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Is China Trying To (Slowly) Burst Another Stock Market Bubble?

Is China Trying To (Slowly) Burst Another Stock Market Bubble?

The pressure point in Asian stock markets this week has been the decline in Chinese equities (the biggest weekly drop in 4 months).

Despite a stellar performance of the economy the outlook for the Shanghai Composite Index isn’t promising as the government is taking advantage of better growth to spur deleveraging.

For a market relying more on liquidity than fundamentals, China’s worsening monetary conditions index suggests tough times ahead…

The last 4 days have highlighted the unusual effect in Chinese stocks.. each time the Shanghai Composite dropped over 1% (red dotted line) it was miraculously lifted to ensure it closed with a loss less than 1%…

 

As Bloomberg reports, authorities favor a steady stock market because it helps companies fund investment and repay debt by issuing new shares, which could help boost economic growth, according to Yin Ming, a vice president at Baptized Capital in Shanghai.

“The national team is behind it,” Yin said. “State funds will likely continue to be a market stabilizer.”

So one wonders, is China desperate to delever the speculative fervor in their markets… but do it just 1% at a time? Can the ‘market’ really be that well centrally planned? We will see…

If the 6-month lag in Chines commodities is anything to go by, the breakdown in Chinese stocks is nowhere near over…

China Puts Bombers On High Alert “For A Potential North Korea Contingency”

China Puts Bombers On High Alert “For A Potential North Korea Contingency”

The US has seen evidence that the Chinese military is preparing “for a potential North Korea contingency“, CNN reports citing a US defense official, and adds that Chinese air force land-attack, cruise-missile-capable bombers were put “on high alert” on Wednesday.

The official added that the US has also seen an extraordinary number of Chinese military aircraft being brought up to full readiness through intensified maintenance.

The official said that these recent steps by the Chinese are assessed as part of an effort to “reduce the time to react to a North Korea contingency.”

Among the contingency options listed is the “risk of an armed conflict breaking out as tensions on the peninsula have risen in the wake of multiple North Korean missile tests.”

There has also been ratcheted up rhetoric from the US and Pyongyang, with the latter’s state media warning Thursday that a pre-emptive strike by North Korea would result in the US and South Korea being “completely destroyed in an instant.”

Beijing has long been concerned about potential instability in North Korea should the regime in Pyongyang collapse, fearing both an influx of refugees and the potential of reunification under a South Korean government closely allied to the US.

Meanwhile, China remains opposed to the US military’s presence in South Korea, protesting the recent US and South Korea decision to begin deploying elements of the THAAD missile defense system.

Given the close economic links between North Korea and China, US military officials have said that Beijing is critical to solving the North Korean situation, with President Donald Trump recently commending Chinese President Xi Jinping for Chinese efforts to curb Pyongyang’s activities.

Earlier on Thursday, Nikkei reported that as a form of ratcheting up pressure on North Korea, China may halt crude exports to North Korea should Pyongyang conduct its sixth nuclear test, “signalling a tougher attitude by Beijing.”

…click on the above link to read the rest of the article…

So China’s Authorities Crack Down on Housing Speculation?

So China’s Authorities Crack Down on Housing Speculation?

Who’s Behind China’s Wild House Price Bubble? State-Owned Property Developers, Funded by State-Owned Banks.

Beijing’s municipal government summoned representatives of state-owned property developers on Monday and told them to stop hyping the already overheated housing market, according to the portal, Chinese Real Estate Business (CREB), cited by Reuters.

State-owned property developers, funded by state-owned banks, have been a major force in inflating home prices as they bid aggressively for land to gain market share. According to CREB, state-owned developers bid for nearly half of the most expensive land in China during the first five months of 2016. And that trend has continued. But after the meeting with the municipal government of Beijing, these firms may be forced “to change their land strategy.”

