Tag: china

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Asia’s Wealthiest Man Is Selling Everything In China. Crash Coming?

With his net worth well in excess of $30 Billion, Li Ka-Shing is the richest man in Asia.  A shrewd property investor, Li made most of his billions by investing in Chinese property market. Yet, unbeknownst to most, Li has been liquidating most of his property holdings in China since last year. With recently completed sale of Pacific Place shopping center in Beijing for $928 million, Li now has no assets of significant value left in or exposed to the Chinese market.

So, what does Li sees that has caused him enough concern to liquidate most of his holdings? 

Same thing that we have mentioned on this blog.( Where Is China’s Hidden Debt Bomb) China is on a verge of a massive credit seizure that should (in theory) collapse it’s real estate, banking, shadow banking, capital missallocationg and credit bubbles. When it does, you will see China go through a massive economic slowdown and a possible revolutionary regime change. While most people will dismiss this view as highly improbable (anticipating a soft landing at best), Asia’s richest (and arguably the smartest) man just voted with his wallet. As they say, money talks and bullshit walks.

In fact, watch Li buy his Pacific Place mall back for $100 Million within the next 5 years.

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Asia’s Wealthiest Man Is Selling Everything In China. Crash Coming?  Google

The richest man in Asia is selling everything in China

Sovereign Valley Farm, Chile

Here’s a guy you want to bet on– Li Ka-Shing.

Li is reportedly the richest person in Asia with a net worth well in excess of $30 billion, much of which he made being a shrewd property investor.

Li Ka-Shing was investing in mainland China back in the early 90s, way back before it became the trendy thing to do. Now, Li wants out of China. All of it.

Since August of last year, he’s dumped billions of dollars worth of his Chinese holdings. The latest is the $928 million sale of the Pacific Place shopping center in Beijing– this deal was inked just days ago.

Once the deal concludes, Li will no longer have any major property investments in mainland China.

This isn’t a person who became wealthy by being flippant and scared. So what does he see that nobody else seems to be paying much attention to?

Simple. China’s credit crunch.

After years of unprecedented monetary expansion that has put the economy in a precarious state, the Chinese government has been desperately trying to reign in credit growth.

The shadow banking system alone is now worth 84% of GDP according to an estimate by JP Morgan. The IMF pegs total private credit at 230% of GDP, jumping by 100% in the last few years.

Historically, growth rates of these proportions have nearly always been followed by severe financial crises. And Chinese leaders are doing their best to engineer a ‘soft landing’.

If they’re successful, the world will only see major drops in global growth, stocks, property, and commodity prices.

If they fail, the spillover could become pandemic.

This isn’t important just for Asian property tycoons like Li Ka-Shing. Even if you don’t know Guangzhou from Hangzhou from Quanzhou, there are implications for the entire world.

Here in Chile is a great example.

Chile is among the top copper producers worldwide, China among its top consumers. With a major slowdown in China, however, copper prices have dropped considerably.

Consequently, the Chilean economy has slowed. The peso is down nearly 10% against the US dollar in recent months, and the central bank is slashing rates trying to prop up growth.

There are similar situations playing out across the globe.

Not to mention, China could put the entire global financial system on its back just by dumping a portion of its Treasuries in order to defend the yuan.

Now, you’d think that a major credit crunch with far-reaching consequences in the world’s second largest economy, its largest manufacturer, and its largest holder of US dollar reserves, would be constant front-page news.

But it’s not.

Most traditional investors are unaware that what’s happening in China will likely have far greater implications to their investment portfolios than the policies of Janet Yellen and Barack Obama combined. At least for now.

And folks who don’t see this coming and keep buying at the all-time high may see their portfolios turned upside down. Quickly.

At the same time, some investors who are conservative and cashed up may realize a real ‘blood in the streets’ moment.

Again, using Chile as an example, I’m starting to see over-leveraged property owners coming to the market in droves ready to make a deal. This is great news because my shareholders and I are able to buy far more property with US dollars than we could even just six months ago.

I expect this trend to hold given that China is just at the beginning of its process.

It’s said that the Chinese word for “crisis” is a combination of “danger” and “opportunity”.

This isn’t entirely accurate. ‘Weiji’ can have several meanings, but is probably best translated as ‘dangerous’ and ‘crucial point’.

