In the Financial/Economic News

[Greg.D.]

Nice collection of links. It's over my head how you short currencies, etc. Personally, I think they should have just ignored Soros rather than draw attention to him - as it seems they are trying to control appearances, definitely important for confidence in the economy.

 

My fingers are always crossed these days for a healthy turnout for the China economy.

[Allon]

Tough to weigh in on this subject, even the subject of China's economy in general. What is really troubling beyond the internal strife known only to those knowledgeable of Soros and his antics (Greece, South American countries) know about, is the effect on the Chinese population. They are the ones the CP has to please. When my wife, not someone who likes the markets of any country, comes home with a scowl on her face when the Chinese market stumbled recently, you know the rest of China's people (not the economic glitterati) are not happy.

 

When the social agreement between the people and the Emperor fails, the Chinese feel they have a right to remove the Emperor. It usually happens after an earthquake or natural catastrophe in the dynasties over time.

 

Then it won't be a contest between economists, but the people and the PLA.

[Randy W]

Cooking the books in the Northeast - this is from the SCMP in Hong Kong

 

Media in 'rust belt' Chinese province told to downplay region's economic slump

 

Fan was quoted as saying the media should lead the public to "look at the trends and be firm in its confidence over development prospects”.

“The external environment and internal conditions have become intertwined and our province is facing stronger economic downward pressure,” he wrote. “Pessimistic but inappropriate comments such as ‘economic lost track’, ‘economic collapse’ and ‘economic fall’ have appeared in the Liaoning media.

"The political discipline of the party has to be enforced as strict propaganda discipline and the spread of any wrong conceptions that violate the directives of the central government is banned. This is the bottom line that should not be crossed.”

Liaoning is in China’s northeastern rust belt, a region once dominated by heavy industry that has suffered as the country’s economy has slowed.

READ MORE: Cooking the books: Government officials in China’s ‘rust belt’ falsified economic figures

The province recorded average annual economic growth of 12.8 percent a year between 2003 and 2012.

But its economy only achieved 2.6 per cent growth in the first half of last year, the lowest level among the nation's 31 provinces, major cities and regions.

Provincial government officials in the northeast of China have admitted seriously falsifying economic data for years, leading to distorted policy decisions and fomenting corruption in the region, according to report by the state-run news agency Xinhua in December.

The officials admitted falsifying statistics after the Communist Party’s graft watchdog examined inflated figures issued by cadres, the report said.

The data had suggested that the economic scale of some areas in Heilongjiang, Jilin and Liaoning provinces was greater than that of Hong Kong, Xinhua cited Zhao Zhenqi, a law maker in Jilin, as saying.

 

[Greg.D.]

Nice. They say they're doing a good job reporting but doing a bad job meeting party Prop objectives. Which is okay for many things but, when it is referring to the direction of the economy, can accomplish something useful in the short term but cause worse troubles down the road.

 

One of several reasons not to co-invest in CN companies. The house always wins.

[Randy W]

Nice. They say they're doing a good job reporting but doing a bad job meeting party Prop objectives. Which is okay for many things but, when it is referring to the direction of the economy, can accomplish something useful in the short term but cause worse troubles down the road.

 

One of several reasons not to co-invest in CN companies. The house always wins.

 

 

The economy seems MUCH too complex these days for ANYONE to deal with. I like this article in the SCMP

 

Are there any smart people left in finance?

The hedge funds’ supposed investment superiority has been unable to deal with new, unpredictable outcomes and actions that make no sense

 

Many investors seek refuge in hedge funds when markets are falling apart. Hedge fund managers are supposed to be able to navigate volatility. But the funds that are supposed to protect you or help you profit from volatility are themselves being blindsided by volatility that they simply cannot predict or rationalise. Nothing makes sense in the current market. More hedge funds have closed shop in 2015 than in any year on record.

The hedge funds’ supposed investment superiority has been unable to deal with new, unpredictable outcomes and actions that make no sense. Governments like China suddenly intervene and buy entire groups of stocks. Central banks buy massive amounts of their nation’s debt. Money is interest free for banks. The real travesty is that average savers who were scared and avoided the stock markets over the last eight years have been robbed of any real returns on their deposits.