Telling state-owned developers to stop hyping, as CREB put it, “operational and market activities” would be the latest effort to crack down on property speculation gone wild in China. It would come on top of the numerous other ways local and central authorities have tried to curb this speculation, without success so far.

Today, the National Bureau of Statistics reported that new home prices in 70 cities surged 11.3% in March year-over-year. It was the 18th month in a row of year-over-year gains. Prices jumped 19% in Beijing and 16.8% in Shanghai (chart by Trading Economics):

On a monthly basis, new home prices rose 0.6%, the fastest in four months, up from 0.3% in February. Of the 70 cities in the index, 62 experienced a month-to-month price gain, up from 56 cities in February, once again defying expectations of a slowdown. Prices jumped the most in Haikou (2.6%), Sanya (2.5%), and Guangzhou 2.3%), followed by other second- and third-tier cities, to which the speculative fire has been spreading.

…click on the above link to read the rest of the article…

Buy the Dip?

The military frolics of spring have distracted the nation’s attention from the economic and financial dynamics that pose the ultimate mortal threat to business as usual. Note the distinction between economic and financial. The first represents real activity in this Land of the Deal: people doing and making. The second, finance, used to be a minor branch — only about five percent — of all the doing in the days of America’s putative bigliest greatitude. The task of finance then was limited and straightforward: to manage the allocation of capital for more doing and making. The profit in that enabled bankers to drive Cadillacs instead of Chevrolets, but not much more.

These days, finance is closer to 40 percent of all the doing in America, and it is not about making anything, but getting more than its share of “money” — whatever that is now — and what “money” mostly is is whatever the people engaged in finance say it is, for instance, Fannie Mae bonds representing millions of sketchy loans for houses of vinyl and strand-board built in places with no future… or stock issued by the Tesla corporation… or the sovereign IOUs of the US Treasury.

The list of things that pretend to be “money” these days would be long and shocking and the sheer churn of these instruments among the banks and markets “produces” the fabled “revenue streams” beloved of The Wall Street Journal. What happens when the world discovers that these instruments (securities and their derivatives) represent falsely? Why, bigly trouble.

And this is the season we’re moving into as the dogwoods blaze: the season of the re-discovery of actual value. For those of you gloating over last week’s demonstrations of US Big Stick-ism, be warned that our military shenanigans have given China and Russia every reason to discipline this country by undermining the international standing of the dollar.

…click on the above link to read the rest of the article…

How America and China Could Stumble to War

How America and China Could Stumble to War

How America and China Could Stumble to War

Can Beijing and Washington escape the Thucydides Trap?

Would a Chinese leader barely in control of his own country after a long civil war dare attack a superpower that had crushed Japan to end World War II five years earlier by dropping atomic bombs on Hiroshima and Nagasaki? As American troops pushed North Korean forces toward the Chinese border in 1950, Gen. Douglas MacArthur could not imagine so. But Mao Zedong did. MacArthur was dumbstruck. Chinese forces rapidly beat American troops back to the line that had divided North and South Korea when the war began. That thirty-eighth parallel continues to mark the border between the two Koreas today. By the time the war ended, nearly three million had perished, including thirty-six thousand American troops.

Similarly, in 1969, Soviet leaders could not imagine that China would react to a minor border dispute by launching a preemptive strike against a power with overwhelming nuclear superiority. But that is precisely what Mao did when he started the Sino-Soviet border war. The gambit showed the world China’s doctrine of “active defense.” Mao sent an unmistakable message: China would never be intimidated, not even by adversaries that could wipe it off the map.

…click on the above link to read the rest of the article…

Is That Armageddon Over The Horizon?

Is That Armageddon Over The Horizon?

The insouciance of the Western world is extraordinary. It is not only Americans who permit themselves to be brainwashed by CNN, MSNBC, NPR, the New York Times and Washington Post, but also their counterparts in Europe, Canada, Australia, and Japan, who rely on the war propaganda machine that poses as a media. http://www.bbc.com/news/world-us-canada-39573526

The Western “leaders,” that is, the puppets on the end of the strings pulled by the powerful private interest groups and the Deep State, are just as insouciant. Trump and his counterparts in the American Empire must be unaware that they are provoking war with Russia and China, or else they are psychopaths.

