Is China’s ‘Real’ Economy Crashing?

Is China’s ‘Real’ Economy Crashing?

Tyler Durden on 03/15/2013 09:55 -0400

As Marc Faber noted, we hardly expect China to report GDP growth rates that do not perfectly fit the goal-seeked solution for utopian society, but under the covers, there appears to be some considerably more ugly real data. One of the hardest to manipulate, manage, or mitigate for a centrally planned economy is Electricity production. The year-over-year drop in China’s electricity production is the largest since the slump in Q1 2009; and the seasonal drop (associated with the New Year) is the largest on record at 25.3%! So on one hand China is discussing tightening monetary policy amid inflation anxiety and a potential real estate bubble – thanks to the rest of the world pumping free money – and on the other hand Chinese officials are faced with the reality of a drastically slowing ‘real’ economy. At the same time, we note that it appearsChina’s export-import data appears overstated. Rock meet hard place. Biggest seasonal drop ever in China electricity production and worst YoY drop since the crash in 2009… And as Bloomberg notes today: Widening differences in bilateral trade data reported by China and Hong Kong suggest export-import activity is being overstated by the mainland as companies report inflated figures, according to Mizuho Securities Asia Ltd. The chart below compares China’s data on monthly exports to Hong Kong the past two years, with counterpart figures from the city on imports.  

China’s numbers were 47 percent higher than Hong Kong’s in January, compared with a 13 percent difference two years earlier. The lower panel shows reports during the same period for China’s overseas shipments to the U.S., using each nation’s official statistics, where the differential has remained more consistent. Exaggerated trade figures would mean that China’s new leaders, who take over the government at the National People’s Congress this week, are failing to get the boost from global demand that the data indicate as they try to sustain a rebound in the world’s second-biggest economy. Hong Kong passed the U.S. in November to become the biggest export market in China data. Exports to Hong Kong from China rose 60.9 percent in the first two months of 2013 from a year earlier, compared with last year’s 20.7 percent gain for the full year. “This seems inconsistent with the pictures of the final demand in both Hong Kong and the countries for Hong Kong re-exporting,”  Read more of this post

BRICs Abandoned by Locals With Fund Outflows Highest Since 1996

BRICs Abandoned by Locals With Fund Outflows Highest Since 1996

The 2.5 million rupees ($45,984) Nirav Vora had in the Indian stock market six years ago have plunged by 72 percent. Now the 39-year-old father of two in Mumbai, who depends on investment income for his livelihood, is plowing money into government bonds.

“The confidence of small investors is rock bottom,” Vora said by phone on Feb. 26. “They have no faith in the markets.”

Vora’s exit from equities is being repeated across the biggest emerging markets as disappointing profits and growing state intervention cause stocks to trail global shares for a fourth year. Trading by Brazilian individuals has dropped to the lowest level since 1999, exchange data show. Russian mutual funds posted 16 straight months of outflows, the most since at least 1996, and withdrawals in India are the biggest in more than two years. Chinese investors emptied more than 2 million stock accounts in the past 12 months.

After amassing unprecedented wealth during 14 years of world-beating economic expansion, citizens of the so-called BRIC countries are losing their appetite for shares even as U.S. households return to stocks. While the Dow Jones Industrial Average (INDU) is trading at an all-time high, the MSCI BRIC Index remains 37 percent below its 2007 peak as economic growth disappoints investors and policy makers do little to improve the treatment of minority shareholders. Read more of this post

Hedge-Fund Liquidations Jumped in 2012 on European Crisis

Hedge-Fund Liquidations Jumped in 2012 on European Crisis

Hedge-fund liquidations rose to a three-year high in 2012 as the European debt crisis and concerns about global economic growth hurt performance for the $2.3 trillion industry, according to Hedge Fund Research Inc.

The number of firms shut jumped to 873, the most since 2009, the Chicago-based data provider said in a statement today. Still, the net number of hedge funds increased after money managers started 1,108 firms last year, it said.

Smaller hedge funds have been hardest hit by the global financial turmoil that has made it more difficult to raise money from investors since the collapse of Lehman Brothers Holdings Inc. in 2008. Hedge funds managing more than $5 billion got 65 percent of the $3.4 billion of assets that flowed into the industry in last year’s fourth quarter while firms with less than $1 billion reaped 8.7 percent, Hedge Fund Research said.

“The capital-raising environment continued to be challenging for emerging managers, including both small and mid- sized funds, as well as newly launched funds,” Kenneth Heinz, Hedge Fund Research’s president, said in the statement. “To raise new investor capital, hedge funds must not only demonstrate both superior performance and an innovative strategy, but also increased organizational efficiencies.” Read more of this post

In China, owning an oversized dog is the newest form of political dissent

In China, owning an oversized dog is the newest form of political dissent

By Damien Ma — March 14, 2013

Damien Ma is a fellow at The Paulson Institute, focused on investment and policy programs. Previously, he was a lead China analyst at Eurasia Group, a political risk research and advisory firm.

