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Sat, 01st October 2016

Anirudh Sethi Report

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Archives of “china” Tag

China’s richest man warns of biggest bubble in history in Chinese real estate

Chinese billionaire Wang Jianlin warns of economic weakness

Chinese mogul Wang Jianlin warned that China’s economy will struggle for another two years and that China’s real estate market is the “biggest bubble in history.” He also said the economy hasn’t bottomed out yet.

Wang is ranked by Forbes as China’s richest man. His company has developed malls and office space across the company but has been cutting back on real estate.

More broadly, he said the US is his favorite place to invest.

CNN spoke with him:

The big problem, according to Wang, is that prices keep rising in major Chinese metropolises like Shanghai but are falling in thousands of smaller cities where huge numbers of properties lie empty.

“I don’t see a good solution to this problem,” he said. “The government has come up with all sorts of measures — limiting purchase or credit — but none have worked.”

Hong Kong offices are the world’s most costly to rent

Hong Kong is still the world’s most expensive city in which to rent offices in its skyscrapers and will remain so in the next three to five years, according to property consultant Knight Frank on Thursday.

Annual office rent in Hong Kong reached $278.5 per square foot in the second quarter, far ahead of New York’s $158 and Tokyo’s $149.5 per square foot. London ranked fourth with an average rent of $114 per square foot, according to Knight Frank’s latest Skyscraper Index, a survey of 31 cities around the world.

 Shanghai, which ranked ninth in the survey, recorded the world’s highest office rental growth at 7.6% in the first six months year-on-year, followed by Sydney at 6.6% and Hong Kong at 5.9%. Singapore was one of the underperformers with a rental fall of 7%, owing to abundant new office supply and a slowing local economy.

“I’m not sure if the rankings are a blessing or woe for Hong Kong… But I don’t expect other cities to easily catch up soon,” said Knight Frank’s senior director Thomas Lam, who predicted the territory’s prime office rents to grow 2-5% next year.

Underpinning Hong Kong’s robust office rental market is both a strong demand and a lack of supply of Grade-A offices. 

China Crushes Yuan Shorts As HIBOR Explodes 190% To 7 Month High

One week ago, with the Yuan having traded within fractions of what many consider a key psychological level for the USDCNY at 6.70, we reported that as many traders expected that following the just concluded G-20 meeting in China, the PBOC would finally relent in its devaluation defense, and let the currency slide on through to the other side. Not only did that not happen, but last Thursday the Chinese Central bank unleashed an unexpected and aggressive attack on currency Yuan shorts, the biggest since the January devaluation scare when the cost of borrowing yuan in Hong Kong soared to a seven-month high amid. The overnight HIBOR, or Hong Kong Interbank Offered Rate, jumped – seemingly without reason – by 3.88% points to 5.45%, the most expensive since February, according to Treasury Markets Association data. Other tenors joined with the one-week rate rose 2.09% points to 4.06%.

Chinese, Russian Navies Launch Largest Ever Joint Drill In South China Sea; Send Message To Washington

Perhaps it is not a coincidence that on the 15h anniversary of Sept11, China’s navy announced earlier that China and Russia will hold eight days of naval drills in the South China Sea off southern China’s Guangdong province starting from Monday. The exercises, previewed here at the end of July, come at a time of heightened tension in the contested waters after an arbitration court in The Hague ruled in July that China did not have historic rights to the South China Sea and criticized its environmental destruction there. As reported previously, China vehemently rejected the ruling and refused to participate in the case, and has been aggressively pushing an axis that involves Russia to counteract that regional tension which has seen the US spearhead the anti-China quasi alliance.

The “Joint Sea-2016” exercise will feature surface ships, submarines, fixed-wing aircraft, ship-borne helicopters and marines, the Chinese navy said in a statement on Sunday on its official microblog. The two countries will carry out defense, rescue and anti-submarine operations, as well as “island seizing” and other activities, it added.

Among the numerous exercises, which are meant to send a loud message to the US, Japan, Philippines and other “interested” parties who dispute China’s territorial claims on the artificial islands and reefs in the South China Sea, marines will participate in live-fire drills, island defense and landing operations in what will be the largest operation ever taken together by the two countries’ navies, the statement said.

China announced that it had called the “routine” naval exercise in July, saying “the drills were aimed at strengthening cooperation and not aimed at any other country.” One can almost sense the smile on its face as it wrote this.

As a reminder, China and Russia are veto-wielding members of the U.N. Security Council, and have held similar views on many major issues such as the crisis in Syria, often putting them at odds with the United States and Western Europe. Last year, they held joint military drills in the Sea of Japan and the Mediterranean.

Vietnam, Myanmar and Laos emerge as FDI magnets

Foreign direct investment into Southeast Asia’s less developed countries surged in the runup to the creation of the ASEAN Economic Community at the end of last year, a new report shows. Cambodia, Laos, Myanmar and Vietnam reaped a 38% increase, as multinationals clearly saw opportunities in the envisioned single AEC market.

The overall picture was less rosy, however. According to the ASEAN Investment Report 2016, overall FDI flows to the Association of Southeast Asian Nations bloc declined by 8% in 2015, to $120 billion. Investment from the EU fell 20% to $20 billion, while the figure from the U.S. dropped 17% to $12.2 billion.

 The report was announced on Tuesday by the ASEAN Secretariat and the United Nations Conference on Trade and Development at the ASEAN Business and Investment Summit (ABIS) 2016.

On the brighter side, FDI from Japan increased 11% to $17.4 billion. China’s number rose 17% to $8.2 billion, and India’s swelled 107% to $1.3 billion.

