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分享 China Must Be Getting Really Nervous To Do This
insight 2015-6-21 16:29
China Must Be Getting Really Nervous To Do This Submitted by Tyler Durden on 06/20/2015 17:30 -0400 China in Share 3 One of the most stunning data points of the ponzi bubble called Chinese Stock Markets has been the greater-than-exponential rise in the opening of new retail stock trading accounts in the last few months. If ever there was a better indicator of speculative excess or a government policy out of control, it was the pace of new account openings. So... when we discover that after 8 years of weekly data provision, China Securities Depository Clearing (CDSC) Corp has decided to discontinue the time series - it is clear China is getting very worried. "Discontinued" - in a very McDonalds-monthly-sales-esque manner, China appears to have decided opacity is the better part of valor. The Source of the data is CDSC's Weekly Statistics... Week of 5/29 was the last update... Nothing since... And this is a series updated on the Friday US session after China's Friday Session is closed (with no lag)... so there has been 3 weeks with no data since the open accounts spiked to 4.3 million in one week... Just what is China trying to hide? Average: 5 Your rating:None Average:5 (7votes)
个人分类: 中国经济|3 次阅读|0 个评论
分享 China, India are ‘changing the nature’ of gold bullion markets
insight 2015-6-17 10:24
China, India are ‘changing the nature’ of gold bullion markets By Myra P. Saefong Published: June 16, 2015 2:24 p.m. ET 2 HSBC says emerging markets ‘largely define’ range for gold prices Shutterstock HSBC expects EM central banks to stock up more on gold. There is a shake-up in the gold market—and emerging markets like China and India are to blame. Emerging-market demand is ‘changing the nature of the bullion market,” HSBC analysts, led by James Steel, said in a note on Tuesday. Investment demand was the primary driver of gold until recently, but “price-sensitive EM demand is an increasingly important driver of gold prices, they said. EM buyers and sellers “largely define” the range for gold—with prices near $1,100 an ounce attracting buyers, but prices near $1,300 causing buyers to “shy away from purchases,” the HSBC analysts said. Gold futures GCQ5, -0.03% settled at $1,180.90 on Tuesday . They also point out that emerging-market central banks have contributed to purchases and they expect official-sector buying this year to climb by 25%. HSBC, Thomson Reuters GFMS In China, gold demand has been hurt by a moderating economy, a pullback in demand for luxury goods, a reduction in official gift giving and strong domestic mine output—which all contributed to the nation’s slowing appetite for imported gold, analysts at HSBC said. But China’s imports are “still robust by any historical measure,” with 2014’s imports marking the second best year for bullion demand in the country’s history, they said. And so far this year, imports are running well ahead of the five-year average. Consumers in important gold-consuming nations such as China, India, Indonesia, Vietnam and other emerging markets, “may have fewer tools at their disposal with which to protect savings and household wealth against rising prices or low or negative real interest rates,” the analysts said. So gold in these markets remains broadly popular since it’s viewed as an “efficient and reliable store of value,” they said. HSBC points out that annual per-capital consumption of gold in India and China is relatively low at one gram, but that also leaves “significant room for growth.” Read: Emerging markets suffer biggest outflow since the financial crisis Looking ahead, HSBC forecast a broad price range of $1,120 to $1,305 an ounce for the rest of this year, with an average price of $1,234, which is unchanged from its previous estimate. It also left its average price forecasts at $1,275 for 2016 and $1,300 for 2017, with its five-year view at $1,325 an ounce.
个人分类: gold|26 次阅读|0 个评论
分享 China Dumps Record $120 Billion In US Treasurys In Two Month Via Belgium
insight 2015-6-16 11:22
China Dumps Record $120 Billion In US Treasurys In Two Month Via Belgium Submitted by Tyler Durden on 06/15/2015 20:31 -0400 http://www.zerohedge.com/news/2015-06-15/china-dumps-record-120-billion-us-treasurys-two-month-belgium Belgium China Crude in Share 20 Those who have been following the saga of "Belgium's" US Treasury holdings learned last month that the "mysterious buyer" behind Belgium's Euroclear was, as some speculated, China all along. Nowhere was this more evident than when showing an overlay of China and Belgium's combined TSY holdings versus China's forex reserves. This is what we concluded last month: "Belgium" is, or rather, was a front for China: either SAFE, CIC, or the PBOC itself. That Belgium's holdings, after soaring as high as $381 billion a year ago, have since tumbled back to only $2532 billon as China has dumped the bulk of its Euroclear custody holdings, and that once this number is back to its historical level of around $170-$180 billion, "Belgium" will again be just Belgium. China's foreign reserves tumbled and this was offset by a the biggest quarterly drop in Chinese pro-forma treasury holdings, which dropped by a record $72 billion in the month of March, and a record $113 billion for the quarter. It wasn't precisely clear just why China, which had historically used UK-based offshore banks to transact in US paper in addition to the mainland, would pick Belgium or why it chose to hide its transactions in such a crude way, however the recent accelerated capital outflow from China manifesting in a plunge in Chinese forex reserves, coupled with a record monthly liquidation in total Chinese holdings, exposed just where China was trading. And while we have yet to get an update from Beijing of its April forex reserves, we know that China's Treasury liquidation has continued. Enter: Belgium, only this time it is not a "mystery" buyer behind the small central European country, but a seller. As the chart below shows, after a record $92.5 billion drop in March, "Belgium" sold another $24 billion in April, bringing the total liquidation to a whopping $116.4 billion for the months of March and April. This means that after adding mainland China's token increase of $2 billion in April after a $37 billion increase the month before, net of Belgium's liquidation China has sold a record $77 billion in Treasurys in the most recent two months. And while we eagerly await the monthly update of Chinese official forex reserves, we can estimate that the drop will be another $50-60 billion in the month of April. The good news, for those tracking the story of China's unprecedented capital outflows, is that after "Belgium's" record March dump, in April Chinese Treasury sales slowed to the slowest pace in the past three months. In other words, China may finally be getting its capital outflow problem under control, which, incidentally is bad news for the Chinese stock market because if true, it means the PBOC can now step back from micro-managing the stock market bubble and its "beneficial" current account inflows to offset the declining capital account. But what is perhaps most curious is that even with China liquidating such a massive amount of US paper into a very illiquid market, the yield on the 10Y did not blow out far more in the months of March or April. And the last question: who did China sell all this paper to? Average: 0
个人分类: treasury yield|6 次阅读|0 个评论
分享 The Sick Man Of Asia - China's Looming Health Disaster(
insight 2015-6-10 10:06
The Sick Man Of Asia - China's Looming Health Disaster (待审核) 2015-6-10 10:05 | 个人分类: health The Sick Man Of Asia - China's Looming Health Disaster Submitted by Tyler Durden on 06/09/2015 20:20 -0400 8.5% China ETC Global Economy India Yuan in Share Submitted by Charles Hugh-Smith of OfTwoMinds blog , That the China Story is going to implode is already baked into the public health catastrophe that will unfold with a vengeance in the coming decade. The financial pundits gushing over "The China Story" - that the Middle Kingdom's industrialization is a permanent boon to the global economy and China's poor - never calculate the human cost of that runaway industrialization and the vast inequalities it has unleashed. The human cost is staggering: at least half the population is suffering from chronic lifestyle/environmental-related illnesses and 225 million suffer from mental disorders. For context, the population of China is estimated to be 1.39 billion, roughly 4.4 times the U.S. population of 317 million, and about 20% of the total global population. Here are some estimates of China's public health problems: (source links below) -- Half the population is estimated to be prediabetic (suffering from metabolic syndrome/diabesity). -- 12% of the populace now has diabetes, roughly 115 million people. -- An estimated 70% of China's diabetics are undiagnosed; only 25% are receiving any treatment and of the 25%, the disease is only being controlled in 40% of those getting treatment. -- Noncommunicable diseases--cardiovascular disease, chronic respiratory diseases and cancer, account for 85% of total deaths in China today -- much higher than the global average of 60%. -- Mental disorders rose by more than 50 percent between 2003 and 2008. An estimated 17.5% of the population (225 million) suffers from some form of mental problem, one of the highest rates in the world. -- More than 300 million people in China -- roughly equivalent to the entire U.S. population of 317 million -- smoke tobacco. -- 200 million workers are directly exposed to occupational hazards. -- Informal estimates suggest a large percentage of the urban population suffers from lung/pulmonary diseases. Over the last 30 years, deaths ascribed to lung cancer have risen by a factor of five in China. -- 160 million Chinese adults have hypertension (high blood pressure). -- In 2006, 80 percent of China’s health budget was spent on just 8.5 million government officials. -- Tthe rate of health-care coverage is high, but the level of benefits is still very low. 836 million rural residents who were officially covered by the government's plan still had to pay the lion’s share of their medical bills. The government coverage paid a mere 8.6% of rural residents' total healthcare expenditures. Sources: China’s Worrying Diabetes Epidemic The Sick Man of Asia: China's Health Crisis Toxic smog threatens millions of Chinese lives Reliable statistics are hard to come by for a number of reasons. Authorities in China avoid quantifying China's public health realities because it detracts from the glowing "China Story" they promote. The rural population (still 55% of the total populace) often has little access to health care and statistics are sketchy. Preconditions that lead to disease (for example, prediabetes and early-stage COPD (chronic obstructive pulmonary disease) are not accurately monitored. The standard Western proponent of the China Story spends a few days in a fancy Shanghai hotel and then repeats glowing (and dodgy) economic statistics, as if that's the whole story. Western pundits don't visit rural village stripped of working-age adults, where grandparents are struggling to raise the children who resent their factory-worker parents' absence. Proponents don't spend time with those on the bottom of the urban "growth story," the millions living in makeshift hovels who receive no state aid due to their status as "illegal residents" in urban zones. The mental health issues arising from dislocated families, uprooted workers and grinding poverty in the midst of a society dominated by an Elite that drives super-sports cars and owns lavish homes in the West are ignored by the mainstream Western media. The rapid ageing of the Chinese populace is exacerbating an already immense public health crisis. It's estimated that by 2040 there will be more people with Alzheimer’s disease in China than in all the developed countries combined. Ill health and chronic disease are undercutting the economic growth everyone is focusing on. Whatever the metric used--hours of labor lost to illness, years of labor lost to early retirement due to ill-health, etc.--the costs of China's environmental damage, disrupted social order and low investment in public health are weighing heavily on output. The rise in health-related costs going forward will not be linear but geometric. Linear increases in pollution, diabesity, etc. can yield a ten-fold increase in diseases that require costly treatments. Every nation, developed and developing alike, has public health challenges. What's different about China (and India) is the scale is just so enormous: 740 million Chinese are regularly exposed to second-hand smoke, for example, and ten of millions of urban dwellers are exposed to air pollution that is said to rival smoking three packs of cigarettes a day in its negative impact on pulmonary health. It's all well and good to toss around grandiose plans for new Silk Roads, aircraft carriers and islands constructed in disputed seas, but where is the money and labor going to come from when the health problems of hundreds of millions of workers and retirees come due and payable? How many more trillions of yuan can local governments borrow once the credit bubble in China deflates, as all financial bubbles eventually do? Apologists and cheerleaders will naturally claim these estimates are exaggerated, and that China is aggressively tackling its immense environmental and public-health problems. The Chinese excel at the Soviet model of showcase trials and projects staged for propaganda, and officials regularly present Potemkin-Village pollution clean-ups. But if you try to come back a year later and check on the progress, you will find it isn't possible--and insisting might get you arrested. What's being exaggerated is China's response to the unfolding environmental and public health catastrophe. The Chinese government's priorities are tightening control of its domestic society and extending hegemony in the South China Sea. Public health receives lip service and a marginal slice of state funding and focus. The money flows to care for the elites, and the peasantry gets next to nothing. That the China Story is going to implode is already baked into the public health catastrophe that will unfold with a vengeance in the coming decade.