We may certainly be at that crucial point, and now might be a good time to take another look at your finances and consider selling before a major crash. The richest man in Asia certainly thinks so.

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China Running On Fumes. What Happens When World Economies Synchronize.

China wants 7% growth, no matter the cost. While China was able to pull it off in the past though massive infrastructure spending, real estate bubble, massive stimulus, jaw dropping growth in bank assets and shadow banking, I am afraid the party is coming to an end. As per Bloomberg report below…..

Gross domestic product grew a seasonally adjusted 1.5 percent from the previous three months, according to the median estimate in a Bloomberg News survey ahead of data released tomorrow, down from 1.8 percent in the fourth quarter. That indicates a sharper deceleration than a median projection for 7.3 percent growth from a year earlier, from 7.7 percent. 

I can only imagine what will happen to their GDP growth when any of the above mentioned bubbles blow up, let alone all of them. Yet, there is a bigger story behind the scenes. It appears, from my vantage point, that most important world economies have synchronized. The US, China, Japan and the EU now move in tandem. This becomes even more apparent when you take our mathematical and timing work into consideration.

As suggested earlier, our mathematical/timing work shows a very clear bear market and a severe US Recession between 2013-2017. When we look at the most important world economies, we find them in a very similar cyclical composition OR right on a verge of a massive slowdown. While globalization played an important role in such synchronization, I continue to believe that FED stimulus and subsequent worldwide speculative bubbles (in all asset classes) are much bigger culprits. If you would be interested in learning when the bear market of 2014-2017 will start (to the day) and it’s internal composition, please Click Here.  

China Bank Assets Change

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China Running On Fumes. What Happens When World Economies Synchronize.  Google

Bloomberg Writes: China GDP Gauge Seen Showing Deeper Slowdown

China’s loss of economic momentum in the first quarter was deeper than the most widely-cited data will show, according to analyst forecasts for a gauge that’s gaining increasing recognition.

Gross domestic product grew a seasonally adjusted 1.5 percent from the previous three months, according to the median estimate in a Bloomberg News survey ahead of data released tomorrow, down from 1.8 percent in the fourth quarter. That indicates a sharper deceleration than a median projection for 7.3 percent growth from a year earlier, from 7.7 percent.

Investors are focused on the scale of a slowdown that prompted Premier Li Keqiang to provide what some analysts dubbed a “mini-stimulus” of spending and tax relief. While the indicator suffers from flaws including the government’s failure to give details of methodology, it provides an extra tool to analyze an economy that bond-fund manager Bill Gross calls the “mystery meat” of emerging markets.

“The quarter-on-quarter data will show growth momentum has actually bottomed out in the first quarter,” said Chen Xingdong, Beijing-based chief China economist at BNP Paribas SA, who previously worked at the World Bank. The measure “has clearly captured the changes in growth momentum,” Chen said.

Data today from the People’s Bank of China showed the nation’s broadest measure of new credit fell 19 percent from a year earlier and money supply grew at the slowest pace on record, underscoring risks of a deeper slowdown as the government tries to curb financial dangers. The Shanghai Composite Index of stocks fell 1.4 percent.

Growth Concerns

While yuan forwards declined yesterday to the lowest level in eight months on concern growth is faltering, economists are picking a rebound this quarter, forecasting quarter-on-quarter expansion of 1.8 percent, according to a separate Bloomberg monthly survey in March. The State Council on April 2 outlined spending on railways and housing, along with tax relief, with annual expansion at risk of missing the 7.5 percent goal.

Bloomberg’s survey of estimates for the first quarter-on-quarter GDP data in 2011 garnered only one forecast, from Goldman Sachs Group Inc. In contrast, the latest poll had 17.

“More and more private-sector economists are giving estimates and paying attention to it,” said Andrew Polk, an economist in Beijing with The Conference Board, a New York-based research group.

At the same time, the indicator has limitations, Polk said. While most countries revise GDP numbers as more information becomes available, the National Bureau of Statistics does so without disclosing why or how, he said.

Lu Ting, head of Greater China economics at Bank of America Corp. in Hong Kong, said “frequent major revisions” and seasonal-adjustment difficulties curtail the data’s reliability.

