Tag: China

Tax Burdens by State | Japan’s GDP | Knock-on Effects of Covid-19

Visual Capitalist – Visualizing Unequal State Tax Burdens Across America – Jenna Ross 1/23/20

Economist – Japan’s GDP shrinks dramatically after a tax rise and a typhoon  2/17/20

WSJ – Daily Shot: WIND & ANZ Research – China Public Transportation Daily Passenger Flows 02/17/20

WSJ – Daily Shot: Fitch – Thailand Tourist Arrivals 02/17/20

Demographics | Oil & Gas Production

FT – China’s falling birth rate threatens economic growth – Sun Yu 1/19/20

FT – Italy’s collapsing birth rate rings demographic alarm bells – Miles Johnson 1/16/20

WSJ – Daily Shot: eia – US Shale Production by Region 1/20/20

WSJ – Daily Shot: Gas Production by Country 1/20/20

China’s Working Age Population | Passive Funds – AUM | Luxury Apartments In Full Swing

WSJ – Daily Shot: Caixin – China’s Working-Age Population 1/15/20

FT – Index funds break through $10tn-in-assets mark amid active exodus – Robin Wigglesworth and Alex Janiaud 1/7/20

WSJ – Aiming at Wealthy Renters, Developers Build More Luxury Apartments Than They Have in Decades – Will Parker 1/15/20

Builders are on track to finish more new apartments in 2020 than in any year since the 1980s, a new study shows, with developers across the U.S. chasing after the more affluent tenants.

An additional 371,000 new rental units are expected to hit the U.S. market this year, which is a 50% increase over the number of new units completed in 2019, according to an analysis from real-estate analytics firm RealPage.

State and local governments are grappling with how to create more rentals to combat the rising cost of housing for middle- and lower-income families. But as much as 80% of new supply this year will come from luxury developments, or what the real-estate industry calls “Class A” properties, said RealPage chief economist Greg Willett.

This year’s surge signals that projects planned around the 2015 peak of the rental market are reaching completion.

The lack of single-family houses available for sale, and the rising price to buy them, has been one major boost to the luxury rental market, Mr. Bahrami said.

And although rental supply this year is the highest in more than 30 years, the construction of single-family homes for sale is well below historic norms, sending more people in search of apartments, said Calvin Schnure, chief economist for the National Association of Real Estate Investment Trusts, a trade group.

Cigarette Sales | Annual Change in Global Car Sales | Diabetes on the Rise in China

WSJ – Daily Shot: Our World in Data – Sales of Cigarettes per Adult Per Day 12/13/19

WSJ – Daily Shot: Fitch – Annual Change in Global Car Sales 12/13/19

Economist – As China puts on weight, type-2 diabetes is soaring 12/12/19 Edition

Australian Air Quality is Suffering | China Pork and Beef Prices are Up

Bloomberg – Politicians Fiddle While Australia Burns – David Fickling 12/10/19

A symptom of the swine fever that ravaged the China pork population.

WSJ – Daily Shot: China CPI YoY – Pork & Beef 12/10/19

Number of Listed Companies (US & China)

FT – US has fewer listed public companies than China – Robin Wigglesworth 10/6/19

So that happened.

Household Debt in China has become a Thing

WSJ – The Trouble With Rate Cuts in China – Mike Bird 8/21/19

This week, the People’s Bank of China revealed a long-anticipated change to how commercial bank interest rates will be calculated. Revealingly, PBOC officials were at pains to stress that while the move might lower interest rates for corporate lending, mortgage interest rates wouldn’t fall.

Eighteen banks now have to show the PBOC the best interest rates they offer to their clients, based on rates set by the central bank’s medium-term lending facility, a source of credit for the banks themselves.

The change has two objectives. One is to lower rates, at least for some loans.

The other is to improve the transmission mechanism for monetary policy: The PBOC wants banks to do a better job of passing changes in policy on to their customers.

The most interesting aspect of the new approach is the deliberate exclusion of real estate. This is likely because Chinese households went on a borrowing spree after the PBOC’s 2015 round of benchmark rate cuts. In 2016, household debt rose by 6.2 trillion yuan ($878.11 billion)—compared with an increase of around 3 trillion yuan a year on average for the previous five years—and only accelerated subsequently.

Which segues nicely to another Mike Bird article.

WSJ – China’s Floundering Crackdown On Household Debt – Mike Bird 8/16/19

Beijing is wisely wary of the decade-long boom in China’s housing market, the consequent build-up in borrowing and what it means for the country’s development model. But in the data there is no sign of a crackdown.