Government policies have made it almost impossible for many hedge fund strategies that depend on rational monetary actions and reactions. Part of the problem of predicting markets is that there is no “correct” price for shares- or anything else like oil. Even looking historically you really can’t answer the question. Were prices wrong then or are they wrong now? Clearly, neither.

But then, hedge fund managers are supposed to be the smartest financiers. Maybe the market has become too complex to even identify and manage risk in some situations. Perhaps the market participants like the algorithm traders are so far out of touch with the real economic world they forgot that what’s happening to the real economy actually matters – someday.

. . .

So as we head into a new (Chinese) year, investors can hope for more luck again. They will need it. As the Yiddish saying goes, “Man plans. God laughs.”

 

[Randy W]

This looks like an interesting article in the WSJ. I don't mind paying for access to news I want to read, but I wouldn't care to have to pay for subscriptions to EVERY news source that I care to reference over the course of a year.

 

Fortunately, in this case, it seems like the (free) summary pretty well covers the meat of the matter.

 

China’s Economic Reforms Have Stalled. Why?

Sentiment on China among global investors has always veered between exaggerated optimism and excessive pessimism. Even so, the latest bout of gloom is unusually severe. As WSJ’s Andrew Browne writes in his “China’s World” column:

Today’s disillusion is focused largely on China’s future prospects, not its current condition. Absent the reassurance of reform progress, the expectation is that growth will stall. Only the timing is in doubt.

Why the delay? Some say Mr. Xi has been too busy consolidating his power, or that he’s been consumed by his anticorruption campaign. It takes time, they point out, to build consensus on controversial overhauls to rejuvenate state-owned enterprises, open the financial system to greater competition and liberalize land and labor markets.

But evidence is building that reforms have stalled for a more basic reason: Mr. Xi, despite the early hype, sees only a limited role for markets.

 

[Randy W]

This looks like an interesting article, but WAY too long for my level of interest and my attention span - TMI - in the NY Times

 

The Fall of China’s

Hedge-Fund King

Xu Xiang was a legend in the country’s booming stock market

— until the bubble he helped to create took him down with it.

 

 

 

As the founder of Zexi Investment, one of China’s most successful hedge funds, Xu had consistently produced returns that were truly unbelievable: His worst-performing fund had grown by nearly 800 percent in five years. He had also survived countless corruption investigations, market falls, purges and other scares. Yet even as his legend grew, Xu remained intensely secretive. He had amassed a fortune by trading on knowledge and information no one else had, rumors no one else knew — a strategy perfectly crafted for China, where information is tightly controlled and reluctantly released. (Almost every source I approached for this article would only speak to me anonymously, fearing government reprisal or harm to their business.) Even as Xu grew richer and more powerful, he kept nearly every detail about his personal life and his trading techniques jealously hidden.

That equilibrium seemed certain to crumble on June 12, when the Chinese stock market began a free-fall. In the span of three weeks, the market lost a third of its value.

. . .

From the beginning of 2015 through September of that year, 34 companies listed on the Chinese stock market reported officials as either missing or under investigation by the authorities, according to Bloomberg News. As of late November, Xinhua, the official Chinese news agency, had identified at least 16 major finance industry figures tied directly to the stock-market cleanup who were either arrested, under investigation or assisting the authorities. In early January, the chairman of Metersbonwe joined the list, disappearing without explanation for more than a week.

“The level of corruption is beyond your imagi­nation,” a prominent Beijing-based hedge-fund manager told me over coffee several weeks after Xu’s arrest. Like all my sources, this fund manager was extremely nervous about being interviewed. The irony of the crackdown was clear: Though a lack of transparency had clearly shattered the market, the Chinese government was responding with a crushing clampdown on information.

[Randy W]

A change in direction?? People's Daily:

Supply-side reform 'needs a big push': President Xi

"The main direction (of the reform) is to reduce ineffective supply, increase effective supply, and make the supply structure more fitting to the demand structure," he said.