Extra Tool

Still, amid a range of concerns about Chinese numbers — from inflated trade figures in 2013 to provincial GDP totals that add up to more than the national tally — the extra gauge is another tool for “measuring the dynamism in the economy,” said BNP’s Chen.

International companies are still betting on China for growth. Hennes & Mauritz AB, Europe’s second-biggest clothing retailer, is expanding into the nation’s smaller cities and Daimler AG said this month that the maker of Mercedes-Benz cars will add 100 dealerships for a network of 400 outlets in the nation by the end of this year.

Financial Strains

The outlook may partly depend on how officials cope with financial strains after the onshore yuan bond market had its first default, by Shanghai Chaori Solar Energy Science & Technology Co.

China has yet to give annualized figures for sequential quarterly growth, which would result in figures that are more volatile than year-on-year numbers. Data compiled by Bloomberg based on the government’s figures showed annualized growth last year of 6.1 percent in the first quarter, followed by 7.4 percent, 9.1 percent and 7.4 percent.

“It looks much less attractive for the government than year-on-year, which is stable and almost always above 7.5 percent,” said Tom Orlik, a Beijing-based economist with Bloomberg LP and author of the 2011 book “Understanding China’s Economic Indicators.”

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China Is Tired Of Stimulating Everything & Everyone. 不再

According to Chinese Premier Li Kegiang, there won’t be any more major stimulus this time around to keep the Chinese economy afloat and it’s zombie companies alive. Exactly at the wrong time. 

“We will not take, in response to momentary fluctuations in economic growth, short-term and forceful stimulus measures,” Li said in a speech. 

Too bad. Unfortunately, his statement has a shell life of a banana. Despite already creating the largest credit and shadow banking bubble in the history of mankind (Where Is China’s Hidden Debt Bomb), Chinese Government will be forced to induce further stimulus as soon as the worldwide recession of 2014-2017 hits.  No stimulus at that stage would mean a complete collapse to the Chinese economy, credit/real estate bubbles, chaos in the streets and a possible revolution. Leaving comrade Li with no other choice.   

Chinese Premier Li claps as he attends the opening ceremony of the BFA Annual Conference 2014 in Boao

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Reuters Writes: China says no major stimulus planned; March trade weak

(Reuters) – Chinese Premier Li Keqiang ruled out major stimulus to fight short-term dips in growth, even as big falls in imports and exports data reinforced forecasts that the world’s second-largest economy has slowed notably at the start of 2014.

Li stressed on Thursday that job creation was the government’ policy priority, telling an investment forum on the southern island of Hainan that it did not matter if growth came in a little below the official target of 7.5 percent.

“We will not take, in response to momentary fluctuations in economic growth, short-term and forceful stimulus measures,” Li said in a speech.

“We will instead focus more on medium- to long-term healthy development.”

His comments are among the clearest yet on the government’s plans for the economy, which has rattled global investors this year with a surprisingly lackluster performance.

Trade data on Thursday showed exports unexpectedly fell for the second consecutive month in March, the worst showing in more than four years, while imports fell by the most in 13 months.

Exports fell 6.6 percent in March from a year earlier, following an 18.1 percent slide in February, and imports fell 11.3 percent, their weakest performance in 13 months.

Economists were most worried by the fall in imports, which was seen confirming weakness in manufacturing and consumer demand. Some of the fall in exports was attributed to figures early last year being inflated by fake invoices before a government crackdown around the middle of 2013.

“My bigger concern is imports. It suggests a weakening in China’s own economy.” Louis Kuijs, economist at RBS in Hong Kong.

Data on April 16 is forecast to show the economy grew an annual 7.3 percent in the first quarter, the weakest rate since early 2009, in the immediate aftermath of the global financial crisis.

Economists at Barclays lowered their first quarter GDP forecast to 7.2 percent after the trade data, saying it was to reflect more signs of soft domestic and external demand.

STIMULUS EXPECTATIONS

The almost unabated run of disappointing data this year has fuelled investor speculation the government would loosen fiscal or monetary policy more dramatically to shore up activity.

But authorities so far have resisted broad stimulus measures. On Wednesday, the top economic planning agency said the government had less room to underpin growth because it did not want to inflate local debt risks.