A new White House Fool has replaced the old fool. The New Fool has sent his Secretary of State to Russia. For what? To deliver an ultimatum? To make more false accusations? To apologize for the lies?

Consider the audacity of Secretary of State Tillerson. He has spent the week prior to his visit to Moscow supporting incredible lies and false allegations that Assad of Syria used chemical weapons with Russia’s permission, which justified Washington’s unambigious war crime of a military attack on a country with which the US has not declared war. Less than 100 days in office, and Trump is already a war criminal along with the rest of his warmonger government.

The entire world knows this, but no one says it. Instead, Tillerson, who has been heavy with lies and threats has the confidence to go to Moscow to tell the Russians that they have to hand over Assad to the American Uni-Power.

Tillerson’s mission demonstrates the complete, total unreality of the world in which Washington lives. Try to imagine Tillerson’s arrogance. If you had been bad-mouthing and threatening strong, important people, would you feel comfortable going over to their house to have dinner with them?

…click on the above link to read the rest of the article…

 

Japan Prepares For North Korea “Emergency”

Japan Prepares For North Korea “Emergency”

Judging by the precautionary actions of North Korea’s neighbors, the next 48 hours on the Korean peninsula could see substantial volatility, because at the same time as China’s largest carrier was said to suspend flights to Pyongyang, the Japanese government has asked the U.S. to provide advance consultation if it is about to launch military action against North Korea, and “has ramped up preparations for emergency situations” according to Japan’s Yomiuri Shimbun, including the potential evacuation of some 57,000 Japanese citizens currently in South Korea.

According to the Japanese publication, PM Shinzo Abe stressed that the region is becoming increasingly tense. “[U.S. President Donald Trump] has stated that all options are on the table. It’s a fact tensions are rising,” he said at the Prime Minister’s Office after receiving a written proposal calling for tougher sanctions on North Korea from the Liberal Democratic Party’s Eriko Yamatani, chief of the headquarters for the abduction issue.

He added that “if an unexpected situation occurs, we’ll ask the United States to cooperate in rescuing the abduction victims.”

The Japanese government, like its South Korean peer, has asked for advance consultation regarding any U.S. military action against North Korea during a series of meetings between Japanese and U.S. officials. The U.S. side is said to have responded positively to the request. This is because Japan would need to take appropriate precautions given that, as an ally of Washington, it could be a target for retaliation should the U.S. military attack North Korea, although in order to preserve the “element of surprise” it would not be at all
surprising if Trump proceeded to launching a strike unannounced.

As the infographic below shows, the Japanese government is contemplating five potential emergency responses should a military clash break out between the US and North Korea:

…click on the above link to read the rest of the article…

Air China Suspends Flights To North Korea As Kim Vows “Merciless Response To Any US Provocation”

Air China Suspends Flights To North Korea As Kim Vows “Merciless Response To Any US Provocation”

In the latest escalation over what may be an imminent preemptive airstrike on North Korea by US warships now located just 300 miles away from the North Korean nuclear test site, moments ago China’s national airline, Air China, announced it was suspending flights from Beijing to the North Korean capital, Pyongyang, from late on Friday, Chinese state broadcaster CCTV said. It did not say why the flights, which operate on Monday, Wednesday and Friday, were being suspended.

In the report published on its website, CCTV did not cite a source while according to Reuters, Air China could not immediately be reached for comment after business hours. The last flight between the two cities took place on Friday, with the return flight to Beijing arriving in the early evening, the broadcaster said. Air China began regular flights between the two countries in 2008 but the flights were frequently cancelled because of unspecified problems, the broadcaster said. China is North Korea’s sole major ally but it disapproves of the North’s weapons programs, and its confrontations with the United States and its Asian allies, and it has supported U.N. sanctions against it.