个人分类: healthcare|22 次阅读|0 个评论
分享 Growth Economics
accumulation 2015-4-28 23:07
Can you comment on why the theory of Malthusian “Population Trap” was well accepted in his time, but broken-down later? Any implications and insight for making a better population policy in China? Malthus argued that capital productivity, especially land productivity given its central role as the most valuable physical capital in Malthus’ time, decreased as population increased. Increases in technology should, according to Malthus, only increase population, therefore reducing relative income and only reduced fertility could increase income, resulting in a natural limit on population control. While Malthus’ claims were supported by the long term relative stability in the population over ancient history, Malthus could not foresee the independent impact technological advances could have on income, namely that land would in the future not be the most important physical capital and that technology increases capital’s productivity, thus not only increasing the possibility of population increase but also income. Population policy in China should, therefore, not depend on the depressive impact of resources per population mentality of controlling population, but rather focus energy and policy on improving the efficiency of production, which can improve income independent of population growth.
个人分类: 宏观经济学|0 个评论
分享 Made in China? Global manufacturing 3.14
So^^So 2015-3-29 16:58
On March 14, The Economist published an article named “Made in China? Global manufacturing”. The article summarized that china has three formidable advantages in manufacturing that will benefit the economy as a whole and reinforces Factory Asia's dominance. At the same time, it makes harder for other areas to become the next new factory. In recent years china faces many unfavorable factors about economic development, such as the wage in china is becoming higher and higher, China's economy is not as robust as it was, the property market is plagued by excess supply, rising debt is a burden and etc. But china still has three advantages to retain the upper hand. Firstly, in old times many countries think china was doing low-value activities in some degree. But now with the need of constant economic development, china goes upmarket to exploit higher-value activities and at the same time it is clinging on to low-cost manufacturing. Because China boasts clusters of efficient suppliers that others will struggle to replicate. It can make more of the things that go into its goods. It also has excellent, and improving infrastructure. Its firms are using automation to raise productivity, offsetting some of the effect of higher wages. Secondly, with rages rising much of the low-cost activity is passing to large low-income populations in south-east Asia, just like Malaysia, Myanmar, Philippines and etc, they reinforce a regional supply chain with China at the centre. Thirdly, China is increasingly a linchpin of demand. As the spending and sophistication of Chinese consumers grows, Factory Asia is grabbing a bigger share of higher-margin marketing and customer service. At the same time, Chinese demand is strengthening Asian supply chains all the more. When it comes to the Chinese market, local contractors have the edge over distant rivals. This article also thinks that deft policy could boost these advantages still further. Regional or global--deals would smooth the spread of manufacturing networks from China into nearby countries. Right policies can weld South-East Asian countries into China's manufacturing machine in general. But how about other countries and region? They lack a large economy that can act as the nucleus of a regional grouping. The North American Free-Trade Agreement has brought Mexican firms into supply chains that criss-cross North America, but not Central and South American ones. High trade barriers mean Western Europe will not help North Africa in the way that it has helped central and Eastern Europe. We can use the next picture to make the analysis. I think the most important thing here is network effect. In south-east Asia, we assume each country has strong links, it represented by solid line. Country A, B and C they connect with each other closely and it is easy for the firm to transfer the industry from one country to another because they are close to each other, they have less barriers and they have the similar culture. What is the most important is that it can reach the economies of scope. It has two means. First, different countries can exchange resources with each other and the similar industry is close to each other can reduce the cost. Second, as a whole to do business can reduce transaction cost compared to these countries which has weak links in the same area, it represented by dotted line and country E and F. In this case A, Band C can provide more products and formulate a whole supply chain so it is more convenient for buyer G to do business with them and G will have more specific investments. So it will cost a lot for it to transfer business to others. We can call the whole process the network effect. The writer think that now technological advances have led to fewer workers on factory floors. China and its neighbours may have been the last countries to be able to climb up the ladder of development simply by recruiting lots of unskilled people to make things cheaply. I think it is the tendency of the society and economy, other countries should develop a new way to promote itself, just like promoting the development of agriculture and services like India’s IT-services sector, building a more liberal global regime, investing in Infrastructure spending and paying more attention to education.
个人分类: 每周经济学人评介|28 次阅读|0 个评论
分享 Uncovering the conduits for China’s capital flight 3.06
So^^So 2015-3-29 16:55
On March 06, financial times published an article written by Andrew Collier: Uncovering the conduits for China’s capital flight. As we all know, capital flight is a universal phenomenon in china. Many factors attribute to this situation, just like expectations of a weaker RMB, too much money owned by wealthy people in china is made by illegal approach, evading foreign-exchange controls, avoiding regulation and high taxes and etc. In the past, there are many ways for people to transfer their money out of china. It can be divided in to current account, capital account and other illegal ways. With the development of world economy and trade shape, Chinese investors have discovered a new way to spirit money out of the country behind the backs of the country’s regulators. The commonest way is service payments. Instead of overpaying for an item, they simply pay for a service that never occurred. Many other realistic things happened recently attribute to China’s capital flight. With China’s property bubble coming to an end, the ability to generate quick profits through the Shadow Banks is no longer available to the country’s wealthier citizens. Many also are faced with President Xi Jinping’s continuing crackdown against corruption. Meanwhile, the declining GDP numbers – with Premier Li Keqiang this week pointing to 7 per cent as the new normal – has made the one way bet on the RMB less attractive. This explains why investors are looking for a safe haven for the money overseas. There are a couple of methods that have become popular over the past few months. For example, study abroad schemes, interbank borrowing, overseas branches of domestic companies and false joint ventures. In 2014 ， bankers involved estimate that as much as 40% of the larger service transactions do not involve actual services. This suggests close to $200 billion of all service payments are in reality permanent exports of capital. That number could double in 2015. I think it will have a big effect on many aspects of not just world but also Chinese economy. These would include the value of the RMB, the amount of domestic money supply and the ability of China to stimulate the economy. There is also a huge impact on the value of global assets where the money is being invested, such as overseas property and stocks. In addition, there is the unknown impact on the value of the assets held by China as foreign exchange.
