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Global Health Officials On High Alert As Wuhan Virus Makes US Landfall

Global Health Officials On High Alert As Wuhan Virus Makes US Landfall

Update (1600ET): Beijing, Shanghai, Tianjin, Zhejiang, Henan, Chongqing, Hong Kong, Bangkok, Seoul, Tokyo, Brisbane, Taipei – and now Washington State. 

The viral pneumonia-like lung illness first discovered late last year in Wuhan, a mid-sized Chinese city in the center of the country, has Beijing’s leadership – who are already grappling with slowing economic growth and continuing trade pressure from the US – very much on edge.

It’s clear now that Beijing’s initial response to reports of a new SARS-like virus was to dissemble. After initially insisting that there was no evidence that the virus could be spread by humans, health officials have now admitted that they were “wrong”, and that human-to-human transmission is possible, meaning that there’s no telling yet just how contagious this thing really is.

It’s already spread rapidly: In just a few weeks, it’s gone from a few isolated cases in Wuhan to nearly 300 confirmed cases, not just in Greater China, but also across the Asia-Pacific region, and now in the US. The fact that the CDC has already identified the first case in Washington State suggests that this is an aggressive pathogen, and health officials are duly concerned.

It has already confounded expectations. The fact that 139 cases – roughly half the total number reported – were only just identified over the weekend is especially unnerving, because now infected hosts have had time to scatter back to wherever they’re from, potentially spreading the virus across the planet.

According to Bloombergthe US case has been revealed to be a man in his 30s who returned to the US last week, but not before visiting a public market in Wuhan…

The sudden spike in cases has prompted airports in the US, Australia and elsewhere to tighte illnesses has prompted tightened borders and a rapid attempt to trace contacts of those who have become ill.

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

China Coronavirus Outbreak Spreads; Hundreds Infected As Human-To-Human Transmission Confirmed

China Coronavirus Outbreak Spreads; Hundreds Infected As Human-To-Human Transmission Confirmed

Health officials in Wuhan, China reported 139 new cases of a new mystery virus over the weekend, now rapidly spreading to other provinces and surrounding countries, reported CNN.

As of Monday morning, three people have died from the pneumonia-like illness, and globally there have been more than 200 reported cases, noted Reuters

Beijing confirmed two cases of coronavirus Monday, while Guangdong health officials reported one case in Shenzhen – these are the first reports that the virus is quickly spreading from Wuhan, the epicenter. 

On Sunday, the World Health Organization (WHO) said the virus originated from a seafood/meat market in Wuhan, has likely spread through human-to-human transmission.

“It is clear that there is at least some human-to-human transmission from the evidence we have, but we don’t have clear evidence that shows the virus has acquired the capacity to transmit among humans easily,” said Takeshi Kasai, the WHO’s regional director for the western pacific, in an interview with Bloomberg TV on Monday. “We need more information to analyze that.”

There are significant concerns about a broader regional outbreak, reports Sunday warned the virus was detected outside China – two in Thailand and one in Japan. 

The South Korean Centers for Disease Control and Prevention (SKCDC) confirmed Monday that a 35-year-old woman arriving at Incheon International Airport from Wuhan tested positive for coronavirus.

“She was immediately separated for treatment in quarantine at a state-designated hospital,” the SKCDC said.

China’s National Health Commission confirmed Monday that the virus has occurred via human-to-human transmission. This has worried officials in the country and in surrounding countries ahead of the Lunar New Year holiday, in which millions of Chinese tourists are expected to travel across the region, could lead to a widespread outbreak of the virus. 

More than 7 million Chinese traveled overseas last year during the holiday season.

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

China Braces For December D-Day: The “Unprecedented” Default Of A Massive State-Owned Enterprise

China Braces For December D-Day: The “Unprecedented” Default Of A Massive State-Owned Enterprise

Something is seriously starting to break in China’s financial system.

