including Canada and Australia and U.S. have just tightened their immigration policy to prevent Chinese from entering their countries. Even on these casual internet message boards, when you look past the paid Chinese propaganda professional commenters, you notice rising general anti-China feelings from all over the world.

2. Increasing internal severe and massive violent social unrest and anti-CCP mutiny from people of all Chinese living places. To beat down internal dissent in mainland China, the CCP every year is forced to spend even more money than on its massive military budget. All the semi-external places (Hong Kong, Xinjiang, Tibet, Macau) are fighting harder and harder to break free from China. Taiwan is for all practical purposes already a separate democratic country, with its own army specificly trained to fight the PLA, and anti-China sentiment there (especially among younger Taiwanese generation) is at all-time high after seeing how China violently suppress Hong Kong as an example of "reunification". This whole situation is continuously worsened by the free flow of information, with Chinese people knowing more and more from travelling abroad and learning about truths from jumping beyond the "Great Fire Wall" on the internet.

3. Its own economy and social system never able to advance to higher level beyond mass skill-less manufacturing, due to complete absence of law and common morals. High technology and innovations and scientific development all require many citizens working together voluntarily contributing long term in a system they trust, with things like rule of law, no censorship on knowledge, no restrictions on speech and expression, copyrights, open minds, patents, common morals when collaborating and trading with each other etc. These qualities are all destroyed in modern China by the CCP. When was the last time you heard an announcement of technology development or innovations or scientific breakthrough coming from a Chinese organization / company / university? You haven't because there ain't any. Unlike mass manufacturing factory work, high level human developments cannot be forced by or bought with a dictator's central planning. The only way contemporary China gets these things is from stealing and spying from all other countries e.g. secretly installing spywares in foreign executives' electronic devices when they enter China, but that has become much more difficult since the whole world has caught on to their act.

This systematic fatal flaw is why you do not see even one Chinese brand or company that can compete in the international market in any industry of the human race. For example Lenovo, who is already one of the few Chinese brands some people may have heard of, cannot make either the chips that power their computers or the operating system that run them, so it is just one of many plain vanilla boxmakers without any competitive advantage offering only cheap price. Another example Huawei is blacklisted by many countries and international customers because everyone knows Huawei's products send all communication data back to the CCP. This CCP weakness is also why China cannot produce even one home-grown science Nobel Prize winner in its history, nor one famous business guru, nor one cultural figure, not even a third rate national soccer team. No rule of law in China also means no people or businesses, both Chinese and foreign, ever invest in China long-term or on a large scale because everything frequently change on a whim along with the political climate. No one trusts any contract or agreement in China because they are always broken by the Chinese and there is no legal protection whatsoever, meaning China can never advance to a knowledge economy or service economy. Your business can be taken from you any second by the military police working for someone with "guanxi". No rule of law also ensures Shanghai fail to become a financial city despite the CCP dumping huge resources into it for 30 years.

4. China's mass skill-less manufacturing itself is going away to other countries due to sharply increasing costs and openly hostile and unfair business environment full of frauds and sanctioned protectionism and government robberies. The labor force is endlessly more demanding in wages and benefits expectations and working conditions, especially since all of today's Chinese workers are single child used to coddling and indulgement by their own family. It is further worsened by the rise of robotic automatic manufacturing and 3D printing. This situation is a death knock to the "growth-based legitimacy" of the CCP, which is the only thing CCP can rely on for continuing ruling power. For sure Chinese people tolerate or even "like" the CCP when the economy seemingly explodes, but when one day it crashes and the country's hopeless bad shape hit them in the face the people's "support" for the CCP will turn on a dime.

Since six months ago, all the major economic indicators for China have gone on a continuing nosedive - including manufacturing orders, export volume, commercial investments, graduate employment rate, corporate credits, foreign capital inflow, domestic consumptions, real estate prices, consumer spendings, luxury goods demand, HSBC Service PMI, survey of business sentiments etc. Suddenly all the rich Chinese tourists gobbling up luxury goods at different world cities seem to have disappeared altogether. The CCP is on its last resort of printing literally trillions of worthless renminbi to dump into massive failing and zero ROI "state projects" that only enrich corrupted CCP officials. China's huge multi-year increase of M2 money supply (it is afraid to publish the figures citing "national security") causes way more long-term harm on itself than short-term help, and when that is over there is nothing else the CCP can do to prop up the failing economy. China currently ranks 82nd on GDP per capita and that is the highest it can go before falling sharply in the coming near future.