个人分类: 每周经济学人评介|28 次阅读|0 个评论
分享 China's Stock Bubble Leaves BNP Speechless: "What Happens Next Is An Unknow
insight 2015-3-27 10:25
China's Stock Bubble Leaves BNP Speechless: "What Happens Next Is An Unknown-Unknown" Submitted by Tyler Durden on 03/26/2015 20:00 -0400 Capital Markets China ETC Hong Kong Market Sentiment OTC Real estate Reuters Shadow Banking Shenzhen in Share 1 Earlier this month, we identified the reason why Chinese stocks have continued to rise in the face of overwhelming evidence that the country’s economy is decelerating quickly. While the first part of the 8-month run can be plausibly attributed to PSL, the furious buying that began in late November looks to be at least partly attributable to the fact that thanks to tighter regulations on lending outside the traditional banking system, China’s $2 trillion shadow banking complex needed somewhere to put cash to work and that somewhere turns out to be the giant bubble that is the SHCOMP. Here’s more: Because according to Reuters, it is precisely China's trust firms, with total assets of $2.2 trillion, and who together with Banker Acceptances comprise the bulk of China's shadow banking pipeline, and no longer able (or willing) to lend to China's small companies and individuals due to a spike in regulation, are shifting more cash into frothy capital markets and over-the-counter (OTC) instruments instead of loans. In other words, instead of using their vast cash hoard of over $2 trillion to re-lend and stimulate China's economy, China's unregulated, shadow banking conduits are now directly buying stocks! Shortly thereafter we highlighted the 7 main reasons for the Chinese stock ramp all of which boil down to one thing: liquidity. Here they are, courtesy of UBS: With no significant change in China's macro or corporate fundamentals, the visible rebound in China's A-share market since November appears to have been largely liquidity driven. We think this, in turn, may have been fuelled by a number of factors including: 1. new funds flowing into the stock market from household saving, real estate, commodities and trust markets; 2. banks' bridge loans provided to investors who lost access to other high-yield shadow banking products as the result of tighter regulation; 3. the PBC's easing of liquidity conditions via a variety of "targeted easing" tools (e.g. MSL, PSL, etc.); 4. the official launch of Mutual Market Access (MMA) between the Hong Kong and Shanghai exchanges; 5. long-term expectations for SOE reform and A-shares entering the MSCI index next June; 6. increased use of leverage by retail investors via margin trading; and 7. market sentiment being boosted by expectations for further policy easing. Meanwhile, February’s RRR cut failed to meaningfully lower China’s interbank rates, likely due to continued sizable capital outflows and significant liquidity withdrawals from China’s money markets by recent IPO applications. Meanwhile, China’s securities regulator warned investors that not wanting to miss out on the next leg up is not a good investment strategy to follow, especially in a market as frothy as this one. Now, BNP is out with a note calling China’s equity bubble “a microcosm for the overall economy: unsustainable growth in leverage masking ever-deteriorating fundamentals and increasing future downside risks.” Here’s more: Against all odds, the best performing asset class on the planet over the last nine months or so has been Chinese equities… ...it’s not the economy (as we’ve been saying for months)... What underlies these extraordinary gains? It is certainly not economic fundamentals. Led by the accelerating real estate slump (China: It’s Only Just Begun), China’s GDP growth has steadily slowed with reported 2014 GDP growth of 7.4% the slowest in almost twenty years. A range of ‘hard’ economic indicators such as electricity production and rail cargo volumes suggest even slower growth. Our preferred ‘real, real’ GDP estimate flags that output growth could have been as low as c.4½% in 2014 (China: Fit as a Fiddle). While the usual data fog around the Lunar New Year partially clouds analysis, high frequency indicators that generate early estimates of GDP growth suggest that the growth has continued to slide in 2015Q1… ...it must be liquidity…. By definition therefore equities’ stellar performance has been a function of liquidity driven multiple expansion. The P/E ratios for the Shanghai and Shenzhen markets have roughly doubled since August to c.19x and c.44x respectively. While still a long way short of the incredible highs of 70-80x reached during the 2006-2007 bubble, multiples are now rapidly approaching their post-GFC highs. One obvious source of fresh liquidity which could have powered equities’ bull-run is from the long-delayed introduction of the Hong KongShanghai ‘stock connect’ last November. The scheme, formerly known as ‘the through train’, allows two trading between the Shanghai A-share market and the Hang Seng. Two-way flows however have been relatively meagre. An initial aggregate quota of RMB300bn was set for northbound flows into Shanghai. So far only about a cumulative RMB125bn has flowed north, leaving RMB175bn of the aggregate quota unfilled. And northbound buy orders have in turn typically only accounted for around ¾% of the Shanghai market’s daily turnover… ...and it comes from a predictable place, leverage… Far from a surge in external liquidity, an increasingly self-feeding domestic frenzy fuelled by leverage appears to be the key driver ….Margin purchases have been running well ahead of redemptions ensuring that the outstanding stock of margin debt has ballooned by over RMB1 trillion since August; equivalent to more than 1% of GDP… ...and castles built on quicksand (i.e. margin debt) will likely collapse… Margin purchases are now accounting for almost 20% of equities daily turnover which itself has soared to wholly unprecedented levels in another sign of self-feeding speculative frenzy. What happens next is clearly an ‘unknown-unknown’. By definition detached from fundamentals, speculative bubbles are inherently re-enforcing in the short-term and frequently last longer than expected. The longer they continue, however, the larger the eventual bursting. * * * As a reminder: Average: 5 Your rating:None Average:5 (2votes) in Share 1
个人分类: 中国经济|9 次阅读|0 个评论
分享 US Hegemony, Dollar Dominance Are Officially Dead As China Scores Overwhelming V
insight 2015-3-26 11:34
US Hegemony, Dollar Dominance Are Officially Dead As China Scores Overwhelming Victory In Bank Battle Submitted by Tyler Durden on 03/25/2015 17:00 -0400 Brazil BRICs China Eastern Europe France Germany Goldman Sachs goldman sachs India Italy Japan Reality The Economist World Bank in Share 20 It’s official: everyone has caught onto the fact that the Asian Infrastructure Investment Bank story is extremely important. We’ve covered this exhaustively over the past month, but to summarize, the China-led development bank essentially marks an epochal shift away from traditionally US-dominated multinational institutions like the IMF and the ADB. Meanwhile, it also represents an implicit attempt by the Chinese to usher in a kind of sino-Monroe Doctrine and solidify their regional — and, to a certain extent their international — ambitions. In a desperate attempt to undermine the effort and preserve what’s left of US hegemony, Washington aggressively lobbied its allies last year to refrain from supporting the effort. Then the UK decided to join calling the bank an “unrivaled opportunity.” That effectively opened the floodgates and in short order, a bevy of Western nations and close US allies suddenly reversed course and indicated they were likely to support the new institution. Here’s more: US Attacks "Closest Ally" UK For "Constant Accommodation" With China De-Dollarization Accelerates As More Of Washington's "Allies" Defect To China-Led Bank US "Isolated" As Key Ally Japan Considers Joining China-Led Bank US Upset At West's Lack Of War Preparedness Treasury Secretary Lew Admits US "International Credibility Influence Is Being Threatened" With the deadline for applications fast approaching, news coverage has picked up markedly of late. Here’s Bloomberg for instance: China’s clout has been expanding for decades, as its rapid growth allowed it to snap up a rising share of the world’s resources, its exports penetrated global markets, and its bulging financial assets gave it power to make big individual loans and purchases. Now, the creation of international lending institutions is leveraging that economic influence closer to the political and diplomatic arenas, as U.S. allies defy America to back China’s initiative. “This is the beginning of a bigger role for China in global affairs,” said Jim O’Neill, U.K.-based former chief economist at Goldman Sachs Group Inc., who coined the term BRICs in 2001 to highlight the rising economic power of Brazil, Russia, India and China… Chinese President Xi Jinping’s vision of achieving the same great-power status enjoyed by the U.S. received a major boost this month when the U.K., Germany, France and Italy signed on to the Asian Infrastructure Investment Bank. The AIIB will have authorized capital of $100 billion and starting funds of about $50 billion. Canada is considering joining, which would leave the U.S. and Japan as the only Group of Seven holdouts as they question the institution’s governance and environmental standards. Australian Prime Minister Tony Abbott’s cabinet approved negotiations to join too, according to a government official who asked not to be identified as the decision hasn’t been made public. Founding membership will be finalized as soon as April 15, a Chinese official said today. “China’s economic rise is acting as a huge pull factor forcing the existing architecture to adapt,” said James Laurenceson, deputy director of the Australia-China Relations Institute in Sydney. “The AIIB has shown the U.S. that a majority in international community support China’s aspirations for taking on greater leadership and responsibility, at least on economic initiatives”... The U.S. still has veto power on major decisions made by both the IMF and the World Bank, and a lock on selecting the president of the World Bank. Both institutions are increasingly unrepresentative and undersized compared with demands they face. As it turns out, not even the very institution that the AIIB is supposed to most directly threaten is prepared to shun the new bank and in fact, it appears as though cooperation may be in the cards: ADB'S NAKAO: ADB WILL COOPERATE WITH, NOT BE HOSTILE TO AIIB ADB'S NAKAO: POSSIBLE ADB, AIIB COULD COOPERATE ON LENDING The more isolated the US becomes as it relates to the new venture, the more transparent its motives seem. This was never about “standards” (the original excuse for Washington’s opposition to the bank), but rather about stifling Chinese ambition because, as we noted previously, while “starting an infrastructure development bank may not be an overt act of aggression, if you just sit idly by and let a rising superpower build stuff, it sends the wrong message, especially aren’t willing to spend at least 4% of GDP on the military.” Here’s The Economist with more on America and its (non)role: In the case of the AIIB, America seems to be confirming China’s darkest fears: it has adopted a policy of containment that is wrong in principle and has failed in practice… There are three reasons why America should be more receptive toward the AIIB and its allies’ potential membership. The first is that Asia’s need for infrastructure is vast and pressing. The continent’s relentless urbanisation requires at least $8 trillion of infrastructure spending in this decade, according to the ADB. The AIIB will not finance this splurge on its own: it looks likely to end up with a capital base of between $50 billion and $100 billion. But it will help. Second, the best way to deal with concerns about Chinese lending standards is to join the bank and improve it from inside, not to throw brickbats from outside… Third, although it might have been better to expand and reform existing institutions (the ADB, World Bank and so on), America itself has made that impossible. Even a modest proposal to increase the resources of the IMF (giving slightly more votes to China and other big emerging markets) has been stymied for years in Congress. * * * To be sure, this is a delicate time for the US in terms of its position on the world stage. The petrodollar is dying , Russia is reasserting itself in Eastern Europe, US-Israeli relations are quickly deteriorating, and now, the world is shifting away from ineffectual US-dominated multinational institutions that, in one way or another, have defined the post WW2 world. The US would be wise to adjust its foreign policy to reflect this new reality rather than desperately cling to the notion that world history is and always will be written by Washington. Average: 4.64706 Your rating:None Average:4.6 (17votes)
个人分类: usd collapse|10 次阅读|0 个评论
分享 【2015新书】The Road to the Rule of Law in Modern China
kychan 2015-3-15 13:29
【2015新书】The Road to the Rule of Law in Modern China https://bbs.pinggu.org/thread-3613561-1-1.html 声明： 本资源仅供学术研究参考之用，发布者不负任何法律责任，敬请下载者支持购买正版。 提倡免费分享！ 我发全部免费的，分文不收 来看看 ... 你也可关注我 https://bbs.pinggu.org/z_guanzhu.php?action=listattentionfuid=3727866
个人分类: 【每日精华】|10 次阅读|1 个评论
分享 The New London Gold Fix And China's Gold Strategy
insight 2015-3-13 16:08