Still, authorities have take some steps to bolster growth. Earlier this month, they announced tax breaks for small firms and plans to speed up some infrastructure spending, including the building of rail lines.

The national railway operator now plans to raise its annual investment by 20 billion yuan($3.2 billion) to 720 billion yuan in 2014.

There have also been moves to cut down on bureaucracy and to open up state-dominated sectors to private investors.

In his speech, Li said China was positioned to sustain a reasonable level of growth over the long term.

“We have set our annual economic growth target at around 7.5 percent,” he said. “It means there is room for fluctuation. It does not matter if economic growth is a little bit higher than 7.5 percent, or a little bit lower than that.”

Investors have long steeled themselves for growth to slow as China’s economy matures, especially as the government tries to steer it away from investment- and export-driven growth and towards consumption-led activity.

But the extent of the slowdown this year has still been a shock to some.

“A lot of people weren’t expecting growth to slow so quickly,” said Julian Evans-Pritchard of Capital Economics in Singapore.

“For us, it’s not unexpected. You’ve seen credit growth slowing since the middle of last year. We think that the current slowdown is a natural extension of that,” he said, adding it would extend into the June quarter.

Economists have repeatedly cut their growth forecasts for 2014, with a Reuters poll showing growth is forecast at 7.4 percent, a shade below the government’s 7.5 percent target.

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Chinese Protests Escalate. Full On Revolution Next?

Despite having overwhelming control, the Chinese Communist Party is starting to worry. More and more of their folk are protesting in the streets, picketing government offices and besieging factory floors. While most of the protests (871 mass incidents over the last 10 years) concentrate on labor and land grab disputes, we believe that is about to change. As reported here earlier, China is facing dual and massive real estate and credit bubbles.

We continue to believe that the eventual collapse in such bubbles will result in millions of Chinese families losing everything, including their jobs.  Further, we believe that such economic developments will force millions of Chinese to hit the streets to protest their government. We saw some early signs of that when Chinese developers started to cut prices a few years ago (right before the massive credit pump instigated by the Chinese government).

Will the Chinese Communist Party be able to survive a massive protest and/or disobedience or will it collapse just like the Soviet Union did? We can’t wait to see what happens. What do you guys think?

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Chinese Protests Escalate. Full On Revolution Next? Google

BusinessWeek Writes: What Drives China’s Protest Boom? Labor Disputes and Land Grabs

What are the main reasons Chinese take to the streets, picket government offices, and besiege factory gates? A recent report by the Chinese Academy of Social Science provides some answers on why people protest, a question that keeps China’s party officials awake at night.

Most protests erupt over labor disputes and land grabs, according to the Annual Report on China’s Rule of Law No 12 (2014), also known as the Blue Book of Rule of Law. The analysis reviewed 871 “mass incidents”—protests involving more than 100 people—carried out by more than 2.2 million people from January 2000 through September of last year, as the official China Daily reported.

As China’s leaders push for faster urbanization, with plans to convert hundreds of millions more farmers into city dwellers, land disputes are a growing problem likely to get even bigger. “In land acquisitions and forced demolitions, for example, many officials often overlook public interest,” Shan Guangnai of the Chinese Academy of Social Sciences told the official newspaper. 

The majority of the protests involved fewer than 1,000 people. Still, almost one-third of the incidents included between 1,000 and 10,0000 people, and 10 megaprotests involved more than 10,000 people demonstrating en masse. Of the largest, half were protesting pollution issues. The two other main causes were traffic accidents and conflicts involving China’s many ethnic groups, which include Tibetans, Muslim Uighurs, and Mongolians.

Almost one-half of the protests were directed at government, with disputes due to problems with law enforcement, land acquisitions, and forced demolitions involving local officials, plus various other rights issues. The remainder of the demonstrations focused on conflicts with enterprises, landlords, schools, and village committees. The large majority of protests—about four-fifths—were organized rather than spontaneous, and 36 incidents resulted in a total of 79 deaths.

The report also showed that protests occur most often in more-developed regions, including eastern and southern China, with Guangdong province alone accounting for about 30 percent. And the number of incidents is rising each year.