Three days after we described the self-destructive doom loop that is tearing apart China’s smaller banks,  where a second bank run took place in just two weeks – an unprecedented event for a country where until earlier this year not a single bank was allowed to fail publicly and has now had no less than five bank  high profile nationalizations/bailouts/runs so far this year – the Chinese bond market is bracing itself for an unprecedented shock: a major, Fortune 500 Chinese commodity trader is poised to become the biggest and highest profile state-owned enterprise to default in the dollar bond market in over two decades.

In what Bloomberg dubbed the latest sign that Beijing is more willing to allow failures in the politically sensitive SOE sector – either that, or China is simply no longer able to control the spillovers from its cracking $40 trillion financial system – commodity trader Tewoo Group  – the largest state-owned enterprise in China’s Tianjin province – has offered an “unprecedented” debt restructuring plan that entails deep losses for investors or a swap for new bonds with significantly lower returns.

Tewoo Group is a SOE conglomerate, owned by the local government and operates in a number of industries including infrastructure, logistics, mining, autos and ports, according to its website. It also operates in multiples countries including the U.S., Germany, Japan and Singapore. The company ranked 132 in 2018’s Fortune Global 500 list, higher than many other Chinese conglomerates including service carrier China Telecommunications and financial titan Citic Group. Even more notable are the company’s financials: it had an annual revenue of $66.6 billion, profits of about $122 million, assets worth $38.3 billion, and more than 17,000 employees as of 2017, according to Fortune’s website.

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

China’s Credit Creation Unexpectedly Collapses At The Worst Possible Time

China’s Credit Creation Unexpectedly Collapses At The Worst Possible Time

Over the weekend, we observed that China’s slumping wholesale inflation, or PPI, which is so critical for corporate profits and sparking benign, demand-driven inflation in the economy, and which in October tumbled to a three year low assuring that Chinese dumping and exports of deflation will only further depress global reflation efforts…

… will not reverse until Beijing injects another elephant-dose of credit into the Chinese financial system.

Just 48 hours later we can confirm that there is zero risk of either a sharp spike in Chinese inflation, or of China flooding the financial system with cheap credit – as it has been known to do during key economic inflection points – because according to the PBOC, China’s credit growth slowed far more than expected in October to the weakest pace since at least 2017 as a continued collapse in shadow banking, weak corporate demand for credit and seasonal effects all signaled that efforts to prop up the economy through bank lending still aren’t working.

The central bank reported that Aggregate Financing, China’s revised version of the old Total Social Financing, was a paltry 618.9 billion yuan ($88 billion), missing the median conservative estimate of 950 billion yuan, and down a whopping 72% from the 2.27 trillion yuan in September and 737.4 billion yuan in the same month of 2018. Today’s print was the lowest in the revised series history which goes back to the start of 2017, and only a slightly lower print in the old series prevents today’s total credit injection from being the lowest since 2016!

New CNY loans of 661.3 billion yuan also missed the consensus print of 800 billion yuan, resulting in outstanding CNY loan growth of 11.9% annualized in October, well below the September 13.3% annualized print. As has been the case recently, two thirds of yuan-denominated bank loans were borrowed by households in the month, while the borrowing by non-financial companies was the least in amount since August 2016.

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

Beijing To Link Facial Recognition System With Social Credit Score In New Metro Security Checks

Beijing To Link Facial Recognition System With Social Credit Score In New Metro Security Checks

Officials in Beijing will combine the country’s state-of-the-art facial recognition technology with a version of their controversial ‘credit system’ to speed up security checks in the city’s overcrowded metro system, according to HKFP.

Long queues and commuters arguing with staff over slow security procedures are common sites during rush hour in the metro system of the 20 million-strong metropolis. –HKFP

Cameras set up at the entrance to subway stations will scan the faces of passengers, sorting them into different security channels, according to the director of the Beijing Rail Traffic Control Center, Zhan Minghui.

He added that the plan will involve the creation of a “passenger credit system” in which ‘white-listed’ individuals will enjoy expedited security clearance. Those who receive “abnormal feedback” after their face scans will be subject to extra security measures.

“The technique aims to improve the efficiency of security checks and includes both body checks and luggage screening when large numbers of passengers enter the station,” Zhan said on Thursday at an urban transportation forum in Beijing.