The New London Gold Fix And China's Gold Strategy Submitted by Tyler Durden on 03/12/2015 22:32 -0400 Afghanistan Bear Market China Global Economy India Iran London Fixing Middle East None in Share 11 Submitted by Alasdair Macleod via GoldMoney.com , This month the physical gold market will undergo radical change when the four London fixing banks hand over the twice-daily fix to the International Commodity Exchange's trading platform on 20th March. From 1st April the Financial Conduct Authority will extend its powers from regulating the participants to regulating the fix as well. This will transfer price control away from the bullion banks allowing direct access to the fixing process for all direct participants and sponsored clients. From this flow two important consequences. Firstly, the London market is changing from an unregulated to a partially regulated market, reducing room for price manipulation. And secondly, the major Chinese state-owned banks, assuming they register as direct participants, have the opportunity to dominate the London physical market without having to deal through one of the current fixing banks. No announcement has been made yet as to who the direct participants will be, but it is a racing certainty China will be represented. Implications of becoming a regulated market Under the current regime a buyer or seller on the fix has to deal through one of the four fixing bullion banks. The information gained by them from seeing this business is crucial, giving them a quasi-monopolistic trading advantage over all the other dealers. Instead, buyers and sellers will be anonymous during the auction process. The new platform should, therefore, ensure equal opportunity, eliminating the advantage enjoyed by the fixing banks. Crucially, it will change market domination from the privileged fixing members in favour of the deepest pockets. These are almost certain to be China's through the state-owned banks which already control the largest physical market in Asia, the Shanghai Gold Exchange (SGE). China's gold strategy China actually took its first deliberate step towards eventual domination of the gold market as long ago as June 1983, when regulations on the control of gold and silver were passed by the State Council. The following Articles extracted from the English translation set out the objectives very clearly: Article 1. These Regulations are formulated to strengthen control over gold and silver, to guarantee the State's gold and silver requirements for its economic development and to outlaw gold and silver smuggling and speculation and profiteering activities. Article 3. The State shall pursue a policy of unified control, monopoly purchase and distribution of gold and silver. The total income and expenditure of gold and silver of State organs, the armed forces, organizations, schools, State enterprises, institutions and collective urban and rural economic organizations (hereinafter referred to as domestic units) shall be incorporated into the State plan for the receipt and expenditure of gold and silver. Article 4. The People's Bank of China shall be the State organ responsible for the control of gold and silver in the People's Republic of China. Article 5. All gold and silver held by domestic units, with the exception of raw materials, equipment, household utensils and mementos which the People's Bank of China has permitted to be kept, must be sold to the People's Bank of China. No gold and silver may be personally disposed of or kept without authorisation. Article 6. All gold and silver legally gained by individuals shall come under the protection of the State. Article 8. All gold and silver purchases shall be transacted through the People's Bank of China. No unit or individual shall purchase gold and silver unless authorised or entrusted to do so by the People's Bank of China. Article 12. All gold and silver sold by individuals must be sold to the People's Bank of China. Article 25. No restriction shall be imposed on the amount of gold and silver brought into the People's Republic of China, but declaration and registration must be made to the Customs authorities of the People's Republic of China upon entry. Article 26. Inspection and clearance by the People's Republic of China Customs of gold and silver taken or retaken abroad shall be made in accordance with the amount shown on the certificate issued by the People's Bank of China or the original declaration and registration form made on entry. All gold and silver without a covering certificate or in excess of the amount declared and registered upon entry shall not be allowed to be taken out of the country. Additionally, China has deliberately developed her gold production regardless of cost so that she is now the largest producer by far in the world today. State-owned refineries process this gold along with doré imported from elsewhere. None of this gold leaves China. The regulations quoted above formalise the State's monopoly over all gold and silver which is exercised through the People's Bank, and they allow the free importation of gold and silver but keep exports under very tight control. On the basis of these regulations and as subsequently amended the People's Bank established the SGE, which remains under its total control. The intent behind the regulations is not to establish or permit the free trade of gold and silver, but to control these commodities in the interest of the state. This being the case, the growth of Chinese gold imports recorded as deliveries to the public since 2002 is only the most recent evidence of a deliberate act of policy embarked upon thirty-two years ago. China had been accumulating gold for nineteen years before she allowed her own nationals to buy any when private ownership was finally permitted. Furthermore, the bullion was freely available, because in seventeen of those years gold was in a severe bear market fuelled by a combination of supply from central bank disposals, leasing, scrap, rapidly-increasing mine production and investor selling, all of which I estimate totalled about 76,000 tonnes in all. The two largest buyers for all this gold for much of the time were the Middle East and China. The breakdown from these sources and the likely demand are identified in the table below taken from my article for GoldMoney on the subject published last October, where a more detailed discussion of global bullion distribution during those years can be found. Put in another context the cost of China's 25,000 tonnes of gold equates to roughly 10% of her exports over the period, and the eighties and early nineties in particular, also saw huge capital inflows when multinational corporations were building factories in China. However, the figure for China's gold accumulation is at best informed speculation, but given the determination expressed in the 1983 regulations and subsequent events it is clear she had deliberately accumulated a significant undeclared stockpile by 2002. So far China's long-term plans for the acquisition of gold appear to have achieved some important objectives. Deliveries to the public through the SGE since only 2008 totalled 8,459 tonnes, gross of returned scrap, probably more than 9,500 tonnes since 2002 given estimated domestic mine production of 1,352 tonnes between2002-2007. With such a large commitment to this market, we must now anticipate the next stage for China's gold policy, which is why the changes in London may be important. China now has the opportunity to take a dominant role in London, without having to direct its order flows through the fixing banks. Therefore, it is no exaggeration to say that from 20th March, China will be able to control the global physical gold market, which will permit her to manage the price. She has the deepest pockets, backed by the largest single stockpile. China's motives China's motives for taking control of the gold bullion market have almost certainly evolved. The regulations of 1983 make sense as part of a forward-looking plan to ensure that some of the benefits of industrialisation would be accumulated as a counterparty risk free national asset. This reasoning is similar to that of the Arab nations capitalising on the oil-price bonanza only ten years earlier, which led them to accumulate their hoard for the benefit of future generations. However, as time passed the world has changed both economically and politically. 2002 was a significant year for China, when geopolitical considerations entered the picture. Not only did the People's Bank establish the SGE to facilitate deliveries to private investors, but this was the year the Shanghai Cooperation Organisation (SCO) formally adopted its charter. This merger of security and economic interests with Russia has bound Russia and China together with a number of resource-rich Asian states into an economic bloc. When India, Iran, Mongolia, Afghanistan and Pakistan join (as they are committed to do), the SCO will cover more than half the world's population. And inevitably the SCO's members are looking for an alternative trade settlement system to using the US dollar. At some stage China with her SCO partner, Russia, will force the price of gold higher as part of their currency strategy. You can argue this from an economic point of view on the basis that possession of properly priced gold will give her a financial dominance over global trade at a time when we are trashing our fiat currencies, or more simply that there's no point in owning an asset and suppressing its value for ever. From 2002 there evolved a geopolitical argument: both China and Russia having initially wanted to embrace American and Western European capitalism no longer sought to do so, seeing us as soft enemies instead. The Chinese public were then encouraged even by public service advertising to buy gold, helping to denude the west of her remaining bullion stocks and to provide market liquidity in China. What is truly amazing is the western economic and political establishment have dismissed the importance of gold and ignored all the warning signals. They do not seem to realise the power they have given China and Russia to create financial chaos by simply hiking the gold price. If they do, which seems to be only a matter of time, then London's fractional reserve system of unallocated gold accounts would simply collapse, leaving Shanghai as the only major physical market. Therefore the failure of the London bullion market to see strategically beyond its short-term interests has opened the door to China's powerful state-owned banking monopoly to control the gold bullion market. This is probably the final link in China's long-standing gold strategy, and through it a planned domination of the global economy in partnership with Russia and the other SCO nations. Average: 4.89655 Your rating: None Average: 4.9 ( 29 votes)
个人分类: gold|1 次阅读|0 个评论
分享 经济增长与不平等现象
accumulation 2015-3-9 14:16
经济增长文献—经济增长与不平等现象： 1.Divergence__Big_Time 2.From Divergence to Convergence Reevaluating the History Behind 3.How Did China Take Off 4.Inequality among World Citizens- 1820-1992 5.Measuring Economic Growth from Outer Space 6.On_the_Mechanics_of_Economic_Development 7.The Dynamics of Smithian Growth 8.The Needham Puzzle- Why the Industrial Revolution Did Not Originate in China 9.从历史和国际的视角看中国的经济增长 10.大分流：欧洲、中国及现代世界经济的发展 11.经济增长的决定因素：跨国经验研究（美）罗伯特·J·巴罗.扫描版 12.劳动无限供给下中国的经济波动 13.李约瑟之谜、韦伯疑问和中国的奇迹——自宋以来的长期经济 14.理解中国经济发展的过去、现在和将来——基于一个贯通的增长理论框架 15.论我国国民经济的次高增长阶段_刘迎秋 16.贫穷的终结 17.中国各省经济增长是否收敛 18.中国经济的长期表现：公元960-2030年·第二版 （英）安格斯·麦迪森著 19.中国经济增长分析 20.中国经济长期增长路径、效率与潜在增长水平
个人分类: 宏观经济学|0 个评论
分享 【2015新书】 Transforming Rural Communities in China and Beyond
kychan 2015-2-26 15:28
【2015新书】 Transforming Rural Communities in China and Beyond https://bbs.pinggu.org/thread-3590333-1-1.html 声明： 本资源仅供学术研究参考之用，发布者不负任何法律责任，敬请下载者支持购买正版。 提倡免费分享！ 我发全部免费的，分文不收 来看看 ... 你也可关注我 https://bbs.pinggu.org/z_guanzhu.php?action=listattentionfuid=3727866
个人分类: 【每日精华】|30 次阅读|1 个评论
分享 【2011】Managing the China Challenge: How to Achieve Corporate Success in the Pe .
kychan 2015-1-31 14:17
【2011】Managing the China Challenge: How to Achieve Corporate Success in the People's Republic https://bbs.pinggu.org/thread-3561929-1-1.html 提倡免费分享！ 我发全部免费的，分文不收 来看看 ... 你也可关注我 https://bbs.pinggu.org/z_guanzhu.php?action=listattentionfuid=3727866
个人分类: 【每日精华】|7 次阅读|0 个评论
分享 China lodges protest after North Korea man 'kills four'
912726421 2015-1-6 00:13
China has protested to North Korea following reports that an army deserter killed four people in a Chinese border city. The soldier crossed the border in late December, stealing money and food before killing residents in Helong, local media reported. He was later arrested north of the Tumen River that divides China and North Korea. The river has been used for years by people trying to flee North Korea. The Chinese foreign ministry gave no details about the incident, but said it has lodged a protest with North Korea. "China's public security bureau will handle the case according to law," a ministry spokeswoman said, suggesting the suspect will be prosecuted in China rather than handed back to Pyongyang. It is not unknown for North Koreans to cross the porous border into China in search of food. Many trying to escape the country cross into China before seeking to travel onto a third country and then into South Korea. China often repatriates defectors back to the North, ruling them economic migrants. Activists say North Korea has strengthened border security to prevent defections since Kim Jong-un took power in 2011.