The core of the reform is to push the reform of State-owned enterprises, accelerate the transformation of government functions, and deepen fundamental reforms, such as those in the pricing, fiscal and taxation, financial and pension fields, the president added.
The market and government should both better play their roles to balance the reforms, he said.

and SCMP:

Xi Jinping’s supply-side plan now the genuine article of economic reform for China

Two pointed items in People’s Daily last week sent the unmistakable message that the president is firmly in the economic driver’s seat

The Monday interview was particularly pointed as it urged officials to dispense with the fantasy of stimulating the economy through monetary easing and warned that the country’s soaring debt levels could lead to “systemic financial risks” and negative growth.
This largely repudiated what Premier Li Keqiang and his cabinet have been doing over the past two years – using high leverage to boost the real estate and stock markets to support economic growth.

. . .

Although Li has repeatedly said his cabinet will not resort to a massive stimulus plan to support growth, the soaring bank lending and debt levels have heightened worries.
The dangerous cost of China’s debt-fuelled growth: delays to much-needed structural reforms

. . .

The two articles suggested that Xi appeared determined to bet on painful restructuring instead of seeking short but unsustainable growth, something that Chinese leaders have said repeatedly over the past few decades but have made little progress in achieving.
As some economists have pointed out, Xi’s emphasis on supply-side reforms is part of a global trend and also reflects his political aim to put more pressure on vested interest groups, including local officials and state-owned enterprises after his harsh crackdown on rampant official corruption.
Indeed, to push through Xi’s reforms means that many “zombie” enterprises will be forced to close down, which could contribute to unemployment and social instability.

. . .

All those factors mean that China’s economic growth could slow further and even fall below the government-set annual growth rate of 6.5 per cent.
The Monday interview seems to suggest Xi is not worried, as the “authoritative source” said the economy would not plunge even without stimulus as it still enjoyed huge potential, was highly resilient and had ample leeway. But it also means that he is prepared to accept lower growth in exchange for notable progress in restructuring, even if the risk of social instability rises significantly.
Despite the staggering odds, Xi’s strong leadership style displayed in his unprecedented anti-corruption campaign and rapid consolidation of power means he stands a good chance of succeeding.

[Randy W]

in the SCMP

 

Chinese yuan slides to 5-year low, pound slumps further in Brexit aftershock

 

 

Yuan Falls!

 

The PBOC set the yuan’s reference rate at 6.6375 per US dollar, down 0.9 per cent from the previous fix, the biggest drop since last August . . . .

 

“The yuan continues to weaken in the face of a stronger USD following the Brexit vote. The fear is that this may revive concerns of further devaluation, which could be in the offing,” said Stephen Innes, senior trader at Oanda Asia Pacific. “I anticipate the risk theme to continue driving the investor sentiment, with the Yuan trading off its back foot.”

 

[Randy W]

Yuan Falls!

 

 

 

The wife headed for the bank yesterday - she may be in for disappointment (as in, converted her money too soon) if it continues this trend!

 

 

 

China’s Market News: Yuan Rate Drops, Credit Risk Increases

 

Edited October 13, 2016 by Randy W
that's 6.7258 (see edit history)

[Randy W]

from Reuters

 

Exclusive: China ready to slow yuan descent, worried about capital outflows - sources

Chinese policymakers have been unfazed by the yuan's recent slide, but are ready to slow its descent for fear of fanning capital flight if the currency falls too quickly through the psychologically important 7-per-dollar level, policy advisers said.

The yuan fell on Friday to an eight-year low of 6.8950 per dollar, extending a sharp decline in the past week and taking its fall so far this year to 5.8 percent. If maintained, it would mark the yuan's biggest annual decline since the landmark revaluation in 2005.

. . .

Beijing's biggest concern is that a sharp fall in the yuan will trigger the sort of capital flight that followed August's surprise devaluation of the currency, which sparked fears the health of the economy was worse than Beijing had let on. China's currency reserves slumped by more than $400 billion by the end of January as Chinese moved cash overseas.

. . .

This year, the central bank has been guiding the yuan lower by pegging it to the dollar when the U.S. currency weakens and pegging it to a basket of currencies when the dollar rises, analysts said. So in recent weeks, the yuan has held largely steady against the basket.

On a daily basis, the central bank sets the yuan's mid-point versus the dollar based on the previous day's closing price, taking into account changes in major currencies.

. . .

Chinese President Xi Jinping told Trump that cooperation was the only choice for relations between the world's two largest economies, with Trump saying the two had established a "clear sense of mutual respect".

Assuming no major ructions from a Trump presidency, some government economists expect the yuan to fall to 7.2 per dollar by the end of 2017, which would imply a drop of 4.2 percent from the current level.