Following repeated missile tests that drew international criticism, China banned all imports of North Korean coal on Feb. 26, cutting off the country’s most important export product. North Korea’s army vowed a ‘merciless’ response to any US provocation, the official news agency reported Friday, as tensions soar over Pyongyang’s rogue nuclear program.

Meanwhile, after warning that it was ready to “go to war”, on Friday North Korea’s army vowed a “merciless” response to any US provocation, the official news agency reported Friday. A statement of KCNA, which cited Washington’s recent missile strike on Syria, said the administration of President Donald Trump had “entered the path of open threat and blackmail against the DPRK”.

…click on the above link to read the rest of the article…

Australia Beckons a War With China

Australia Beckons a War With China

Photo by Marko Mikkonen | CC BY 2.0

Australia is sleep-walking into a confrontation with China. Wars can happen suddenly in an atmosphere of mistrust and provocation, especially if a minor power, like Australia, abandons its independence for an “alliance” with an unstable superpower.

The United States is at a critical moment. Having exported its all-powerful manufacturing base, run down its industry and reduced millions of its once-hopeful people to poverty, principal American power today is brute force. When Donald Trump launched his missile attack on Syria — following his bombing of a mosque and a school — he was having dinner in Florida with the President of China, Xi Jinping.

Trumps attack on Syria had little to do  with chemical weapons. It was, above all, to show his detractors and doubters in Washington’s war-making  institutions — the Pentagon, the CIA, the Congress — how tough he was and prepared to risk a war with Russia.  He had spilled blood in Syria, a Russian protectorate; he was surely now on the team. The attack was also meant to say directly to President Xi, his dinner guest: this is how we deal with those who challenge the top dog.

China has long received this message. In its rise as the world’s biggest trader and manufacturer, China has been encircled by 400 US military bases — a provocation described by a former Pentagon strategist as “a perfect noose”.

This is not Trump’s doing. In 2011, President Barack Obama flew to Australia to declare, in an address to parliament, what became known as the “pivot to Asia”: the biggest build-up of US air and naval forces in the Asia Pacific region since the Second World War. The target was China.  America had a new and entirely unnecessary enemy. Today, low-draft US warships, missiles, bombers, drones operate on China’s doorstep.

…click on the above link to read the rest of the article…

China Warns North Korea War “Could Break Out At Any Moment”

China Warns North Korea War “Could Break Out At Any Moment”

“North Korea is a problem,” Trump told reporters at the White House on Thursday. “The problem will be taken care of.”

Which prompted North Korea’s rebuke of US President Trump’s “aggressive words,” overnight.

Both China (“The situation now is similar to the time before a storm, and this kind of dangerous situation worth of our attention and we must be alert,”) and Russia (watching the developments around North Korea with “great concern”) have weighed in on the increasingly tense saber-rattling occurring between the two nations.

As Bloomberg reports, China warned that a war on the Korean Peninsula would have devastating consequences and “one has the feeling that a war could break out at any moment.”
Chinese Foreign Minister Wang Yi urged all parties “to stop provoking and threatening each other and not to make the situation irretrievable,” seemingly fearful that the next step could make war (world-inclusive) inevitable.

“No matter who the nation is, if it continues to provoke wars in the Peninsula, it has to bear this historical responsibility and pay its price.”

“Once a war really happens, the result will be nothing but losing all round and no one could become a winner,” Wang told reporters in Beijing on Friday, according to the official Xinhua News Agency.

These concerns were echoed by a senior Russian lawmaker who, as AP reports, says the US is a greater threat to global peace than North Korea…

Konstantin Kosachev, the head of the Foreign Affairs Committee in the upper house of Russian parliament, said Friday “the most alarming thing about the current U.S. administration is that you can’t be sure if it is bluffing or really going to implement its threats.”