5. Fierce unstoppable purges and mutually-destructive infighting among different factions within the party, who are imprisoning and killing each other every day. This power grab goes on under the laughable thin guise of "anti-corruption drive" when everyone knows all officials in china are corrupted. No work to manage the country or guide the ship is being done while this is going on.

6. Its many previously-suppressed fatal problems have all grown too big to be contained all catching up to the CCP e.g.

- severe carcinogenic poisonous pollution everywhere in air and water and soil and their own food etc, with the WHO issuing multiple warnings on Chinese population having the fastest cancer growth rate in the whole world
- skyrocketing unrepayable bad debts of all kinds everywhere, its true scope no one on Earth knows because all data from China are faked
- biggest housing bubble in human history, in addition to innumerous crumbling "ghost cities" and shoddily-built vanity project "GDP-creating" infrastructure that cannot and will not be used
- rapidly aging demographics with a 140:100 male:female ratio (from one child policy, culture of "leftover women", and many Chinese families killing their own daughters so as to chase boys)
- world's no.1 wealth inequality, with a Gini coefficient rivaling 18th century France just before the French revolution
- complete absence of soft power / cultural influence / social attraction, partly due to CCP censorship. One result of which is minimal and sharply dwindling number of foreign professionals and tourists and students going to China. It also means the CCP only has force as the only tool to use on the international stage
- all Chinese chasing foreign-brand goods and services while ditching low-quality Chinese-brands, who have a well known history of poisoning their own food and their own baby formula so as to make more money. This dashs CCP's hope to build indigenous industries and a domestic consumption economy
- corruptions and fraud throughout the whole rotten core of a system
- desperate mass exodus at all levels of Chinese society to escape the country using emigration or buying houses / study abroad or marriage to foreigners or plain old human smuggling, resulting in all able Chinese leaving taking huge amounts of talents and money out of the country
- the law of large numbers, "middle-income trap", "Minsky moment", "Lewis inflection point" all work against the growth-based legitimacy CCP desperately needs for its survival

Most importantly, the CCP knows that if 1.4 billion Chinese learn about basic human qualities such as morals, truth, justice, human rights, rule of law, fairness, freedom, universal values etc the CCP will be toppled very quickly. Therefore its state-controlled brainwashing education and propaganda machinations ensure a complete lack of morals and regard for laws in all Chinese growing up and beyond. Coupled with the fact that Chinese do not work well together, this results in failure in all basic aspects of human interactions with every modern Chinese, whether it is business trading / personal dealings / technology development / creating innovations / human communications / scientific research / artistic expressions / teamwork collaborations / academic exchange etc. Another propaganda brainwashing technique used by the CCP is to make all Chinese people pathologically nationalistic and very emotional on this issue, so the CCP can always create and point to some "foreign enemies" so as to hide all the domestic crises and government robberies going on. This attention-diverting technique is the same trick magicians have used for more than a thousand years to fool their audience.

An interesting example would be the Chinese reaction to this report - they are expected to dismiss this report as total rubbish, accuse the author "unpatriotic" for saying the truth, shout China will only become richer and stronger than all other countries, yet they will give no counter-arguments and they will make no acknowledgement to the horrible factual conditions and complete lack of basic human qualities listed above in modern China. Ironically, the longer Chinese people deny or refuse to acknowledge the CCP problem, the longer they are only digging themselves into the hole and hurting themselves for any chance of recovery, causing the chinese economy to crash even further. Consider the example of Google, Facebook, Wikipedia, Youtube, Whatsapp, Twitter, Instagram etc - these services are all completely banned in China while at the same time the rest of the planet are on these services every second communicating ideas with each other, making friends, exchanging knowledge, doing business, working together, improving science and technology and arts, and advancing humanity.