In May, the Beijing subway announced that it had started “deducting credit points” from passengers who eat in metro cars.

Officials did not announce a timeline for the rollout.

Beijing’s subway system currently handles approximately 12 million trips on an average workday – a figure expected to increase to 17 million within the next two years. 

China’s use of facial recognition is becoming more commonplace. The Beijing Universal Studios amusement park which is currently under construction will admit visitors without a ticket – and will use cameras that scan their faces to determine whether they have paid for a ticket.

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

Chinese Bank On Verge Of Collapse After Sudden Bank Run

Chinese Bank On Verge Of Collapse After Sudden Bank Run

First it was Baoshang Bank , then it was Bank of Jinzhou, then, two months ago, China’s Heng Feng Bank with 1.4 trillion yuan in assets, quietly failed and was just as quietly nationalized. Today, a fourth prominent Chinese bank was on the verge of collapse under the weight of its bad loans, only this time the failure was far less quiet, as depositors of the rural lender swarmed the bank’s retail outlets, demanding their money in an angry demonstration of what Beijing is terrified of the most: a bank run. 

Local business leaders, political cadres and banking executives rallied Thursday at the main branch of Henan Yichuan Rural Commercial Bank, just outside the central Chinese city of Luoyang, where they stood one by one before a microphone to pledge their backing for the bank, as smiling employees brandished wads of cash before television cameras to demonstrate just how much cash, literally, the bank had.

It was China’s latest, and most desperate attempt yet to project stability and reassure the public that all is well after rumors spread that the bank’s chairman was in trouble and the bank was on the brink of insolvency. However, as the WSJ reports, it wasn’t enough for 31-year-old Li Xue, who showed up for the third day Thursday to withdraw thousands of yuan of her mother’s life savings after hearing from fellow villagers that Yichuan Bank – which is the largest lender in Yichuan county by the number of branches and capital, and it is also a member of PBOC’s deposit insurance system, according to the local government – was going under.

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

Hong King Kong

Hong King Kong

Of course the notion of addressing Hong Kong has been in my mind for a while, but it’s a bit of a moving target: things change all the time, and seemingly on the fly. However, with today’s fresh developments, it seems silly to wait any longer. Hong Kong Civic party lawmaker Dennis Kwok yesterday expressed the reason way better than I could:

As I said time and again, the use of troops in Hong Kong will be the end of Hong Kong, and I would warn against any such move on the part of the central people’s government.”

He said that before today’s arrests -and subsequent release on bail- of a handful of alleged protest leaders Joshua Wong, Andy Chan, and Agnes Chow. Who, if you read between the lines, didn’t lead much of anything; they may be figure-heads, but that’s not the same thing. The protests are either lacking leaders or everyone’s a leader, depending on who you ask. So why arrest them to begin with? You tell me.

What I did find enlightening was Reuters’ report yesterday on Beijing having rejected Hong Kong Chief Executive Carrie Lam’s (how is CEO a political function?) proposal to communicate with the protesters and perhaps allow some concessions to their demands. I know it’s only one source, but it appears quite feasible.

Carrie Lam is between a rock and a hard place, and she admits it -at least according to the Reuters piece-, though not to the protesters. Beijing is in exactly such a spot, but won’t admit it, ever. And that right there is Hong Kong’s main issue.

China Rejected Hong Kong Plan To Appease Protesters 

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

The Dragon lays out its road map, denies seeking hegemony

The Dragon lays out its road map, denies seeking hegemony

The key merit of China’s National Defense in the New Era, a white paper released by the State Council in Beijing, is to clear any remaining doubts about where the Middle Kingdom is coming from, and where it’s going to by 2049, the mythical date to, theoretically, be restored as the foremost global power.

Although not ultra-heavy on specifics, the white paper certainly should be read as the Chinese counterpoint to the US National Security Strategy, as well as the National Defense Strategy.

It goes without saying that every sentence is being carefully scrutinized by the Pentagon, which regards China as a “malign actor” and “a threat” – the terminology associated with its “Chinese aggression” mantra.

To cut to the chase, and to the perpetuating delight of China’s supporters and critics, here are the white paper’s essentials.