The strongest growth was seen in the so-called CLMV countries, with the 38% jump bringing their figure to $17.4 billion, from $12.6 billion in 2014. Their share of FDI in the region increased to 14%, from 10%.

South China Sea Time Bomb: Beijing Sets “Red Line” on Japan-US Joint Operations

In this April 26, 2012 file photo released by China's Xinhua News Agency, Chinese navy's missile destroyer DDG-112 Harbin fires a shell during the China-Russia joint naval exercise in the Yellow SeaOn Saturday, diplomatic sources confirmed that China had issued a severe warning to Tokyo in late June demanding that Japan refrain from dispatching Self-Defense Forces to join US operations testing the freedom of navigation in the South China Sea.

Japan will “cross a red line” if SDF vessels take part in the freedom of navigation operations, Chinese Ambassador Cheng Yonghua conveyed to Tokyo at the time. Cheng threatened military action if Japan failed to comply with the ultimatum.

The warning came two weeks prior to The Hague international arbitration court’s adverse ruling deeming the waters and territory that the Chinese people had historically viewed as their own were to be stripped of their control and that Beijing must immediately remove itself from the disputed territory.

On Saturday, diplomatic sources confirmed that China had issued a severe warning to Tokyo in late June demanding that Japan refrain from dispatching Self-Defense Forces to join US operations testing the freedom of navigation in the South China Sea.

Chinese appetite fuels higher pork prices.YTD Up by 10%

Chinese consumers just cannot get enough pork. The richer the nation becomes, the more pigs its citizens want to eat. Despite a seasonal dip in pork consumption during July — the Chinese eat less meat in warmer months — prices are up 10% so far in 2016 compared to the same period last year, and some forecast that pork demand this year will soar by 30% from a year ago.

Prices for the white meat are currently just below the record high of 21.2 yuan ($3.1) per kilogram reached at the end of June 2016, up from the recent low mark of 12 yuan in early 2015, according to official Chinese figures.

 One reason for the price jump is that a large number of pigs died as a result of heavy rains, landslides and flooding in northern China in July, which affected 10 provinces or regions. About 10,000 pigs drowned at a village in Hubei province alone, according to Chinese media reports.

The outlook for domestic pork supply could worsen, as the National Bureau of Statistics has said that five of the provinces hit hardest by the flooding produce a third of China’s pork.

Another factor squeezing pork supply has been the rising price of corn — the key ingredient in pig feed — which rose by 11% from January to May, according to China’s Ministry of Agriculture.

Is China’s DF-41 Missile Really a Late Soviet Gift to Beijing?

DF-41 ICBMOn July 8, Washington and Seoul announced that the two countries had reached an agreement to deploy the THAAD (Terminal High Altitude Area Defense) in South Korea.

Mentioning the alleged similarities between Russia’s RS-36M2 Voyevoda (NATO reporting name – Satan) and  China’s DF-41, ICBMs Vasily Kashin dismissed them as a mixture of fact and fantasy.

“The DF cannot be considered as an analogue of any missile built in Ukraine during the Soviet days, even though the Chinese may have managed to obtain some crucial technology from Ukraine’s Yuzhmash missile design bureau”, he said.

Voyevoda was a giant liquid-fuel silo-based missile with a takeoff weight of 211 tons, while the DF-41 is a solid-fuel missile that can also be moved around by rail and on wheels.

“The RT-23, which, like the DF-41, is a three-stage solid-fuel missile with ten individually targeted warheads, is closer to modern Chinese ICBMs, but, developed 30 years ago, it is still a far cry from what the Chinese are working on now,” Vasily Kashin noted.

“The RT-23 had a liftoff weight of 105 tons, which made its use on railway cars a problem – the missile was too heavy to carry. Moreover, its range was only 10,000 kilometers, which is way less than what the Chinese say their DF-41 will be able to fly to,” he added.

Breaking -Steel Giant POSCO’s Profit zooms by 88%

Posco on Thursday reported an 88 per cent jump in second-quarter net profit as steel prices continued to rise on reduced Chinese output.

The world’s fifth-largest steelmaker by production posted a net profit of Won220.5bn for the April-June period, compared with Won117.4bn a year earlier. Its operating profit fell slightly to Won678.5bn while sales decreased 15.4 per cent to Won12.86tn

The strong performance underlines an upturn in the Asian steel sector as China, the world’s biggest steel consumer and producer, plans to cut steelmaking capacity by 100m-150m tonnes in the next five years.

The South Korean steelmaker returned to profit in the first quarter after reporting its first ever loss amid a flood of cheap Chinese exports, which drove steel prices to their lowest level in more than a decade.

Steel prices in China have increased about a third this year, helping many Chinese steel mills to return to profits from heavy losses last year. Posco’s executives forecast that steel prices in China would remain strong in the second half as Beijing tries to restructure the country’s steel sector to cut overcapacity.

Bitcoin and China’s endless chain of bubbles

From the stock and property markets to other segments of the economy, bubbles are continually cropping up in China. Lately, the country’s investors have been turning to bitcoin in droves.

Chinese investors are constantly shifting from one promising asset to another, seeking to maximize their returns amid excess liquidity. The slowdown in growth means the authorities have little choice but to maintain a fairly accommodative monetary policy, contributing to the abundance of cash.

 Chinese President Xi Jinping stressed during a roundtable discussion last Friday that his administration will “continue its aggressive fiscal policy and moderate monetary policy to expand demand adequately.”

It is under these circumstances that China has emerged as a global center of bitcoin trading, with the country purportedly accounting for 40% of investors and 80% of transactions in the market for the digital currency.