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分享 「Bridge China 2015国际桥梁展」2015年6月10日与您相约上海！
bridge01 2014-12-22 14:37
「Bridge China 2015国际桥梁展」2015年6月10日与您相约上海！
　　【Bridge China 国际桥梁展(www.bridgechina.com.cn)】2014年12月22日讯 「Bridge China 国际桥梁展」是由HNZ MEDIA 鸿与智商业媒体旗下的国际桥梁产业网和MBC《现代桥梁》杂志发起，邀请国内外知名协会/学会、科研机构共同举办，致力于促进桥梁行业的健康发展，为桥梁产业新产品、新技术的开发及应用提供优质高效的交流平台。「Bridge China 国际桥梁展」每年在中国上海、北京举办，并在桥梁设计与施工、桥梁养护与维修、桥梁加固与抗震、桥梁防水、桥梁工程机械、桥梁企业的运营管理等领域开设专题。自2012年举办以来，已成功举办了5届，迄今为止，已吸引了来自全球20余个国家和地区的500余家企业的参与。 　　「Bridge China 2015国际桥梁展」（第六届中国国际桥梁施工机械、材料及技术展览会）（以下简称本届展会）将于2015年6月10-12日在国家会展中心（上海虹桥）举办。本届展会由国际桥梁产业网和MBC《现代桥梁》杂志发起，由HNZ MEDIA 鸿与智商业媒体和合肥联贸媒会展服务有限公司共同主办。将集中展示桥梁产业最新的产品、技术及材料等。 　　近年来我国桥梁的行业发展迅猛，对新材料及新设备的应用带来了巨大的市场和商机。从桥梁的安全养护（包括加固、防水）到桥梁的抗震隔震，从桥梁构件的更换替换到桥面的铺装施工……在桥梁施工工程上，新型材料及设备的身影几乎无处不在。许多新产品特别是防水、防腐、防火、加固、养护等材料、抗震、减震仪器、缓冲装置、橡胶止水带、预应力设备、预应力设备、混凝土预制构件、各种检测试验仪器、各种测量测试仪器、桥面铺装、紧固件等等都已成为桥梁建设工程中的不二选择。我国大规模桥梁工程的建设不仅仅给新材料及新设备企业带来了发展机会，同时也给新材料及设备的产业提出了更高的要求。 　　「Bridge China 2015国际桥梁展」正是在此背景下诞生，展会将集中展示桥梁建设应用材料及设备行业的一系列技术和产品。本届展会的展示范围包括：桥梁防水、防腐、防火、加固、养护等材料、橡胶止水带、格栅、环氧沥青、水泥垫块、钢模板、各种数据采集仪器、各种检测试验仪器、各种测量测试仪器、抗震、减震仪器、缓冲装置、钢结构部件，混凝土预制构件、斜拉索、缆索、支座、伸缩缝、贝雷片、阻尼器、护栏、预应力钢索、张拉工具、桥面铺装、紧固件、（景观）照明、风障等。 　　展会期间的“第五届国际桥梁工程创新峰会”将围绕桥梁领域最新的热点、政策导向、市场应用和技术发展等展开讨论。届时上下游企业将齐聚一堂，分别就“桥梁行业发展环境分析—政策、市场”、“桥梁设计、施工及运营”、“既有桥梁安全养护维修（包括监测、抗震、加固、防水等）”、“桥梁工程的新技术、新设备、新材料、新工艺”等行业热点话题上百位行业专家共同探索分析市场热点。 　　作为引领中国桥梁应用材料及设备的行业盛会，「Bridge China 2015国际桥梁展」为展示桥梁安全与创新应用材料领域的最新产品、顶尖技术和解决方案的同时，也为行业的技术合作与贸易、信息交流搭建最佳的商贸平台。「Bridge China 2015国际桥梁展」是行业内不容错过的展会。 咨询电话：021-31007290
个人分类: 展会资讯|34 次阅读|0 个评论
分享 Just What Is China Buying?
insight 2014-12-20 15:49
Just What Is China Buying? Submitted by Tyler Durden on 12/19/2014 14:15 -0500 Belgium China Deutsche Bank Trade Balance in Share 19 Something strange is going on in China. On one hand, as the chart below shows, China's trade surplus is growing and growing, and just hit record highs. In other words, China is - on paper - receiving record amounts of foreign currencies in exchange for its (mostly) goods exports. That much is clear in the Chinese (record) trade balance chart below: Yet on the other hand, a chart from Deutsche Bank shows something very peculiar: even as China's foreign reserves should be rising, they are not only dropping , but just suffered their biggest quarterly drop in the past decade! This validates what the TIC data has shown recently, namely that China has not only not been adding to US Treasury but reduced its TSY holdings to the lowest since February 2013 , and that contrary to what some have alleged, China is not using Belgium as an offshore-based conduit for Treasury accumulation. A bigger question is just what is China buying "off the books" to account for this reserve decline, amounting to about $100 billion in Q3, or is this merely due to even more off the books "capital flight" as some has speculated. Or is China indeed actively buying commodities - either as shown here previously for Commodity Funding Deals involving gold or in physical bulk, perhaps to quietly fill up its new Strategic Petroleum Reserve (see " Record Oil Tankers Sailing to China Amid Stockpiling Signs ") - and bypassing the official ledger in doing so. If so, which commodities is China buying, and how big will the foreign reserve plunge be in the fourth quarter. For the answer to the latter we will check back in a little over a month when the "official" data is released. As for the former, one can only speculate. Average: 5 Your rating:None Average:5 (34votes)
个人分类: 中国经济|9 次阅读|0 个评论
分享 US and China reach historic climate change deal, vow to cut emissions
science21 2014-11-14 09:25
Beijing (CNN) -- In a historic climate change deal, U.S. President Barack Obama and Chinese President Xi Jinping announced both countries will curb their greenhouse gas emissions over the next two decades. Under the agreement, the United States would cut its 2005 level of carbon emissions by 26-28% before the year 2025. China would peak its carbon emissions by 2030 and will also aim to get 20% of its energy from zero-carbon emission sources by the same year. "As the world's two largest economies, energy consumers and emitters of greenhouse gases, we have a special responsibility to lead the global effort against climate change," Obama said Wednesday in a joint news conference with Xi. The announcement marks the first time China has agreed to peak its carbon emissions, according to the White House. Xi is calling for "an energy revolution" that would include broad economic reforms addressing air pollution. Obama-GOP truce at risk over energy? Obama: 'This is a major milestone' Senator: Climate change isn't settled China and Japan in 'renormalization' phase White House, China agree on climate change Game changer for global talks? Obama, who was in Beijing for the Asia-Pacific Economic Cooperation (APEC) summit, said he hopes the deal will spur other nations to tackle climate change. "We hope to encourage all major economies to be ambitious -- all countries, developing and developed -- to work across some of the old divides, so we can conclude a strong global climate agreement next year," Obama said. Xi said both sides were committed to working toward the goals before the United Nations Climate Conference in Paris next year. Colorful economic summit ends with rare news conference in Beijing No more excuses The Center for Climate and Energy Solutions said the joint announcement is "an extremely hopeful sign" and will help get other countries on board. "For too long it's been too easy for both the U.S. and China to hide behind one another," said the center's president, Bob Perciasepe. "People on both sides pointed to weak action abroad to delay action at home. This announcement hopefully puts those excuses behind us. We'll only avert the worst risks of climate change by acting together." The announcement could put climate change back on the G20 agenda, said researcher David Holmes of Monash University in Australia. "The announcement may mean climate will have to be higher on the G20 agenda, despite host nation Australia trying to keep it off altogether," Holmes said. "As an economic meeting, it cannot afford to ignore the restructuring of energy markets and productive capacity that will be needed to accommodate these very ambitious cuts." The goals laid out by Obama and Xi were not as ambitious as some hoped, said Lo Sze Ping, CEO of the World Wildlife Fund Beijing. But "what's important is that both these two large emitters are taking the responsibility to act and work together to resolve the problem, not the numbers or targets themselves," he said. US-China relations: Can teens succeed where presidents have failed? Obama and Putin meet in Beijing See leaders' awkward photo op Challenges in Washington The White House said the ultimate target is to "achieve deep economy-wide reductions on the order of 80% by 2050." A senior Obama administration official said the goals are "ambitious and achievable" -- but U.S. domestic politics could be a challenge. The official said "leading climate deniers" in the Republican party might try to stop the initiative. The official hinted that Obama could act alone if necessary. "Congress may try to stop us, but we believe that with control of Congress changing hands we can proceed with the authority we already have," the official said. "This is really the crusade of a narrow group of people who are politically motivated and have made this a cause celebre, but we believe we will be successful." The Obama administration hopes to sell the plan back home by touting the anticipated savings on energy costs. The plan offers initiatives and incentives to develop more solar and wind power in both countries, the official said. "Consumers and businesses will save literally billions of dollars," a senior administration official said. But the Senate's top Republican said the climate change deal will hurt the U.S. economy. "Our economy can't take the President's ideological war on coal that will increase the squeeze on middle-class families and struggling miners," Sen. Mitch McConnell said in a statement. "This unrealistic plan, that the President would dump on his successor, would ensure higher utility rates and far fewer jobs." 24 hours with President Obama in China China's next steps China has agreed to provide another 800-1,000 gigawatts of nuclear, wind, solar and other zero emission generation capacity by 2030. That amount of zero-emission output exceeds all the coal-fired power plants that exist in China today and is close to total current electricity generation capacity in the United States. A senior Obama administration official said that historically, the United States and China have often been seen as antagonists, so the climate change deal "should send a powerful message," and "will usher in a new day, where the U.S. and China can work as partners." Clearing the air We have a special responsibility to lead the global effort against climate change. President Obama During Obama's visit to Beijing, the Chinese government closed factories and gave employees time off to reduce car traffic and emissions in Beijing. The reduction of smog and the appearance of blue skies was noted by media throughout the APEC summit. Top Senate Republicans slam climate deal More agreements made As well as the historic climate change deal, Obama and Xi also agreed on the importance of denuclearizing the Korean peninsula, cybersecurity, strengthening military relations and increasing trade. "China is firmly committed to the denuclearization of the Korean peninsula," Xi said. Both sides also agreed to an extension of the validity of short- term business and tourist visas from one to 10 years, and of student visas from one year to five years. "This arrangement will facilitate the travel of millions of U.S. and Chinese citizens, furthering the trade, cultural, and people-to-people ties that form the foundation of our bilateral relationship," the White House said.