What global stability?

The Beijing leadership openly asserts that as “the US has adjusted its national security and defense strategies, and adopted unilateral policies” that essentially “undermined global strategic stability.” Vast sectors of the Global South would concur.

The counterpart is the evolution of “the China-Russia comprehensive strategic partnership of coordination for a new era,” now playing “a significant role in maintaining global strategic stability.”

In parallel, Beijing is very careful to praise the “military relationship with the US in accordance with the principles of non-conflict, non-confrontation, mutual respect and win-win cooperation.” The “military-to-military relationship” should work as “a stabilizer for the relations between the two countries and hence contribute to the China-US relationship based on coordination, cooperation and stability.”

Another key counterpart to the US – and NATO – is the increasingly crucial role of the Shanghai Cooperation Organization (SCO), which is “forging a constructive partnership of non-alliance and non-confrontation that targets no third party, expanding security and defense cooperation and creating a new model for regional security cooperation.”

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

Chinese Bank With $100 Billion In Assets Is About To Collapse

Chinese Bank With $100 Billion In Assets Is About To Collapse

While the western world (and much of the eastern) has been preoccupied with predicting the consequences of Trump’s accelerating global trade/tech war and whether the Fed will launch QE before or after it sends rates back to zero, Beijing has quietly had its hands full with avoiding a bank run in the aftermath of Baoshang Bank’s failure and keeping the interbank market – which has been on the verge of freezing – alive.

Unfortunately for the PBOC, Beijing was racing against time to prevent a widespread panic after it opened the Pandora’s box when it seized Baoshang Bank, the first official bank failure in an odd replay of what happened with Bear Stearns back in 2008, when JPMorgan was gifted the historic bank for pennies on the dollar.

And with domino #1 down, the question turned to who is next, and could it be China’s Lehman.

As a reminder, back in May, shortly after the shocking failure of China’s Baoshang Bank (BSB), and its subsequent seizure by the government – the first takeover of a commercial bank since the Hainan Development Bank 20 years ago – the PBOC panicked and injected a whopping 250 billion yuan via an open-market operation, the largest since January. Alas, as we said at the time, it was too little to late, and with the interbank market roiling, with Negotiable Certificates of Deposit (NCD) and repo rates soaring (in some occult cases as high as 1000%) we said that it’s just a matter of time before another major Chinese bank collapses.

We Are Neutral on Chinese Equities, Says Bank of Singapore’s Malik

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

China Hit By “Significant Banking Stress” As SHIBOR Plummets To Recession Levels

China Hit By “Significant Banking Stress” As SHIBOR Plummets To Recession Levels

It’s probably not a coincidence that just days after we reported that China’s interbank market was freezing up in the aftermath of the Baoshang Bank collapse and subsequent seizure, which led to a surge in interbank repo rates and a spike in Negotiable Certificates of Deposit (NCD) rates…

… that Beijing is doing everything in its power to keep liquidity flowing within the world’s largest, ~$40 trillion, financial system.

Case in point: China’s overnight SHIBOR lending rate tumbled overnight, sliding from 1.253%, and 1.924% a week ago, to just 1.11% today. This, as Commodore Research points out, marks the lowest level seen since June 12, 2015. 

In fact, the only other time this decade that SHIBOR rates fell to such a low level was back in 2015 (which was a period when China was likely undergoing a recession). Prior to 2015, the previous time that SHIBOR rates fell to 1.11% (or lower) was during the global financial crisis in 2008/2009.

As Commodore further notes, “there recently has remained talk of liquidity problems and banking fears in China (and these concerns have only grown since the Baoshang Bank failure in May). Low SHIBOR lending rates are supportive and accommodative in nature — but rates sitting at rare multi-year lows are likely an indication that China is facing significant banking stress at the moment.”

The report’s conclusion: “It is very rare for the overnight SHIBOR lending rate to be set as low as 1.11%.”

Meanwhile, as the world’s biggest financial time bomb ticks ever louder, traders and analysts are blissfully oblivious, focusing instead on central banks admitting that the recession is imminent and trying to spin how a world war with Iran would be bullish for stocks.