Last week, in its annual Article IV assessment of the Chinese economy, the International Monetary Fund raised its forecasts for Chinese household debt by several percentage points. The IMF expects household debt to rise to 56.2% of GDP this year, and as high as 67.9% of GDP in 2024. The latter figure would be well above current levels in Japan and the eurozone.

In the past 12 months, developers have booked a record 11.7 trillion yuan ($1.66 trillion) in pre-sales—sales of homes due to be completed in the years ahead. Assuming that buyers put down a deposit of around 30%, that is north of 8 trillion yuan in mortgage debt not yet fully on the shoulders of the household sector.

In comparison, Chinese household debt rose by 7.3 trillion yuan between the end of 2017 and the end of 2018, according to data from the Bank for International Settlements. 

The government has good reasons to want to stop the buildup. Many emerging markets have struggled to regain high levels of growth after generating considerable property-related debt, particularly in Asia.

But there is no sign that household debt is even plateauing, let alone declining. Beijing’s stated preference is for an end to speculative household borrowing, but it is proving to be a difficult habit to kick.

I.O.U.s – As Good As Real Money

NYT – Circulating in China’s Financial System: More Than $200 Billion in I.O.U.s – Alexandra Stevenson and Cao Li 8/6/19

China’s trade war with the United States has escalated in recent days, posing a growing threat to an already slowing economy. 

China is not running out of money. But Chinese banks are reluctant to lend to private businesses because they consider big, state-owned enterprises more reliable in paying off their debts. Alternative sources of money have dried up as regulators have cracked down in recent years on China’s shadowy world of unofficial lending.

So a growing number of companies are issuing i.o.u.s to their suppliers. Some suppliers turn around and use the notes to pay another supplier. And then — in a sign of how desperate some Chinese companies have become for money — they sell the notes for less cash than they are worth.

Commercial acceptance bills are not legal tender. Rather, they are pieces of paper promising payment in the future. Companies owed some $211 billion in these informal notes as of February, the most recent government data available, an increase of more than one-third from the previous year.

More debt may be floating around China’s corporate world and goes untracked if the notes are being traded for less than their face value. A market has formed around commercial acceptance bills, in which companies buy and sell them based on the prospects for being paid back. The bigger and better known the company, the more secure the bill is considered.

A pillar of China’s economy, the property sector, is feeling the squeeze particularly hard. Sales have been slowing since late 2017, making it hard to pay for new projects. At the same time, the government is clamping down on other ways that property companies raise money, like through the shadow banking system.

Property companies have adapted by effectively turning the commercial acceptance bills into a currency, according to interviews and filings from dozens of property developers and suppliers like steel companies, design and construction firms.

Xu Jiang of Zhubo Design, an architecture and urban planning company in the southern city of Shenzhen, said customers had started to pay with commercial acceptance bills two years ago. The customers, which include some of the country’s biggest developers, local governments and state-owned firms, now use these notes more frequently than paying cash, he said.

Today, one of the biggest issuers of i.o.u.s is China’s largest and best known property company, Evergrande ($36bn market cap). By the end of last year it had issued nearly $20 billion worth of i.o.u.s to its suppliers. With a towering $100 billion debt pile and a penchant for raising bonds to pay off the interest, it appears to have turned to commercial acceptance bills to help cover costs.

Bauing Construction Holding Group, a big supplier of design and materials to China’s biggest property developers, has disclosed that it is owed $96.4 million in these i.o.u.s from Evergrande.

Another company that owes Bauing money is the state-owned firm China State Construction Engineering. China State said it had owed $490 million in i.o.u.s to all of its suppliers at the end of last year.

Another major property developer, Greenland Holding, which was founded by the Shanghai government and has property developments in dozens of cities across China, had $550 million worth of unpaid notes out to suppliers by the end of last year, according to its annual report. The company said that was 10 times the amount it had outstanding in 2017.

African Swine Fever is likely to make your Bacon more Scarce

Economist – African swine fever threatens 200m pigs in China – Daily Chart 8/6/19

African swine fever, a highly contagious virus, has spread to every province in China. The country is the world’s biggest pork producer, and home to half the pigs on the planet. In the last year it has reported 149 outbreaks. Some 1.2m pigs have been culled, according to official statistics. Unofficial reports suggest far bigger losses. Rabobank, a Dutch bank, reckons that by year-end, as many as 200m pigs could be lost to disease or slaughter, leading to a 30% drop in pork production.