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What The US Told China In Regards To Currency Depreciation Is Disturbing

America has been on a roll lately, making friends in all the right places. Syria, Afghanistan, Egypt, Iraq, Iran, Russia, Ukraine, North Korea, Libya, China, etc…. Continuing in this tradition of fairness and brotherhood, the US warned China on it’s recent currency depreciation, raising “serious concerns” and suggesting that China gets back to the path of currency appreciation. You know, since everyone believed the Chinese Yuan would appreciate when floated at market. 

That would be a solid advice if the US wasn’t trying to do exactly the same thing. Even thought the US Treasury/FED has been trying to inflate the dollar away over the last 2 decades (without too much luck), it is their Chinese counterparts that are succeeding. Yet, not by design. It appears that Yuan is declining based on market forces as opposed to government intervention.   Either way, the US has no business telling other nations what to do with their currencies when every nation, more or less, is trying to succeed in competitive debasement of their own currency at the expense of their neighbors. 

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What The US Told China In Regards To Currency Depreciation Is Disturbing  Google

Reuters Writes: U.S. warns China over currency depreciation

(Reuters) – The United States warned Beijing on Monday that the recent depreciation of the Chinese currency could raise “serious concerns” if it signaled a policy shift away from allowing market-determined exchange rates.

Washington has been pressing China for years to allow its currency to trade at stronger values. A weak yuan makes Chinese exports cheaper for U.S. consumers at the expense of U.S. producers. A weaker yuan also makes Chinese consumers less able to buy foreign goods.

Last month, U.S. Treasury Secretary Jack Lew welcomed a decision by China to allow its currency to vary more against the dollar in daily trading.

Monday’s comments by a senior official from the Treasury Department suggested the United States was not completely sold on China’s intention to reduce authorities’ interventions in exchange markets.

“If the recent currency weakness signals a change in China’s policy away from allowing adjustment and moving toward a market-determined exchange rate, that would raise serious concerns,” the official, who asked not to be named, told journalists in a phone call.

In comments that outlined U.S. positions before meetings later this week of the International Monetary Fund and between Group of 20 nations, the official noted the widening of China’s currency trading band came just after a drop in the yuan’s value that coincided with reports of “considerable intervention” in exchange markets by Chinese authorities. That is exactly the sort of behavior Washington wants Beijing to ditch.

The United States also appears likely to pressure Europe at the meetings to act more decisively to fix its troubled banking sector.

The Treasury official said recent economic data from Europe showed the region was experiencing “chronic low inflation and weak demand.” That appeared to be a nod to growing concerns that Europe’s economy is so weak it risks falling into a dangerous spiral of falling prices and wages known as deflation.

“More needs to be done to support growth,” the Treasury official said.

The official had blunt words for other economic powers as well, saying that Japan should avoid engaging in too much fiscal austerity.

He said U.S. sanctions on Russian officials were already having an impact on Russia’s economy. The official also chided emerging markets for going too slowly in adopting free-floating currencies.

“Resistance in many emerging markets to moving more quickly to market-determined exchange rate regimes is hindering the rebalancing needed to ensure a lasting, strong global recovery,” the official said.

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Where Is China’s Hidden Debt Bomb

Bloomberg asks where China’s debt bomb is hiding. Actually it’s not hidden at all. Here it is. 

  • $21 Trillion Debt Mountain. Roughly the same size as the entire US Banking Sector. It took the US 220 years to get to that number, it took China just 5 years of explosive credit growth. 
  • $6 Trillion In Shadow Banking. Actually, no one knows how large this number is. I have read good data/reports putting this number at $10-15 Trillion range.  
  • Empty cities, shopping centers, massive speculative bubble in real estate, built out infrastructure, rising cost of labor and export driven economy.

 There you go, in plain sight for everyone to see. 

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Where Is China’s Hidden Debt Bomb Google

 

Bloomberg Writes: Where Is China’s Debt Bomb Hiding?

Photograph by Sandro Bisaro

Chinese cities are carrying levels of debt, with Shanghai at 123 percent

As fears rise of companies going bankrupt and local governments defaulting, and with speculation mounting about a coming “Bear Stearns Moment,” it’s worth looking at which parts of China are most indebted.