Beijing “Seriously Considering” Rare-Earth Export Ban

Beijing “Seriously Considering” Rare-Earth Export Ban

Following what was a mostly quiet holiday weekend for trade-war-related rhetoric (other than a dollop of trade-deal optimism offer by President Trump, little was said by either side), Beijing has started the holiday-shortened week by reiterating threats to embrace what we have described as a ‘nuclear’ option: restricting exports of rare earth metals to the US.

Global Times editor Hu Xijin, who has emerged as one of the most influential Communist Party mouthpieces since President Trump increased tariffs on $200 billion in Chinese goods, tweeted that China is “seriously considering restricting rare earths exports to the US.”

Based on what I know, China is seriously considering restricting rare earth exports to the US. . China may also take other countermeasures in the future.

There are signs that these warnings should be taken seriously: One week ago, President Xi and Vice Premier Liu He, China’s top trade negotiator, visited a rare earth metals mine in Jiangxi province. Rare earths, which are vital for the manufacture of everything from microchips to batteries, to LED displays to night-vision goggles, have been excluded from US tariffs.

Rare

Though other Chinese officials have denied that export curbs were being considered, Xi’s visit was widely viewed as a symbolic warning. Seven out of every 10 tons of rare earth metals mined last year were produced by Chinese mines. One analyst warned that Xi’s visit was intended to send “a strong message” to the US.

Beijing is limited in its ability to retaliate against Washington’s tariffs by the fact that there simply aren’t enough American-made goods flowing into the Chinese market. Because of these limits, it’s widely suspected that Beijing will find other ways to retaliate. Though they are more plentiful than precious metals like gold and platinum, rare earths can be expensive to refine and extract.

Four

The tension has sparked a 30% increase in ‘heavy rare earth’ metals.

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

“A Big Wake Up Call”: Chinese Bond Market Roiled By First Ever Bank Failure

“A Big Wake Up Call”: Chinese Bond Market Roiled By First Ever Bank Failure

Late last Friday, we reported that several hours after the market close, China’s financial regulator and central bank made a shocking announcement: for the first time in nearly 30 year, China would take control of a bank, in this case the troubled inner Mongolia-based Baoshang Bank, due to the serious credit risks it poses.

The news which highlights the potential for increased stress at regional lenders that piled into off-book financing in recent years, was strategically timed to hit ahead of the weekend, and with the market closed, it avoided an immediate panic selling waterfall. However, the fact that in China banks are now fair game for failure, and will soon join the record surge in Chinese corporate defaults…

… slammed the country’s financial sector on Monday, sending funding costs sharply higher and underscoring the potential for increased stress at regional lenders that piled into off-book financing in recent years.

Unfortunately for Beijing, Bloomberg writes overnight that despite the strategically timed news, it wasn’t enough to prevent turmoil from sweep across the nation’s bond market, where funding costs for lenders surged and yields on government debt jumped. The seven-day repurchase rate jumped 30 basis points to 2.85%, the highest in a month, as of late Monday in Shanghai, while the yield on 10Y sovereign bonds climbed 5 bps to 3.35%.

“Baoshang’s case is a big wake-up call,” said Becky Liu, head of China macro strategy at Standard Chartered. “Participants in the interbank market, who didn’t differentiate credit when lending to banks on the belief that they will never go bankrupt, have now become more cautious. That has helped drive up funding costs and thus sovereign yields.”

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

The road to modern wars

The road to modern wars 

President Trump pursues a policy combining military threat with economic warfare and his aim is to restore American hegemony especially in view of the rising contender: China. Beijing has been acquiring technological knowledge and started expanding beyond the borders, having easier access to Central Asia and the Pacific than Americans.

In 2015, when Trump stood for election, we wrote: “Trump’s war rhetoric is very popular with his audiences and is a step beyond Obama’s statement about American exceptionalism. In New Hampshire, Trump nearly declared war on China as he stated: ‘Take a look at China what they have done, they have taken our money, our jobs, our base, our manufacturing, and we owe them 1.5 trillion dollars that’s like a magic act, they have taken everything, and we owe them money.’ Mr Trump did not tell his audience that bringing back jobs comes at a cost. China’s GDP per capita is around 7,500 dollars, while the GDP per capita of the US is about 55,000 dollars. The China rhetoric is unambiguous; China stole what belongs to the US, and there is no need to repay US debt owed to China. The world should brace for Mr Trump as the 45th president of the USA.