Although African swine fever is not harmful to humans, it kills up to 90% of pigs. Infected animals stop eating, hemorrhage and die, often within a week. There is no vaccine or cure. Before 2007 the disease had been eliminated from most of the world, with the exception of Africa. It reemerged in Georgia in early 2007 and spread to Russia, Ukraine, Belarus and Lithuania.

The disease was probably introduced to China via its northern neighbor, with which it shares a 4,300km (2,670-mile) border, or through infected pork products imported from Europe. 

China’s first outbreak was reported on August 3rd 2018 in Liaoning, a coastal province in the north-east of the country. Chinese authorities scrambled to contain the disease, culling tens of thousands of pigs and banning transport of the animals into and out of affected areas. It did not work. The virus spread to every part of the country. It eventually crossed into neighboring Vietnam, Cambodia and Laos.

With pork prices in the country expected to jump by 70% year-on-year in the second half of 2019, China’s favorite meat may soon be off many dinner tables.

July 19, 2018

If you were only to read one thing…

Bloomberg – Panic Roils China’s Peer-to-Peer Lenders – Jun Luo, Alfred Liu, and Crystal Tse 7/16

  • “China’s savers are rushing to pull money from peer-to-peer lending platforms, accelerating a contraction of the $195 billion industry and testing the government’s ability to maintain calm as it cracks down on risky shadow-banking activities.”
  • “In some cases, savers are turning up at the offices of P2P operators to demand repayment, spooked by reports of defaults, sudden closures and frozen funds. At least 57 platforms have failed in the past two weeks, adding to 80 cases in June, the biggest monthly tally in two years, according to Shanghai-based Yingcan Group. The researcher defines failed platforms as those that have halted operations, come under police investigation, missed investor payments, moved into other businesses, or had operators flee with client money.”
  • “’Investors have lost confidence in the smaller platforms, because they have no idea if those companies will survive,’ said Dexter Hsu, a Taipei-based analyst at Macquarie Capital. Only a handful of the 2,000 or so remaining firms are likely to endure, he said.”
  • “China’s P2P industry, the world’s largest, is one of the riskiest and least-regulated slices of the nation’s sprawling shadow-banking system. A government clampdown has weighed on P2P platforms for two years, but the pressure intensified in recent months after China’s credit markets tightened and the banking regulator issued an unusual warning to savers that they should be prepared to lose all their money in high-yield products.“
  • “The shakeout has cast doubt on the listing plans of several P2P lenders and underscores the delicate balancing act faced by China’s government as it tries to reduce moral hazard in the financial system without triggering a crisis. While there’s little sign that the P2P turmoil has spread to systemically important wealth-management products issued by banks, much of China’s $10 trillion shadow-lending system faces the same headwinds of rising defaults, slowing economic growth and official calls to end to implicit guarantees on risky investments.”
  • “China’s P2P platforms have about 50 million registered users and 1.3 trillion yuan ($195 billion) of outstanding loans, most of which have short maturities. Normally, savers have to wait for loans facilitated by the platforms to mature before getting their money back. But some are now trying to exit early by selling their rights to others at a discount, or by going to the platform’s offices to demand repayment.”
  • “The turmoil is also hurting companies and individuals who have relied on P2P platforms for financing. They include cash-strapped small businesses seeking working capital, individuals without a credit history, and, more recently, leveraged stock market investors and home buyers in need of down-payments.”
  • “Some P2P platforms were also raising funds illegally for their own use, while others were running Ponzi schemes that collapsed when the flow of new money halted, regulators have said. That helps explain why authorities have so far been steadfast in cracking down.”
  • “Last month, China Banking and Insurance Regulatory Commission Chairman Guo Shuqing warned that any savings or investment product with promised returns of more than 8% is likely to be ‘very dangerous’ and that investors should be prepared to lose all their money if advertised returns exceed 10%. The average yield on P2P loans was 10.2% in the first half, official figures show. Reported default rates vary from zero on the best platforms to 35% on the worst, according to National Internet Finance Association of China.”

Markets / Economy

WSJ – Daily Shot: Gold 7/17

 

WSJ – Daily Shot: Silver 7/17

WSJ – Daily Shot: NASDAQ Composite Index 7/17

 

Real Estate

Bloomberg Businessweek – Britain’s Online Shopping Boom Is a Bust for the High Street – Sam Chambers 7/10

  • “Online retailers typically benefit from lower overhead than their store-based counterparts, but in the U.K. that advantage is bigger than just about anywhere. The country has the developed world’s highest commercial property taxes, and in many areas those levies have jumped even as store sales decline, because land values have risen since the financial crisis. Last year, Tesco paid £700 million in property taxes, and J Sainsbury Plc, the No. 2 chain, paid £550 million. Amazon’s bill: £14 million.”