Digging down into the debt morass, region by region, has only just recently become possible. Following orders from Beijing regulators, as of the end of January and for the first time ever, all of China’s 30-some provinces (including the big, centrally administered cities of Beijing, Shanghai, Tianjin, and Chongqing) have released figures showing their relative states of indebtedness.

Although there’s plenty to worry about, the picture is a very mixed one, with debt-to-revenue ratios varying from a low of 69 percent in the coastal province of Shandong to as high as 156 percent in the fast-expanding megalopolis of Chongqing, previously run by disgraced leader Bo Xilai.

Other top Chinese cities also showed high levels of debt, with Beijing at 135 percent and Shanghai at 123 percent. Still, they didn’t come close to matching some of their global peers, such as the city of Osaka, Japan (181 percent), or the province of Ontario, Canada (226 percent), notes a recent Moody’s Investors Services (MCO)report on China’s provincial debt burdens.

China’s “local government-related debt is not a monolithic system but one that varies greatly,” writes Moody’s analyst Debra Roane in the March 25 report. She also points out that Canadian provinces are able to manage mounting debt because of their “access to a wide range of taxes that they can adjust independently”—not an option for China’s provinces or cities.

Besides overall amount of debt, the Moody’s report looks at other factors influencing the ability of localities to manage their financial obligations. An important one: debt maturity. By that measure, the danger zone shifts to China’s coastal provinces such as Jiangsu (with more than one-third of its debt due this year) and Zhejiang (about 30 percent due before next January). Beijing and Sichuan province also showed high levels of short-term debt.

The composition of the debt is changing, with borrowers increasingly relying less on bank loans and more on less-regulated sources like shadow banking. Those provinces most dependent on trust products, one popular variety of shadow credit, include the coal-mining province of Shanxi with 27 percent, followed by Chongqing at 15 percent. Next is Zhejiang, Jiangsu, and Hebei province near Beijing, all at more than 10 percent. The use of such new products as trusts “complicates the ability of the government to monitor such debt and the ability of market participants to judge the level of indebtedness of local governments,” the report says.

A final concern is the degree to which provinces rely on land sales for their revenue. Again, Zhejiang, Jiangsu, and Chongqing are among the most dependent, with Fujian and Shandong rounding out the top five. (Tibet relies less on land sales than any other region in China.) “While this revenue source has proven to be quite lucrative, it has also been highly volatile and therefore not a reliable source for debt repayment,” warns Moody’s.

One way to make indebtedness less of a risk would be to allow municipalities or provinces to issue bonds, particularly to help cover infrastructure projects that may not provide returns for many years (to date, bond financing by local governments is largely barred). “It’s not fair if projects that will benefit future generations are funded only through the tax payments of the current generation. So it’s OK to issue some bonds but under strict conditions,” said Chinese Finance Minister Lou Jiwei at a recent conference in Beijing, reported China Daily on March 26.

For the big picture? As of June 30, 2013, total local government debt and contingent liabilities had reached 17.89 trillion yuan (almost $2.9 trillion), up 63 percent from the end of 2010, announced China’s National Audit Office at the end of last year.

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China’s Manufacturing Hits The Wall

As discussed here on Friday, Chine’s Hang Seng index entered it’s official “Bear Market” territory as of last week.  Today’s we get a confirmation that Chinese broad manufacturing index has hit a wall, falling to 48.1, indicating weakness and decline. This should not come as a surprise to anyone here. We have already discussed why China is due for a major slow down if not an outright collapse. China’s manufacturing slowdown is just another symptom. So, what is really troubling China? Let’s start with these.

  • $21 Trillion Debt Mountain. Roughly the same size as the entire US Banking Sector. It took the US 220 years to get to that number, it took China just 5 years of explosive credit growth. 
  • $6 Trillion In Shadow Banking. Actually, no one knows how large this number is. I have read good data/reports putting this number at $10-15 Trillion range.  
  • Empty cities, shopping centers, massive speculative bubble in real estate, built out infrastructure, rising cost of labor and export driven economy. 

Maybe I am stupid, but tell me again how this is going to end well for China? When the US financial market starts its bear market and when the US Economy enters into a severe recession, there will be hell to pay in China. When will that happen? Luckily for you, we know to the day. Please Click Here to learn more.   