He says “America objectively poses a greater threat to peace than North Korea,” adding that “the entire world is scared and left guessing if it strikes or not.”

…click on the above link to read the rest of the article…

Doomsday Device

All across the banking world – from commercial loans to leases and real estate – credit is collapsing. Ambrose Evans-Pritchard writing for British newspaper The Telegraph:

Credit strategists are increasingly disturbed by a sudden and rare contraction of U.S. bank lending, fearing a synchronized slowdown in the U.S. and China this year that could catch euphoric markets badly off guard. Data from the U.S. Federal Reserve shows that the $2 trillion market for commercial and industrial loans peaked in December.

The sector has weakened abruptly as lenders tighten credit, especially for non-residential property. Over the last three months it has dropped at a rate of 5.4% on annual basis, a pace of decline not seen since December 2008.

C & I loans, y/y growth. Readers may recall that we recently showed this chart in “Libor Pains”, in which we discussed corporate debt. Actually, y/y commercial & industrial loan growth peaked in early 2015 already, not just “last December”… but lettuce not quibble (Pritchard likely meant to refer to total commercial bank credit, the growth rate of which reached an interim peak in late 2016 – shown further below). The point remains that credit growth is falling fast – click to enlarge.

If new loans aren’t made, the supply of credit money will contract. That’s the “doomsday device” embedded in our credit money system: It is subject to sharp and disastrous drawdowns in the money supply.

When loans are paid or written off, the outstanding credit (money) ceases to exist. This reduces the money supply and triggers corrections, recessions, or market crashes.

Real money doesn’t disappear in a credit contraction. But our fake “credit money” does. This makes the entire system vulnerable to the credit cycle. Credit increases. Then it decreases. And as credit money vanishes, the recession deepens… causing the credit market to tighten further and causing more money to disappear.

…click on the above link to read the rest of the article…

The Real Reason The Federal Government Have Been Keen to Blame Russia for Everything: Gold – Rory Hall

The Real Reason The Federal Government Have Been Keen to Blame Russia for Everything: Gold - Rory Hall
How would you feel if you had planned a gathering of your closest family and friends and your list of invites grows to include some 185 guests. You also invited your known trouble-making cousin. Your cousin shows up drunk, armed and belligerent. He begins harassing a good portion of the guests, smashes some of your prized possessions and then, as an added bonus, he shoots and kills 12 of your guests.

As your cousin is leaving the gathering, he takes your wallet and your wife’s purse. He also goes in your bedroom, opens your safe and removes all your gold and silver. Your cousin now has all your credit and debit cards and all the cash you had on hand. You can not conduct business in any manner. You can’t even pay the caterer for their services.

If this sounds like a horrific story, you’re right – it is. The drunken cousin is a metaphor for how the U.S. has been acting for the past several years and how it has treated countries around the world. Do you suppose some of these nations are more than a little tired of being treated in this manner? Do you suppose that instead of acting as this oppressive “cousin” acts that some of these countries would find it better to simply develop a way to leave the “gathering” in a peaceful manner and get on with their own business?

As we reported on March 30 China and Russia are taking steps to move away from their out of control “cousin”, the Federal Reserve Note, U.S. dollar, world reserve currency.

…click on the above link to read the rest of the article…

China May Import Its Workers To Canada As It Seeks “Total Access” To Canadian Market

China May Import Its Workers To Canada As It Seeks “Total Access” To Canadian Market

China’s ambassador to Canada, Lu Shaye, told the Globe and Mail that Beijing is seeking full access to Canada’s economy ahead of free trade talks, a move that could result in Chinese state-owned companies bringing their own employees to work on projects in Canada. Charles Burton, an associate political science professor at Brock University, said bringing their own workers abroad is “normal practice” for Chinese companies. “It’s not as if [the Chinese] would be asking something of Canada that they don’t expect from other countries,” he said.