Economist – Big corporates’ quest to be hip is helping WeWork 7/12

  • “Research suggests that employees are happier in co-working environments like those run by WeWork. But the firm’s real genius is that it is also far cheaper for their employers. Property experts estimate that firms typically spend anywhere between $16,000 and $25,000 per employee on rent, security, technology and related office expenses. Mr Neumann insists they can get all of that from WeWork starting at $8,000 per worker. Efficient use of space is one reason. Ron Zappile of Colliers, a property-services firm, reckons that typical corporate offices use some 185 square feet (17 square meters) per employee. WeWork members get by on 50 square feet per head.”
  • “WeWork has more than 250,000 members from a range of industries (see chart) and expects to double revenues this year for the ninth straight year. Last year it made $886m in revenue, 93% of which came from memberships.”
  • But…”WeWork’s net losses also roughly doubled, however, from $430m in 2016 to $884m last year. As with many fast-moving startups, it explains its lack of profitability by pointing to big investments. It will open 15 new offices a month worldwide for the foreseeable future. Its bonds issued in April were rated as junk.”
  • “…the most important source of stability may well be a shift in its customers, from startups to big firms. A few years ago, WeWork’s business was comprised almost entirely of small fry. In the year to September the enterprise segment (firms with over 1,000 staff) grew by around 370%. As of June, big firms accounted for about a quarter of its membership and revenues. More than 1,000 companies now take anything from one to 12,000 desks. In June, Facebook asked WeWork for an entire building for several thousand workers.”
  • “The average enterprise lease is close to two years and many new ones are three to five years long. Whereas big firms, used to conventional office leases of 10-20 years, see WeWork’s contracts as flexible, the firm itself sees them as commitments that will help it weather a downturn.”

Cryptocurrency / ICOs

WSJ – Daily Shot: Barchart – Bitcoin 7/17

WSJ – Cryptocurrency Exchanges Are Getting Hacked Because It’s Easy – Steven Russolillo and Eun-Young Jeong 7/16

Tech

Bloomberg Businessweek – China’s Technology Sector Takes On Silicon Valley – Peter Elstrom, Yuan Gao, and Xiaoqing Pi 7/10

China

FT – China money market funds’ rush into bank credit worries investors – Don Weinland 7/16

  • “Investors have warned of growing systemic risks in China’s $1.09tn money market fund industry, as funds buy up bank credit despite a surge in bad debt this year.”
  • “Comparably high yields and low risk at Chinese money market funds in recent years have made the industry a favorite among retail investors in the country. Assets under management have grown from Rmb600bn at the end of 2012 to an estimated Rmb7.3tn ($1.09bn) in March, making it the second-largest market in the world after the US.”
  • “But in recent months China’s central bank has tightened monetary policy and access to credit, forcing down the funds’ once-attractive yields. At the biggest funds, average returns have dropped to an annualized to 3.7% from about 4.5% at the start of the year.”
  • “In response, funds have rushed into bank credit, such as negotiable certificates of deposit, as a means to boost returns and continue attracting retail investments.”
  • “Investors are now warning that the push into bank credit comes just as regulators are forcing banks to recognize vast amounts of bad debts that were once hidden off their balance sheets, leading to greatly increased risk for the investments. Falling credit ratings at banks could force money market funds to exit their investments, something that could lead to a shock through the massive fund industry.”
  • “Ant Financial’s Yu’e Bao, with about $200bn under management, is the world’s largest money market fund. Last month it reduced the amount of money investors could withdraw within one day to Rmb10,000 ($1,498) per investor from Rmb50,000. About Rmb200bn flowed out of the fund between April and June. The company declined to comment.”
  • “The risks at the funds are centered around their source of high-yielding investments: credit from hundreds of small banks with weakening balance sheets.”

FT – China closes a fifth of foreign university partnerships – Emily Feng 7/17

FT – Hong Kong tightens screws on pro-independence party – Ben Bland 7/17

  • “The Hong Kong government is considering banning a pro-independence political party on unprecedented ‘national security’ grounds, a move decried by activists as the latest violation of the city’s promised freedoms and rights.”

India

NYT – In India, Summer Heat May Soon Be Literally Unbearable – Somini Sengupta 7/17

Other Interesting Links

Maps on the Web: Reddit – White Americans by State 2017 7/4