 

had to look this up at the Merriam-Webster site

 

Definition of ruction

1 : a noisy fight

2 : disturbance, uproar

 

 

[Randy W]

Sounds like they want to keep it where it is - around 6.95 - from the SCMP:

 

China to chart stable yuan course and stem financial risks in 2017 amid US Fed headwinds

 

The country’s leaders will aim to keep the yuan on an even keel and pay more attention to “financial risks” next year.

The priorities were set at the annual Central Economic Work Conference, a series of top-level closed-door meetings that ended on Friday, according to a statement released by Xinhua.

The renewed focus comes amid rising pressure on the yuan to depreciate and growing risks to the financial system in the aftermath of the US Federal Reserve’s rate rise.

China would “keep the yuan exchange rate basically stable at a reasonable and balanced level while increasing flexibility in the exchange rate mechanism”, the statement said.

 

 

China would also “put financial risk prevention and control into a more important position” to curb asset bubbles and to avoid any systemic financial risks.

[Randy W]

in Bloomberg

 

China’s Army of Global Homebuyers Is Suddenly Short on Cash

China’s escalating crackdown on capital outflows is sending shudders through property markets around the world.

In London, Chinese citizens who clamored to purchase flats at the city’s tallest apartment tower three months ago are now struggling to transfer their down payments. In Silicon Valley, Keller Williams Realty says inquiries from China have slumped since the start of the year. And in Sydney, developers are facing “big problems” as Chinese buyers pull back, according to consultancy firm Basis Point.

“Everything changed’’ as it became more difficult to send money offshore, said Coco Tan, a broker associate at Keller Williams in Cupertino, California.

. . .

The change spooking Zheng and his compatriots came in a statement from the State Administration of Foreign Exchange on Dec. 31, hours before the reset of Chinese citizens’ annual foreign currency quotas. Among other requirements, SAFE said all buyers of foreign exchange must now sign a pledge that they won’t use their $50,000 quotas for offshore property investment. Violators will be added to a government watch list, denied access to foreign currency for three years and subjected to money-laundering investigations, SAFE said.

 

 

[Randy W]

Continuing that theme . . . in the SCMP

 

How China’s overseas property dream turned into a nightmare

Capital controls mean people who signed up for flats in Malaysia cannot send money from mainland

 

http://cdn3.i-scmp.com/sites/default/files/styles/980x551/public/images/methode/2017/03/21/ae8a1abc-0db8-11e7-9af0-a8525e4e6af4_1280x720.JPG?itok=lgswBW9B

 

However, capital controls introduced by Beijing have turned the dream of a Malaysian property into a nightmare for many mainlanders.

Zhang, who lives in Hefei, the capital of Anhui province, was enticed by Forest City commercials in early 2016, when China was witnessing the largest wave of outbound investment the country had ever seen, with its foreign exchange reserves, a rough gauge of capital outflows, falling at a record pace.

 

. . .

 

The mainland has lost nearly US$1 trillion in foreign exchange reserves from the peak in 2014, and about two months after Zhang’s visit to Johor, Beijing ordered a halt to “irrational” outbound investment, especially that which ended up in overseas property projects.

 

Zhang discovered this year that no bank on the mainland would help her pay for her overseas property dream. When she attempted to transfer money to the vendor’s bank account in Hong Kong in January, her local bank told her the Hong Kong account was “not correct”. However, she had managed to pay 20 per cent of the amount she owed for the property to the same Hong Kong account in October.

She told the Post she was now trapped in limbo and was trying to get a refund. Other purchasers are taking the same course of action.

“Now we understand all further instalments need to be paid abroad. But this is not allowed due to the foreign exchange controls from the Chinese government,” said another Forest City purchaser, Vicky Wu from Guangzhou. “If we do so, we will be put on the government’s black list.”

 

 

[Randy W]

The yuan seems to be holding steady at slightly below 6.9 for now. In the SCMP

 

China not currency manipulator, US dollar too strong, says Trump in major flip-flop on campaign vow

 

 

“I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me. But that’s hurting -- that will hurt ultimately,” he told the newspaper. “It’s very, very hard to compete when you have a strong dollar and other countries are devaluing their currency.”