40 次阅读|0 个评论
分享 China's Gold Strategy
insight 2014-11-7 10:58
China's Gold Strategy Submitted by Tyler Durden on 11/03/2014 19:33 -0500 Afghanistan Bear Market Central Banks China India Iran Kazakhstan Middle East recovery Renminbi Turkey Uzbekistan in Share 2 Submitted by Alasdair Macleod via GoldMoney.com , China first delegated the management of gold policy to the People's Bank by regulations in 1983. This development was central to China's emergence as a free-market economy following the post-Mao reforms in 1979/82. At that time the west was doing its best to suppress gold to enhance confidence in paper currencies, releasing large quantities of bullion for others to buy. This is why the timing is important: it was an opportunity for China, a one-billion population country in the throes of rapid economic modernisation, to diversify growing trade surpluses from the dollar. To my knowledge this subject has not been properly addressed by any private-sector analysts, which might explain why it is commonly thought that China's gold policy is a more recent development, and why even industry specialists show so little understanding of the true position. But in the thirty-one years since China's gold regulations were enacted, global mine production has increased above-ground stocks from an estimated 92,000 tonnes to 163,000 tonnes today, or 71,000 tonnes* ; and while the west was also reducing its stocks in a prolonged bear market all that gold was hoarded somewhere. The period I shall focus on is between 1983 and 2002, when gold ownership in China was finally liberated and the Shanghai Gold Exchange was formed. The fact that the Chinese authorities permitted private ownership of gold suggests that they had by then acquired sufficient gold for monetary and strategic purposes, and were content to add to them from domestic mine production and Chinese scrap thereafter rather than through market purchases. This raises the question as to how much gold China might have secretly accumulated by the end of 2002 for this to be the case. China's 1983 gold regulations coincided with the start of a western bear market in gold, when Swiss private bankers managing the largest western depositories reduced their clients' holdings over the following fifteen years ultimately to very low levels. In the mid-eighties the London bullion market developed to enable future mine and scrap supplies to be secured and sold for immediate delivery. The bullion delivered was leased or swapped from central banks to be replaced at later dates. A respected American analyst, Frank Veneroso, in a 2002 speech in Lima estimated total central bank leases and swaps to be between 10,000 and 16,000 tonnes at that time. This amount has to be subtracted from official reserves and added to the enormous increase in mine supply, along with western portfolio liquidation. No one actually knows how much gold was supplied through the markets, but this must not stop us making reasonable estimates. Between 1983 and 2002, mine production, scrap supplies, portfolio sales and central bank leasing absorbed by new Asian and Middle Eastern buyers probably exceeded 75,000 tonnes. It is easy to be blasé about such large amounts, but at today's prices this is the equivalent of $3 trillion. The Arabs had surplus dollars and Asia was rapidly industrialising. Both camps were not much influenced by western central bank propaganda aimed at side-lining gold in the new era of floating exchange rates, though Arab enthusiasm will have been diminished somewhat by the severe bear market as the 1980s progressed. The table below summarises the likely distribution of this gold. Today, many believe that India is the largest private sector market, but in the 12 years following the repeal of the Gold Control Act in 1990, an estimated 5,426 tonnes only were imported (Source: Indian Gold Book 2002), and between 1983 and 1990 perhaps a further 1,500 tonnes were smuggled into India, giving total Indian purchases of about 7,000 tonnes between 1983 and 2002. That leaves the rest of Asia including the Middle East, China, Turkey and South-East Asia. Of the latter two, Turkey probably took in about 4,000 tonnes, and we can pencil in 5,000 tonnes for South-East Asia, bearing in mind the tiger economies' boom-and-bust in the 1990s. This leaves approximately 55,000 tonnes split between the Middle East and China, assuming 4,850 tonnes satisfied other unclassified demand. The Middle East began to accumulate gold in the mid-1970s, storing much of it in the vaults of the Swiss private banks. Income from oil continued to rise, so despite the severe bear market in gold from 1980 onwards, Middle-Eastern investors continued to buy. In the 1990s, a new generation of Swiss portfolio managers less committed to gold was advising clients, including those in the Middle East, to sell. At the same time, discouraged by gold's bear market, a western-educated generation of Arabs started to diversify into equities, infrastructure spending and other investment media. Gold stocks owned by Arab investors remain a well-kept secret to this day, but probably still represents the largest quantity of vaulted gold, given the scale of petro-dollar surpluses in the 1980s. However, because of the change in the Arabs' financial culture, from the 1990s onwards the pace of their acquisition waned. By elimination this leaves China as the only other significant buyer during that era. Given that Arab enthusiasm for gold diminished for over half the 1983-2002 period, the Chinese government being price-insensitive to a western-generated bear market could have easily accumulated in excess of 20,000 tonnes by the end of 2002. China's reasons for accumulating gold We now know that China had the resources from its trade surpluses as well as the opportunity to buy bullion. Heap-leaching techniques boosted mine output and western investors sold down their bullion, so there was ample supply available; but what was China's motive? Initially China probably sought to diversify from US dollars, which was the only trade currency it received in the days before the euro. Furthermore, it would have seemed nonsensical to export goods in return for someone else's paper specifically inflated to pay them, which is how it must have appeared to China at the time. It became obvious from European and American attitudes to China's emergence as an economic power that these export markets could not be wholly relied upon in the long term. So following Russia's recovery from its 1998 financial crisis, China set about developing an Asian trading bloc in partnership with Russia as an eventual replacement for western export markets, and in 2001 the Shanghai Cooperation Organisation was born. In the following year, her gold policy also changed radically, when Chinese citizens were allowed for the first time to buy gold and the Shanghai Gold Exchange was set up to satisfy anticipated demand. The fact that China permitted its citizens to buy physical gold suggests that it had already acquired a satisfactory holding. Since 2002, it will have continued to add to gold through mine and scrap supplies, which is confirmed by the apparent absence of Chinese-refined 1 kilo bars in the global vaulting system. Furthermore China takes in gold doré from Asian and African mines, which it also refines and probably adds to government stockpiles. Since 2002, the Chinese state has almost certainly acquired by these means a further 5,000 tonnes or more. Allowing the public to buy gold, as well as satisfying the public's desire for owning it, also reduces the need for currency intervention to stop the renminbi rising. Therefore the Chinese state has probably accumulated between 20,000 and 30,000 tonnes since 1983, and has no need to acquire any more through market purchases given her own refineries are supplying over 500 tonnes per annum. All other members of the Shanghai Cooperation Organisation** are gold-friendly or have increased their gold reserves. So the west having ditched gold for its own paper will now find that gold has a new role as Asia's ultimate money for over 3 billion people, or over 4 billion if you include the South-East Asian and Pacific Rim countries for which the SCO will be the dominant trading partner. *See GoldMoney’s estimates of the aboveground gold stock by James Turk and Juan Castaneda. **Tajikistan, Kazakhstan, Kyrgyzstan, Uzbekistan, India, Iran, Pakistan, and Mongolia. Turkey and Afghanistan are to join in due course. Average: 4.666665 Your rating: None Average: 4.7 (9 votes)
个人分类: gold|2 次阅读|0 个评论
分享 The Bronze Swan Arrives: Is The End Of Copper Financing China's "Lehman Eve
insight 2014-10-26 16:43
The Bronze Swan Arrives: Is The End Of Copper Financing China's "Lehman Event"? Submitted by Tyler Durden on 05/23/2013 10:06 -0400 lang: en_U in Share 13 In all the hoopla over Japan's stock market crash and China's PMI miss last night, the biggest news of the day was largely ignored: copper, and the fact that copper's ubiquitous arbitrage and rehypothecation role in China's economy through the use of Chinese Copper Financing Deals (CCFD) is coming to an end. Copper, as China pundits may know, is the key shadow interest rate arbitrage tool, through the use of financing deals that use commodities with high value-to-density ratios such as gold, copper, nickel, which in turn are used as collateral against which USD-denominated China-domestic Letters of Credit are pleged, in what can often result in a seemingly infinite rehypothecation loop (see explanation below) between related onshore and offshore entities, allowing loop participants to pick up virtually risk-free arbitrage (i.e., profits), which however boosts China's FX lending and leads to upward pressure on the CNY. Since the end result of this arbitrage hits China's current account directly, and is the reason for the recent aberrations in Chinese export data that have made a mockery of China's economic data reporting, China's State Administration on Foreign Exchange (SAFE) on May 5 finally passed new regulations which will effectively end such financing deals. The impact of this development can not be overstated: according to independent observers, as well as firms like Goldman, this will not only impact the copper market (very adversely) as copper will suddenly go from a positive return/carry asset to a negative carry asset leading to wholesale dumping from bonded warehouses, but will likely take out a substantial chunk of synthetic shadow leverage out of the Chinese market and economy . Naturally, for an economy in which credit creation is of utmost importance, the loss of one such key financing channel will have very unintended consequences at best, and could potentially lead to a significant "credit event" in the world's fastest growing large economy at worst. But before we get into the nuts and bolts of how such CCF deals operate, and what this means for systemic leverage, we bring you this friendly note released by Goldman's Roger Yuan overnight, in which Goldman not only quietly cut their long Copper trading recommendation established on March 1 (at a substantial loss), but implicitly went short the metal with a 12 month horizon: a huge shift for a bank that has been, on the surface, calling for a global renaissance in the global economy, and in which Dr. Copper is a very leading indicator of overall economic health and end demand. From Goldman: Closing: Long LME copper September 2013 contract at $7,482/t, a $236/t (3.1%) loss Following the initial sell-off in copper prices in the second half of February 2013, we established a long copper position at $7,718/t in the September contract (on March 1, 2013). We believed that the fall in copper prices, reflecting in part concerns about Chinese activity, was overdone. We reiterated this view on April 22, post further substantial price declines. Since then, prices have rebounded strongly, with the September contract closing at $7,482/t on May 22, up by 10% from the May 1 low of $6,808/t. The emergence of the risk that CCFDs unwind over the next 3 months – we had assumed that deals would continue indefinitely – has complicated our near-term bullish copper view (from current prices ). On the one hand, our fundamental short-term thesis is playing out – copper inventories are drawing, copper’s main end-use markets in China are growing solidly (property sales +39% yoy, completions +7% yoy, auto’s output +14% yoy Jan-April 2013), seasonal factors are currently supportive, Chinese scrap availability is tight, positioning also remains short, and policy risks are, arguably, mildly skewed to the upside. Set against this is the likely near-term unwind in CCFDs and, critically, our view that copper is headed into surplus in 2014 (the window for higher copper prices is shortening). On net, we now see the risks to our 6-mo forecast of $8,000/t as skewed to the downside, and, in this context, we unwind our September long copper position at $7,482/t, a $236/t (3.1%) loss, given the recent strong rally in LME prices to near our 3-mo target of $7,500/t. Additionally, we believe that a further rally in copper prices in the near term would be a good selling opportunity taking a 12-month view . Consumers: We believe that consumers will have a better opportunity to enter the copper market to buy taking a 12-month view. Following the recent sharp sell-off in zinc we are increasingly bullish on the outlook from current prices and as such believe consumers should take advantage of current low levels. Producers: Our base case of a sharp slowdown in growth of Chinese construction completions in 2014, in the context of above-trend supply growth, presents significant longer-term downside risks to global copper demand growth and prices. Therefore we continue to believe that any further rallies in the copper price in 2013 represent a good opportunity to hedge, and in our view other non-producer market participants should continue to monitor any copper positions in light of the 2014 downside risks. So just what is the significance of CCFDs? As it turns out, it is huge . Goldman explains (get a cup of coffee first: this is not a simple walk-thru): The combination of Chinese capital controls and a significant positive domestic (CNY) to foreign (USD) interest rate differential has, in recent years, resulted in the development and implementation of large scale ‘financing deals’ which legally arbitrage the interest rate differential via China’s current account. These Chinese ‘financing deals’ typically use commodities with high value-to-density ratios such as gold, copper, nickel and ‘high-tech’ goods, as a tool to enable interest rate arbitrage. With the notional value of the deals far exceeding the export/import value of the commodities used, and likely significantly contributing to the recent run-up in China’s short-term FX lending (and related upward pressure on the CNY), China’s State Administration of Foreign Exchange (SAFE) announced new regulations to address these issues (May 5), to be implemented in June. Goldman continues : SAFE’s new policies are, in our view, likely to bring these Chinese ‘financing deals’ to an end over the next 1-3 months . Having said this, some uncertainty remains around the implementation of the new policies by SAFE and Chinese banks, the speed at which the policies impact the market, and the possibility that new financing deals are “invented”. Owing to these uncertainties, a complete unwind of CCFDs is still at this point considered a risk. In this note we provide a full example of a typical deal and discuss our understanding of the impact of an unwind in Chinese Copper Financing Deals (CCFDs) 1 on the copper market. Our view is that the bulk of copper stored in bonded warehouses in China – at least 510,000t at present, as well as some inbound copper shipments into China – is being used to unlock the CNY-USD interest rate differential . This material has not been entirely unavailable to the market (deals can be broken if costs rise, such as a tightening of LME spreads), but the inventory has been effectively financed by factors exogenous to the copper market for some time. We find that a complete unwind of CCFDs would be bearish for copper prices as the copper used to unlock the differential would shift from being a positive return/carry asset to a negative carry asset for those who currently hold it . As such this inventory will likely become more ‘available’ to the global market. Initially stocks would likely move into the Chinese domestic market to ease the current tightness, until the current SHFE price premium to LME closes. After the SHFE-LME price arbitrage closes sufficiently, the remaining bonded stock (over and above day-to-day working flows) would likely shift from bonded warehouses to the LME . We expect that the ex-China (LME) market would likely see inventory increases as a result, as China draws on bonded stocks instead of importing and as excess bonded stocks are shifted back on to the LME. We estimate that the ex-China market will need to ‘carry’ a minimum of 200-250kt of additional physical copper over the coming months, equivalent to 4%-5% of quarterly global supply. The latter would most likely result in a widening contango, including downward pressure on cash prices. Specifically, the current LME 3-15 month contango is 1.1%, compared to full carry of c.3%-3.5%. The emergence of this bearish risk – we had assumed that deals would continue indefinitely – complicates our near-term bullish copper view. Indeed, our fundamental short-term thesis is unfolding – copper inventories are drawing, copper’s main end-use markets in China are growing solidly (property sales +39% yoy, completions +7% yoy, auto’s output +14% yoy over the Jan-April 2013 period), seasonal factors are currently supportive, and scrap availability in China is reportedly tight. Positioning also remains short, and policy risks may be mildly skewed to the upside (ECB meeting June 6 and FOMC meeting June 18-19). The other factors that have recently supported a rebound in copper prices have been mine supply disruptions at Grasberg in Indonesia (c.480kt for 2013E), and the threat of further strikes in Chile ahead of the Chilean elections and at Grasberg ahead of contract negotiations (the current labour contract ends in September). Our forecast 2013 disruption allowance of 5.8%, or c.900kt is designed to account for these kinds of developments, and so far this year our allowance looks reasonable, meaning that these disruptions are not set to impact our overall balance forecast. Set against this is the likely near-term unwind in CCFDs and, critically, our view that copper is headed into significant surplus in 2014 (the window for higher prices is shortening). On net, we now see the risks to our 6-mo forecast of $8,000/t as skewed to the downside. In this context, we unwind our September long copper recommendation at $7,482/t, a 3% loss. If you haven't shorted copper after reading the above.... we suggest you re-read it. Ploughing on: below is the reason for SAFE's new dramatic regulations, and why China decided to go ahead and kill CCFD, unintended consequences, whatever they may be, be damned: China’s foreign currency reserves have risen significantly since the start of the year, placing upward pressure on the CNY (Exhibit 1). This development prompted SAFE, China’s regulator of cross-border transactions, to announce a new set of regulations on May 5, to be implemented in June. The new regulations can be split into two parts, and broadly summarised as follows: a) The first measure targets Chinese bank balance sheets. This measure aims to: i) Directly reduce the scale of China’s FX loans, thus reducing the scale of letter of credit (LC) financing (bank loans), thereby reducing the volume of funding available for CCFDs (though not specifically targeting CCFDs); and/or ii) Raise banks’ FX net open positions (banks are required to hold a minimum net long FX position at the expense of CNY liabilities), thus raising LC financing costs, thereby increasing the cost of funding CCFDs. Specifically, Exhibit 2 shows that SAFE aims to implement a bank loan to bank deposit ratio of 75%-100% going forward, compared to an existing ratio of 150%. b) The second measure targets exporters and/or importers (‘trade firms’) by identifying any activities that mainly result in FX inflows above normal export/import backed activities (i.e. trades for the purpose of interest rate arbitrage, amongst others). This measure would force entities to curb their balance sheets if they are found to be involved in such activities. Since May10 SAFE has been requesting ‘trade firms’ provide detailed information of their balance sheets and trading records, in order to categorize them as either A-list or B-list firms by June 1, 2013. B-list firms will be required to reduce their balance sheet significantly by cutting any capital inflow related trade activities. To avoid being categorized as a B-list firm by SAFE, ‘trade firms’ may reduce their USD LC liabilities in the near term, with CCFDs likely impacted. It is not yet clear what happens to the B-list firms once they are categorized as such. However, if B-list firms were prohibited from rolling their LC liabilities this could increase the pace of the CCFD unwind, since these trade firms would likely need to sell their liquid assets (copper included) to fund their LC liabilities accumulated through previous CCFDs. These new regulations are likely to impact a number of markets and market participants. In this note we focus on the impact on CCFDs and the copper market. Should a) and b) be enforced, copper financing deals are highly likely to be impacted. * * * That explains China's macro thinking. But what does it mean for the actual Copper Financing Deal? The below should explain it: An example of a typical, simplified, CCFD In this section we present an example of how a typical Chinese Copper Financing Deal (CCFD) works, and then discuss how the various parties involved are affected if the deals are forced to unwind. Exhibit 3 is a ‘simplified’ example of a CCFD, including specific reference to how the process places upward pressure on the RMB/USD. We believe this is the predominant structure of CCFDs, with other forms of Chinese copper financing deals much less profitable and likely only a small proportion of total deal volumes. A typical CCFD involves 4 parties and 4 steps: Party A – Typically an offshore trading house Party B – Typically an onshore trading house, consumers Party C – Typically offshore subsidiary of B Party D – Onshore or offshore banks registered onshore serving B as a client Step 1) offshore trader A sells warrant of bonded copper (copper in China’s bonded warehouse that is exempted from VAT payment before customs declaration) or inbound copper (i.e. copper on ship in transit to bonded) to onshore party B at price X (i.e. B imports copper from A), and A is paid USD LC, issued by onshore bank D . The LC issuance is a key step that SAFE’s new policies target. Step 2) onshore entity B sells and re-exports the copper by sending the warrant documentation (not the physical copper which stays in bonded warehouse ‘offshore’) to the offshore subsidiary C (N.B. B owns C), and C pays B USD or CNH cash (CNH = offshore CNY). Using the cash from C, B gets bank D to convert the USD or CNH into onshore CNY, and trader B can then use CNY as it sees fit. The conversion of the USD or CNH into onshore CNY is another key step that SAFE’s new policies target . This conversion was previously allowed by SAFE because it was expected that the re-export process was a trade-related activity through China’s current account. Now that it has become apparent that CCFDs and other similar deals do not involve actual shipments of physical material, SAFE appears to be moving to halt them. Step 3) Offshore subsidiary C sells the warrant back to A (again, no move in physical copper which stays in bonded warehouse ‘offshore’), and A pays C USD or CNH cash with a price of X minus $10-20/t, i.e. a discount to the price sold by A to B in Step 1. Step 4) Repeat Step 1-Step 3 as many times as possible, during the period of LC (usually 6 months, with range of 3-12 months). This could be 10-30 times over the course of the 6 month LC, with the limitation being the amount of time it takes to clear the paperwork. In this way, the total notional