Earlier this year, Canadian and Chinese officials held exploratory talks on a free trade deal and another meeting is set to take place this month,  Lu told the Globe, just as the US prepares to renegotiate NAFTA with Canada and Mexico.

Lu said that his government wants to avoid discussions of human rights issues, fearing it could become a “bargaining chip” in negotiations. Additionally, anticipating what has become an increasingly regular response by sovereign governments to China’s money-laundering disguised as M&A ambitions, the ambassador said China’s government would interpreted any attempt by Ottawa to block takeovers of Canadian companies on national security grounds as protectionism.

“Investment is investment. We should not take too much political considerations into the investment,” he said. “Just like the negotiations of the (Canada-U.S.) FTA, we should not let political factors into this process. Otherwise, it would be very difficult.”

…click on the above link to read the rest of the article…

Moscow And Beijing Join Forces To Bypass US Dollar In Global Markets, Shift To Gold Trade

Moscow And Beijing Join Forces To Bypass US Dollar In Global Markets, Shift To Gold Trade

The Russian central bank opened its first overseas office in Beijing on March 14, marking a step forward in forging a Beijing-Moscow alliance to bypass the US dollar in the global monetary system, and to phase-in a gold-backed standard of trade.

According to the South China Morning Post the new office was part of agreements made between the two neighbours “to seek stronger economic ties” since the West brought in sanctions against Russia over the Ukraine crisis and the oil-price slump hit the Russian economy.

According to Dmitry Skobelkin, the deputy governor of the Central Bank of Russia, the opening of a Beijing representative office by the Central Bank of Russia was a “very timely” move to aid specific cooperation, including bond issuance, anti-money laundering and anti-terrorism measures between China and Russia.

The new central bank office was opened at a time when Russia is preparing to issue its first federal loan bonds denominated in Chinese yuan. Officials from China’s central bank and financial regulatory commissions attended the ceremony at the Russian embassy in Beijing, which was set up in October 1959 in the heyday of Sino-Soviet relations. Financial regulators from the two countries agreed last May to issue home currency-denominated bonds in each other’s markets, a move that was widely viewed as intended to eventually test the global reserve status of the US dollar.

Speaking on future ties with Russia, Chinese Premier Li Keqiang said in mid-March that Sino-Russian trade ties were affected by falling oil prices, but he added that he saw great potential in cooperation. Vladimir Shapovalov, a senior official at the Russian central bank, said the two central banks were drafting a memorandum of understanding to solve technical issues around China’s gold imports from Russia, and that details would be released soon.

…click on the above link to read the rest of the article…

Why China Is About To Bring The Global Reflation Rally To A Halt

Why China Is About To Bring The Global Reflation Rally To A Halt

Previously we reported that iron ore prices – having almost doubled in the past year and launching a global reflationary wave – are on the verge of tumbling as the world becomes increasingly aware that China has a “13,000 Eiffel Tower” record inventory problem.

And while we previously discussed the immediate adverse implications for iron ore bulls, the conseqences for the global economy could be far more material.

Conveniently, in a note this morning, BMO’s Mark Steel looked at the same issue, focusing on the big picture implications.

“Iron has already broken below its 50d MA, the BMO analyst writes, and has already broken below trade support, and it is now poised at the bottom of the channel, so, yes, here is another potential “pre-breakdown” view – Exhibit 1.”

He then notes that “that kinda looks a lot like inflation expectations, which if anything are just a tad ahead, as they have already broken to the downside in the US, and also in Canada, and also in Germany, and also in France, and also in Japan, and also in Mexico. You get the picture, the inflation trade like a fifty-year-old doing the breakdance for the first time. For the reflationists, it’s not a pretty picture – Exhibit 2.

The conclusion is troubling for the global reflation rally:

We don’t want to make up any new theory, about what drives asset prices. Oh wait, yes we do, and indeed did, with the record-setting

 …click on the above link to read the rest of the article…

Olduvai II: Exodus
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Olduvai
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Olduvai III: Cataclysm
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