Most Americans will likely have a preconceived notion of the Chinese relationship with dogs. When a developing country can barely take care of all its own people, animal rights tend to sit very low on the totem pole. But the reality is much more complicated, especially with a burgeoning dog culture associated with the rise of young urban elites with disposable income.

That complex reality is being captured in a soon-to-be-released documentary on China and dogs. The film, Oversized Dogs: Chinese Dog Laws and the People Who Break Them,is ostensibly about what the title suggests. It follows several Beijing residents who own dogs that are technically illegal because they are above the size limit stipulated in an antiquated Beijing law. It’s not just the Chinese capital — these size limitation rules have popped up in other parts of China, yet Chinese dog owners seem to be flouting them with impunity. Beyond the legal issue, dog ownership in China turns out to be an interesting examination of evolving attitudes in Chinese society today. In particular, it indirectly reflects the rise of rights consciousness among the growing legion of Chinese who count themselves among the middle class. Read more of this post

China’s Billionaire Bubble Stands in Xi Jinping’s Way

China’s Billionaire Bubble Stands in Xi Jinping’s Way

Now that Xi Jinping officially holds the reins in Beijing, the world is asking this question: Can China’s new leader revamp an economy that may become the world’s largest during his 10-year term? Here’s an even better one: Will Beijing let him? Much is being made of how quickly Xi is replacing Hu Jintao in China’s fastest formal transfer of power in more than a generation. Although it took Hu almost two years to get all top three positions — president, Communist Party head and chairman of the military commission — Xi has them right out of the gate. The sense is that Xi has been empowered to rebalance an economy that’s producing a dangerous gap between rich and poor. That would sound more plausible if not for China’s billionaire bubble. The real big money in China isn’t in the private sector, but the public one. A March 7 Bloomberg News story dramatized the point: The ranks of the ultra-wealthy in China’s legislature swelled 20 percent this year. The list of China’s 1,000 richest people published by the Shanghai-based Hurun Report contains 90 members of the National People’s Congress. That, Bloomberg calculates, is up from 75 in 2012. It’s worth noting that everyone on the Hurun list had a fortune of at least 1.8 billion yuan ($289.4 million), more than former Republican presidential candidate Mitt Romney.

Chinese politics is proving to be a bit too lucrative for the nation’s own good. Corruption, of course, doesn’t taint every member of Beijing’s inner circle. Yet the vast financial empires being amassed by some and the lack of transparency about wealth among politicians require attention and, where needed, legal action. Xi must break this cycle. As more and more politicians get rich through questionable land grabs, insider trading and old- fashioned rent seeking, there is less incentive to retool the economy. Political will shrinks as overseas bank accounts swell. All that money sloshing around conspires to widen China’s rich- poor divide. But can Xi do it? The plot thickens when you consider Bloomberg’s June story on how Xi’s extended family accumulated a fortune estimated at $376 million. Only time will tell if history remembers Xi as China’s great reformer or the great enricher of a party that’s become communist in name only.

(William Pesek is a Bloomberg View columnist. Follow him on Twitter.)

Buffett’s BYD Threatened by Prius in China Hybrid Shift

Buffett’s BYD Threatened by Prius in China Hybrid Shift

Toyota Motor Corp. (7203)’s Prius hybrid is emerging as the likeliest winner from China’s faltering attempt to dictate the future of world motoring.

Policies favoring Warren Buffett-backed BYD Co. (1211) and other electric-vehicle makers were meant to help China vie for global leadership in a technology the government expected to replace clunkers that run on gasoline. Except, as Chairman Mao Zedong put it, “seek truth from facts,” and the fact is: EVs flopped.

Consumer appetite failed to materialize even with financial incentives that halved the price tag of a BYD e6. The 27,800 EVs on Chinese roads are fewer than 6 percent of the government’s 2015 target — and 0.02 percent of the total civilian fleet. For now, China needs to promote other technologies to cut the tailpipe fumes choking its cities, says one minister.

“We’re very anxious” about worsening air pollution, Miao Wei, industry minister and a three-decade veteran of China’s auto industry, said during last week’s annual National People’s Congress in Beijing. “I’ve never believed that you can gain global leadership in one leap.” Read more of this post

China WMPs raise liquidity, transparency worries; Banks are reportedly now required to finish examining and – where needed – make changes to their capital-pool WMPs before April.

China WMPs raise liquidity, transparency worries

By Elva Muk | 15 March 2013 (2 hours ago)
As the China Banking Regulatory Commission sets out requirements for wealth-management product providers, analysts highlight issues around WMPs.

As China’s banking regulator seeks to limit the risk of wealth management products (WMPs) in the banking sector, some market participants are looking to clarify what they see as the major issues: chiefly liquidity and transparency.

Banks are reportedly now required to finish examining and – where needed – make changes to their capital-pool WMPs before April. If they don’t satisfy the China Banking Regulatory Commission (CBRC), it might consider halting the firm’s WMP business. Read more of this post