Some people say China economically developed a lot in past 20 years, but the truth is this "development" is actually debt borrowed against the future. After the 1989 Tiananmen Square massacre of their own students, in order to survive and hang on to power, the CCP was forced to pursue short-term explosive economic growth that sacrifice everything else, including a foundation or potential for long-term economic and social development. This "scorched earth" policy is like winning the lottery for corrupted CCP officials who can rob a lot of money from the country in the short-term before escaping to America. The only entity left to suffer is China's future from this point on, a country that has been turned by the CCP into a place with no law, no morals, no system for future scientific or economic or social development, no spiritual support apart from money, no trust or cooperation among Chinese, no trust or goodwill from foreigners, no other country as friends, all resources sold away cheaply, entire environment and air and water and soil and food fatally polluted, only social recognition is to make a lot of money for "face", no creativity or personal development for Chinese young people, a populus not allowed to know the truths and not allowed to say the truths.

The end result is that majority wealth of this "debt borrowed against the future" has gone to the 0.000000001% elite ruling class "princeling" CCP families (about 250 of them) who have already smuggled trillions of dollars abroad along with their U.S. passports and their own children (all Chinese elites and Politburo members hold foreign passports, with U.S. and U.K. being the most sought after choice). For the CCP in 1989, 1.4 billion people is great central-planning asset when the country start from nothing and you order them to do backbreaking mass manufacturing repetitive factory work 20 hours a day without workers protection of any kind. But in the 2014 borderless knowledge economy when that no longer works, 1.4 billion immoral and uncooperative and selfish and undeveloped and angry Chinese contained in a lawless system without any hopes of growth is very, very dangerous liability for the CCP.

All debts against the future have to be paid back - China is no exception. That moment may arrive a bit later than expected but it surely will come, as it has on 100% of occasions in human history. In normal countries bad conditions correct themselves with short periods of market ups and downs, but in China the CCP suppress all problems and criticisms until inevitable system meltdown. For China the moment has arrived to suffer the consequences for all its own chosen actions in past 30 years. All the festering fundamental systematic problems listed above and much more, are only getting worse and worse everyday until one day when the system can suddenly no longer bear.

Think USSR in 1989.

( Cliff notes summary for the smartphone generation with ADD, ADHD and Asperger's:

- The Chinese Communist Party (CCP) signed a deal with the devil to pursue miraculous short-term economic growth
- Miraculous short-term economic growth has been achieved, now China has hit the wall on its path of no return, many bad conditions have caught up
- CCP cannot go on externally, it cannot go on internally, economy has no way to go but greatly down, many fatal cancers and huge structural problems from the past now overwhelming the country
- Something has to break, what happens is anyone's guess, guaranteed to greatly impact China and the world

 

[DB008]

China could be the next Japan: Merrill Lynch analysts

China risks heading in the same worrying direction as Japan, a nation now synonymous with decaying first world economies, according to financial strategists.

The report by Bank of America Merrill Lynch has urged the Chinese authorities to act swiftly to prevent lapsing into a stagnant economic phase similar to its island neighbour's.

"In general, it appears to us that the problem facing China today may be more serious than Japan's," the report said.

"We chose 2014 to be year zero because there are strong signs that the house cycle in China is tipping over."

But the Merrill Lynch report, released this week, is the first to suggest China may go the way of the first Asian tiger economy as bad debt accumulates rapidly and assets begin to deflate in value.

"If our assessment is correct, then banks, developers and building materials should start to underperform significantly reasonable soon," the report said.

The analysts said China's emerging issues were likely to continue as it was facing similar problems to those confronting Japan before its asset bubble burst after peaking in 1989.

These included imbalanced growth, government stimulus, overcapacity, an overwrought housing market, and a severely under-capitalised financial system.

http://www.smh.com.au/business/china/china-could-be-the-next-japan-merrill-lynch-analysts-20140912-10fiqm.html#ixzz3DBtgQnOk

 

[Smurf1976]

New home prices down in 55/70 cities last month.
Just like the 2008 Down turn pattern evolving but with a lower high to 2010 similar down turn.

There's a noticeable difference in the pattern this time compared to the previous two downturns.

Looking at that chart, last time it was an abrupt collapse. Plane just suddenly dived, fell out of the sky and crashed nose first into the ground type of situation.

This time it's more gradual. Engines slowed down, plane lost altitude but remained flying as such until it reached the ground still horizontal and with the wheels down.

There does seem to be a difference in the detail. Whether or not that really matters I'm not sure, but this one does seem more orderly.

Looking at the long term and the impacts on Australian exports, there's a difference in the commodities needed to build versus to operate what is already built. Building needs steel (iron ore + coking coal) and other metals etc to build lots of infrastructure. Just running once you've built it needs oil (petrol etc), thermal coal (for electricity) etc. So some differences there on an individual commodity level.