LCs issued over a particular tonne of bonded or inbound copper over the course of a year would be 10-30 times the value of the physical copper involved, depending on the LC duration. Copper ownership and hedging : Through the whole process each tonne of copper involved in CCFDs is hedged by selling futures on LME futures curve (deals typically involve a long physical position and short futures position over the life of the CCFDs, unless the owner of the copper wants to speculate on the price). Though typically owned and hedged by Party A, the hedger can be Party A, B, C and D, depending on the ownership of the copper warrant. As Goldman further explains, the importance of CCFD is " not trivial " - that is an understatement: with the implicit near-infinite rehypothecation in which the number of "circuits" in the deal is only a factor of "the amount of time it takes to clear the paperwork", there may be hundreds of billions, if not more, in leverage resulting from this shadow transaction that has been used in China for years. Now, that loop is about to end . The reality is nobody can predict what the impact will be, but whatever it is - i) it will extract tremendous leverage from the system and ii) it will have adverse impacts on both China's ability to absorb inflation and grow its economy. How important are CCFDs? They are not trivial! Chinese ‘financing deals’, including CCFDs, are likely to contribute to China’s FX inflows since they involve direct FX inflows through China’s current account. Specifically, for CCFDs, the immediate cross-border conversion of FX to onshore CNY after Party C pays Party B for the copper warrant (Step 2) directly contributes to China’s FX inflows. In terms of outflows, the issuance of LC (FX short-term lending) by Party D to Party A (Step 1) is not associated FX outflow by definition, and when the LCs expire they tend to be rolled forward. Step 3 occurs offshore, so there is no inflow/outflow related to this transaction. In this way, the net Chinese FX inflows/outflows associated with CCFDs are equivalent to the change in the value of the notional LCs. We make some broad estimates of how much of China’s short-term FX lending could be accounted for by CCFDs. Specifically, our best estimate suggests that roughly 10% of China’s short-term FX lending could have been associated with CCFDs since the beginning of 2012 (Exhibit 4). In April 2013, we estimate that CCFDs accounted for $35-40 bn (stock) of China’s total short-term FX lending of $384 bn (stock), making various assumptions. More broadly, Chinese bonded inventories and short-term FX lending has been positively correlated in recent years (Exhibit 5). Two key questions remain: how the upcoming unwind will impact each CCFD participant entity... How an unwind may impact each CCFD participant As we discussed on pages 4 and 5, SAFE’s new regulations target both banks’ LC issuance (first measure) and ‘trade firms’ trade activities (second measure). Here we discuss how the different entities (A, B, C, D) would likely adjust their portfolios to meet the new regulations (i.e. what happens in a complete unwind scenario). Party A: Party A, without the prospect of $10-20/t profit per Step 1-3 iteration, is likely to find it hard to justify having bonded copper sitting on its balance sheet (the current LME contango is not sufficient to offset the rent and interest costs). As a result, Party A’s physical bonded copper would likely become ‘available’, and Party A would likely unwind its LME short futures hedge. Party B, C: To avoid being categorized as a B-list firm by SAFE, Party B and C may reduce their USD LC liabilities by: 1) selling liquid assets to fund the USD LC liabilities, and/or 2) borrowing USD offshore and rolling LC liabilities to offshore USD liabilities . The broad impact of this is to reduce outstanding LCs, and CCFDs will likely be affected by this. It is not yet clear what happens to the B-list firms in detail once they are categorized as such. However, if B-list firms were prohibited from rolling their LC liabilities this would increase the pace of the CCFDs unwind. In this scenario, these trade firms would have to sell their liquid assets (copper included) to fund their LC liabilities accumulated through previous CCFDs. Party D: To meet SAFE’s regulations, Party D will likely adjust their portfolios by reducing LC issuance and/or increasing FX (mainly USD) net long positions , which would directly reduce the total scale of CCFDs and/or raise the LC financing cost, respectively. ... And what happens to copper prices (hint: GTFO) Implications for copper - bonded copper moves from a positive carry asset to negative carry asset Implications for copper - bonded copper moves from a positive carry asset to negative carry asset We expect that a complete unwind of CCFDs, everything else equal, is likely to be bearish for copper prices, LME spreads, and bonded premiums. CCFDs involve a long copper physical positions and a short futures position on the LME. The physical position would be sold if CCFDs unwound and the short futures positions bought back. The newly available physical copper would not be financed by the China and ex-China interest rate differential anymore (not a positive carry asset anymore), and would instead need to be financed by a natural contango (in the interim copper becomes a negative carry asset), everything else equal. Theoretically then, the physical market, over a short period (say, one quarter), may need to absorb as much as c.400kt of copper, equivalent to 8% of quarterly global copper supply. By contrast, the LME futures market would need to absorb buying of c.0.2%-0.3% of quarterly traded LME volumes and c.6% of daily average 2012 open interest. The impact on the physical market is therefore likely to be relatively large, in spite the fact that an unwind of CCFDs does not result in the creation of new copper (i.e. aggregate global copper inventory impact is 0/our inventory chart does not change). What about in practice? Since there are no comparable historical examples to make reference to, what happens when CCFDs unwind in practice is open for debate. We believe that since the downward pressure on the physical market is large, both in absolute terms and relative to the upward pressure on the futures market, near-term prices are likely to come under relatively significant pressure. Further, if the market fears the unwind of CCFDs, physical buyers may hold off on purchases, and futures sellers may bet on lower prices (offsetting either in part or more than offsetting the financing deal related unwind buying). In this way it is likely that in practice the whole copper price curve would be under pressure in the case of a complete CCFD unwind, at least until the contango widens sufficiently to compensate for the cost of carry. We see the following as a likely chain of events in a complete unwind scenario: China would draw on bonded until it is ‘full’. In the current market bonded copper stocks will likely initially flow into the domestic Chinese market, since SHFE prices are above LME prices, with the SHFE curve in backwardation and LME in contango. Chinese imports fall/remain low, placing upward pressure on LME stocks . Since China is drawing bonded inventories to meet its demand, Chinese copper imports are likely to be under downward pressure beyond May, resulting in any excess material ex-China turning up on the LME as well (Exhibit 7). Remaining bonded stocks (ex-stocks in transit), would shift to LME . Once China is ‘full’ (i.e. the import arbitrage closes, bonded physical premia decline, SHFE price and curve softens), the remaining excess bonded inventory will likely make its way on to the LME. Since China is in deficit at present (drawing bonded and SHFE inventories, SHFE in backwardation), due in part to seasonal factors, the inventory numbers noted above, in practice, will likely be smaller but still very large. Our best estimate would be a minimum of 200,000-250,000t of stock could shift/build on the LME over the next 2-3 months, or 4%-5% of quarterly global consumption. LME contango to widen. Higher LME stocks suggest higher LME copper spreads, including downward pressure on the front end. Exhibit 8 illustrates that over the last 6 years, the buildup of LME inventory has been consistently associated with widening LME spreads into contango, and the scale of contango is mostly driven by financing cost and inventory levels. With excess copper flowing into LME warehouses, the spread needs to widen further to finance the carry trade effectively. For reference, LME annual rents are c.$150/t or 2% of copper prices. Assuming an annualized financing cost of 1%-1.5%, full carry is c.3%-3.5%, compared to current LME 3-15 month contango of 1.1%. The main caveat to the above is that a complete unwind in CCFDs is still subject to the implementation of the policy by SAFE, Chinese banks and ‘trade firms’, and the possibility that new financing deals are “invented”. As a result, we will continue to closely monitor implementation of the policy by banks via monitoring bonded physical premiums, SHFE spreads and bonded stock flows. Finally, what does all this mean for explicit rehypothecation chain leverage (initially just at the CCFD level although a comparable analysis must be done for systemic as well) and CCFD risk exposure: Leverage in CCFDs Below is a demonstration of the LC issuance process in a typical CCFD. Assuming an LC with a duration of 6 months, and 10 circuit completions (of Step 1-3) during that time (i.e. one CCFD takes 18 days to complete), Party D is able to issue 10 times the copper value equivalent in the form of LCs during the first 6 month LC (as shown from period t1 to t10 in Exhibit 10). In the proceeding 6 months (and beyond), the total notional value of the LCs remains the same, everything else equal, since each new LC issued is offset by the expiration of an old one (as shown from period t11 to t20). In this example, total notional amount of LC during the life of the LC = LC duration / days of one CCFD completion* copper value = 10. In this example, the total notional amount of LC issued by Party D, total FX inflow through Party D from party A, and total CNY assets accumulated by party B (and C) are all 10 times the copper value (per tonne). To raise the total notional value of LCs, participants could: Extend the LC duration (for example, if LC duration in our model is 12 months, the notional LC could be 20 times copper value) Raise the no. of circuits by reducing the amount of time it takes to clear the paperwork Lock in more copper Risk exposures of parties to CCFDs Theoretically, Party B risk exposure Party D risk exposure Party A risk exposure Party B’s risks are duration mismatch (LC against CNY assets) and credit default of their CNY assets; Party D’s risks are the possibility that party B has severe financial difficulties. (they manage this risk by controlling the total CNY and FX credit quota to individual party B based on party B’s historical revenue, hard assets, margin and government guarantee) (Party D has the right to claim against party B (onshore entity), because party B owes party D short term FX debt (LC)). If party B were to have financial difficulties, party D can liquidate Party B’s assets. Party A’s risk is mainly that party D (China’s banks) have severe financial difficulties (Party A has the right to claim against party D (onshore banks), because Party A (or Party A’s offshore banks) holds an LC issued by party D). In the case of financial difficulties for Party B, and even in case Party D has difficulties, Party A can still get theoretically get paid by party D (assuming Party D can borrow money from China’s PBoC). In brief (pun intended): a complete, unpredictable cluster**** accompanied by wholesale liquidations of "liquid assets", deleveraging and potentially a waterfall effect that finally bursts China's bubble, all due to a simple black swan. Although, in reality, nobody knows. Just like nobody knew what would happen when the government decided to let Lehman fail. So... is this China's Lehman?
个人分类: copper|13 次阅读|0 个评论
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