President Trump wants to dictate to the whole world, but, taking into account the fact that the United States is now in conflict with Cuba, Venezuela, Iran, Syria, Russia, China and North Korea, a big war is not to be expected any time soon, so much so that the military interventions in Afghanistan, Iraq, Pakistan, Yemen and Libya appear to be inconclusive. Washington has an arsenal of other measures and these include:

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

‘Clash of civilizations’ or crisis of civilization?

‘Clash of civilizations’ or crisis of civilization?

Talk about a graphic display of soft power: Beijing this week hosted the Conference on Dialogue of Asian Civilizations

Organized under the direct supervision of President Xi Jinping it took place amid an “Asian Culture Carnival.”  Sure, there were dubious, kitschy and syrupy overtones, but what really mattered was what Xi himself had to say to China and all of Asia. 

In his keynote speech, the Chinese leader essentially stressed that one civilization forcing itself upon another is “foolish” and “disastrous.” In Xi’s concept of a dialogue of civilizations, he referred to the New Silk Roads, or Belt and Road Initiative (BRI), as programs that “have expanded the channels for communication exchanges.”

Xi’s composure and rationality present a stark, contrasting message to US President Donald Trump’s “Make America Great Again” campaign.

West vs East and South

Compare and contrast Xi’s comments with what happened at a security forum in Washington just over two weeks earlier. Then, a bureaucrat by the name of Kiron Skinner, the State Department’s policy planning director, characterized US-China rivalry as a “clash of civilizations,” and “a fight with a really different civilization and ideology the US hasn’t had before.”

And it got worse. This civilization was “not Caucasian” – a not so subtle 21st century resurrection of the “Yellow Peril.” (Let us recall: The “not Caucasian” Japan of World War II was the original “Yellow Peril.”) 

Divide and rule, spiced with racism, accounts for the toxic mix that has been embedded in the hegemonic US  narrative for decades now. The mix harks back to Samuel Huntington’s The Clash of Civilizations and the Remaking of World Order, published in 1996. 

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

On Hostile Coexistence with China

On Hostile Coexistence with China

President Trump’s trade war with China has quickly metastasized into every other domain of Sino-American relations.   Washington is now trying to dismantle China’s interdependence with the American economy, curb its role in global governance, counter its foreign investments, cripple its companies, block its technological advance, punish its many deviations from liberal ideology, contest its borders, map its defenses, and sustain the ability to penetrate those defenses at will.

The message of hostility to China these efforts send is consistent and apparently comprehensive.  Most Chinese believe it reflects an integrated U.S. view or strategy.  It does not.

There is no longer an orderly policy process in Washington to coordinate, moderate, or control policy formulation or implementation.  Instead, a populist president has effectively declared open season on China.  This permits everyone in his administration to go after China as they wish.  Every internationally engaged department and agency – the U.S. Special Trade Representative, the Departments of State, Treasury, Justice, Commerce, Defense, and Homeland Security – is doing its own thing about China.  The president has unleashed an undisciplined onslaught.  Evidently, he calculates that this will increase pressure on China to capitulate to his protectionist and mercantilist demands.  That would give him something to boast about as he seeks reelection in 2020.

Trump’s presidency has been built on lower middle-class fears of displacement by immigrants and outsourcing of jobs to foreigners.  His campaign found a footing in the anger of ordinary Americans – especially religious Americans – at the apparent contempt for them and indifference to their welfare of the country’s managerial and political elites.  For many, the trade imbalance with China and Chinese rip-offs of U.S. technology became the explanations of choice for increasingly unfair income distribution, declining equality of opportunity, the deindustrialization of the job market, and the erosion of optimism in the United States.

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

Olduvai IV: Courage
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Olduvai II: Exodus
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