 China Bank Assets InvestWithAlex

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China’s Manufacturing Hits The Wall  Google

BusinessWeek Reports; Why China’s Manufacturing Sector Has Hit a Wall

More bad economic news out of China: A key indicator released on March 24 showed that the manufacturing sector of the world’s second-largest economy contracted for the fifth straight month.

The HSBC and Markit purchasing managers’ index fell to 48.1 in March, below the 48.7 expected by analysts in a Bloomberg News survey (a number above 50 indicates growth). “The weakness appears even more pronounced given that there is usually a seasonal rebound after the Chinese New Year holiday,” said Julian Evans-Pritchard, China economist at London-based Capital Economics, in a March 24 note.

The lackluster showing of the so-called Flash PMI (usually based on results from 85 percent to 90 percent of companies surveyed; the final reading will be released April 1) follows weak investment, industrial production, and export numbers in the first two months. “The old growth engine is losing steam,” Chen Xingdong, chief China economist at BNP Paribas in Beijing, told Bloomberg News.

Now some economists are predicting China’s leaders will have to take steps to boost growth in order to meet this year’s gross domestic product target of “about” 7.5 percent. “Weakness is broadly-based with domestic demand softening further,” Qu Hongbin, Hong Kong-based chief China economist at HSBC, said in a statement. “We expect Beijing to launch a series of policy measures to stabilize growth. Likely options include lowering entry barriers for private investment, targeted spending on subways, air-cleaning and public housing, and guiding lending rates lower.”

China’s slowing economy may mean a more gradual implementation of the sweeping market opening, proposed at the Third Plenum, a key party meeting held last November. While some reforms may support growth (such as opening more space for private capital), others, such as pushing enterprises to deleverage and reducing excess inventories, are expected to have a dampening effect on GDP.

“The brief honeymoon period in which China’s leadership could deliver both structural reforms and accelerating growth is now over,” warned Andrew Batson, China research director at Beijing-based GK Dragonomics, in a January note.

“China has its eyes fixed firmly on its next destination—aiming for higher-quality, more inclusive, and more sustainable growth,” said Christine Lagarde, managing director of the International Monetary Fund, speaking in Beijing at the opening of the China Development Forum on March 23. “The reforms needed to reach this destination … are ambitious. They will require hard decisions and trade-offs,” she said before the latest manufacturing release.

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The Extent Of China’s Credit Bubble

The chart below speaks for itself and the extent of Chinese Credit Default time bomb. Please note, this chart doesn’t include China’s so called “Shadow Banking” assets which are estimated to be at an additional $6-10 Trillion. In short, China makes US Credit Infusion by the FED look like child’s play. When China finally blows sky high, it’s defaults will be as massive at the credit expansion below. 

China Bank Assets InvestWithAlex

 

The Extent Of China’s Credit Bubble

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Goldman Sachs Needs To Distribute Their Chinese Shares To Fools. Issues A Buy Recommendation

I write about China and their economic situation extensively. Please type in “China” into the search bar on the right to see all of the data. With it’s massive credit bubble, real estate bubble, lagging stock market, falling currency and a slew of other problems, Goldman Sachs believes right now is the great time to buy China. Certainty, with all the bad news and Chinese stock market “under performance” it might seem as if right now is a good time to buy China. After all, the god of investment banking, Goldman Sachs thinks so.  

Don’t be a fool. 

Goldman Sachs will be selling China while you are buying there idiotic forecast. With the US Bear Market and a severe recession of 2014-2017 starting now, it would be very difficult for the Chinese stock market to exhibit any sort of a bull market. Not impossible, but highly unlikely. Remember, Chinese credit collapse, defaults, real estate collapse and Yuan decline are all in early stages of development. So, read between the lines here and sell China.  

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Goldman Sachs Needs To Distribute Their Chinese Shares To Fools. Issues A Buy Recommendation Google

Bloomberg Reports: China Stocks Seen Rallying 24% at Goldman on Valuations

Goldman Sachs Group Inc. is sticking with its recommendation to buy Chinese stocks, the biggest losers worldwide this year, after valuations fell to the lowest level in a decade versus global peers.