 

[DeepState]

From Wall Street Journal: Almost Half of Wealthy Chinese Want to Leave, Study Shows
15 Sept 2014

[Although many wealthy want to leave China for all the well worn reasons, the interesting part for me is that there are a number who want to enter China too (albeit the net figures probably skew towards exits from wealthy Chinese given weight of numbers). Pick your poison].

Is someone able to post up a link to the Barclays Report from whence this arose?? My search skills aren't strong enough. The brief details extracted from this report are on the wires too.

---

Nearly half of wealthy Chinese are planning to move to another country within the next five years, according to a new Barclays survey.

The survey, which questioned more than 2,000 high net-worth individuals with more than $1.5 billion in total net worth, found that 47% of Chinese respondents said they want to move, compared with a global average of 29%.

Singaporeans were the second-most eager to flee home, with 23% planning to relocate in five years, followed by 20% for the U.K. and 16% for Hong Kong. Indian and American rich are the least likely to move, with only 5% and 6% of respondents saying they would relocate.

The top reasons Chinese cite for moving abroad are better educational and employment opportunities for children (78%), economic security and desirable climate (73%), and better health care and social services (18%). Hong Kong is their top destination (30%), followed by Canada (23%).

But for all those money drain, China is also on the receiving end: It’s a top destination for Singapore’s high net-worth individuals, with 30% saying they want to move to the Middle Kingdom.

Around the world, a growing proportion of high-net-worth individuals are earning their wealth through entrepreneurship. They have bigger risk appetites than those who inherit money and are more willing to move to find the most promising business opportunities.

Asia, set to become the largest regional market by number of millionaires by the end of 2014 according to Barclays, has created a new generation of wealthy individuals keen to educate themselves and their offspring overseas.

 

[Uncle Festivus]

From Wall Street Journal: Almost Half of Wealthy Chinese Want to Leave, Study Shows
15 Sept 2014

[Although many wealthy want to leave China for all the well worn reasons, the interesting part for me is that there are a number who want to enter China too (albeit the net figures probably skew towards exits from wealthy Chinese given weight of numbers). Pick your poison].

Is someone able to post up a link to the Barclays Report from whence this arose?? My search skills aren't strong enough. The brief details extracted from this report are on the wires too.

https://wealth.barclays.com/en_gb/home/research/research-centre/wealth-insights/volume-18.html

 

[Uncle Festivus]

Some blogger........

http://charleshughsmith.blogspot.com.au/2014/09/which-global-hegemon-is-on-shifting.html

 

[notting]

China opens up it's markets somewhat to the west, whilst ramping the crap out of stocks in the local communist controlled media.
Seems some may be wising up right now!!!

 

[notting]

China's energy demand has increased by 8% per anum over the last decade.
China's energy consumption is the best indicator of what is happening in the economy.
Right now Chinas energy consumption is stagnant.
China isn't growing!!!

 

[waterbottle]

China's energy demand has increased by 8% per anum over the last decade.
China's energy consumption is the best indicator of what is happening in the economy.
Right now Chinas energy consumption is stagnant.
China isn't growing!!!

There has been lots of talk of a China-induced crash over the past 6 years but nothing has materialised. Why is this time different?

 

[CanOz]

There has been lots of talk of a China-induced crash over the past 6 years but nothing has materialised. Why is this time different?

The broken clock...

 

[notting]

There has been lots of talk of a China-induced crash over the past 6 years but nothing has materialised. Why is this time different?

The Chinese market has done nothing but crash for the past 6 years. What are you talking about?

 

[nulla nulla]

The Chinese market has done nothing but crash for the past 6 years. What are you talking about?

I thought it was the "rate of growth" that was slowing? As far as I know China has not gone into recession. The economy is still growing around 7% but down year on year with previous years. Have I missed something?

 

[DeepState]

The Chinese market has done nothing but crash for the past 6 years. What are you talking about?

What 6 year crashing are you talking about?

 

[DeepState]

I thought it was the "rate of growth" that was slowing? As far as I know China has not gone into recession. The economy is still growing around 7% but down year on year with previous years. Have I missed something?

Slowing growth (we could express it as insufficient growth relative to expectations) is enough to cause a correction. For example, the composition of China's slowing growth has likely had an impact on iron ore prices.