“Given how share prices have corrected and given where the valuations are, from a risk-reward standpoint we still think we can make a positive case on Chinese equities,” Kinger Lau, a strategist at Goldman Sachs, said in an interview inHong Kong on March 4. He predicts theHang Seng China Enterprises Index (HSCEI) will climb to 12,000 in the next 12 months, a 24 percent advance from last week’s close, versus the brokerage’s December forecast for the measure to reach 13,600 by the end of 2014.

The index of Chinese shares in Hong Kong lost 10 percent this year through last week, the most among 93 global benchmark indexes tracked by Bloomberg, as factory gauges pointed to a slowdown in the economy and concern grew that more companies will struggle to repay debt after the nation’s first onshore corporate bond default on March 7. The gauge trades at a 45 percent discount to the MSCI All-Country World Index, the most in a decade.

China’s leaders are trying to balance clampdowns on the shadow-banking industry and local-government debt with measures to support growth in the world’s second-largest economy.Shanghai Chaori Solar Energy Science & Technology Co. (002506) became the first company to default in China after failing to pay full interest due last week on onshore bonds.

Relative Value

The Hang Seng China index is valued at 1.1 times net assets, the biggest discount since September 2003 to MSCI’s global index, which has a multiple of 2. The H-share measure slid 1.7 percent to 9,540.10 as of 1:41 p.m. in Hong Kong.

BlackRock Inc. today named Helen Zhu as head of China equities, luring the New York bank’s chief China equity strategist away from Goldman Sachs. The appointment takes effect on April 7 and Zhu may start managing funds later this year, BlackRock said in a statement. The New York-based firm is the world’s largest money manager, overseeing about $4.3 trillion.

Industrial & Commercial Bank of China Ltd., China Construction Bank Corp. and Agricultural Bank of China Ltd. all trade at about the same level as their net assets, while Bank of China Ltd. has a price-to-book ratio of 0.8. The four lenders are the nation’s biggest by market value.

“Any clear and concrete policy measures in terms of dealing with shadow banking loans and local government debt would likely be positive catalysts for banks,” Lau said. “Valuations for Chinese banks have already priced in a very significant crisis scenario.”

Regulated Borrowing

Premier Li Keqiang told the National People’s Congress last week that China will develop a regulated regional borrowing mechanism, after local-government liabilities surged to 17.9 trillionyuan ($2.9 trillion) as of June 2013 from 10.7 trillion yuan at the end of 2010. Authorities have also started a cleanup of the $6 trillion shadow-banking industry and identified sectors of the economy in need of consolidation.

While Chinese banks’ non-performing loans rose by 28.5 billion yuan in the last quarter of 2013 to 592.1 billion yuan, the highest since September 2008, bad loans only accounted for 1 percent of total lending, the China Banking Regulatory Commission said Feb. 13.

Bank valuations currently imply a non-performing loan ratio of about 7 percent, Lau said.

Global Outlook

An improving global economic outlook may also be a catalyst for a rally in Chinese shares, Lau said, declining to name specific stocks.

The World Bank raised its 2014 growth forecasts for advanced nations in January to 2.2 percent from 2 percent, while cutting its estimates for developing nations to 5.3 percent from 5.6 percent. China is the world’s biggest exporter.

China last week retained a target for 7.5 percent growth in 2014 for the $9 trillion economy. Gross domestic product expanded 7.7 percent in 2013, the same pace as in 2012.

A purchasing managers’ index from HSBC Holdings Plc and Markit Economics dropped to a seven-month low of 48.5, the companies said March 3. A similar gauge from the government with a larger sample size fell to 50.2, the lowest since June, a report showed March 1. Numbers above 50 signal expansion.

Overseas shipments unexpectedly declined 18.1 percent in February from a year earlier, customs data showed March 8, compared with analysts’ median estimate for a 7.5 percent increase. Producer prices fell 2 percent, the most since July, according to a statistics bureau report yesterday, extending the longest decline since 1999.

Share Slump

The Hang Seng China gauge has tumbled 16 percent since Noah Weisberger, a New York-based analyst at Goldman Sachs, predicted on Dec. 2 that the H-share measure would rally 18 percent by the end of 2014.

Goldman Sachs’s forecast formed part of a trade recommendation in which the bank told investors to buy Chinese stocks while selling copper as a bet that commodities would lag the rally in equities. Goldman Sachs called the trade its fourth top recommendation for 2014.