Showing posts with label Geography of China. Show all posts
Showing posts with label Geography of China. Show all posts

Wednesday, November 22, 2017

Hong Kong Property: Record Price Per Square Foot Smashed...Twice...By The Same Buyer

Two weeks ago, we discussed Algebris Investments’ analysis of the world’s biggest asset bubbles. Portfolio manager, Alberto Gallo, noted that “It’s not just about valuation, it’s about irrational behaviour” and used variety of measures to identify the latter including ”Sky is the limit”, “Bidding wars” and “The trend is your friend”. Gallo listed what in his opinion were the fourteen biggest bubbles across the globe which included Hong Kong property, obviously.


In the global league table, Hong Kong held on to the dubious accolade of being the world’s most expensive place to live for the seventh year in succession in 2017, as Forbes noted, quoting work by Oxford Economics.


Holding on to its rank as the most expensive housing market in the world for the seventh year in a row is Hong Kong.


 


The median home price was 18.1 times the median annual pretax household income last year, according to a recent annual report from Demographia. Though a small improvement from the year before when home prices were 19 median household income, Hong Kong still ranks as "severely unaffordable" the report said.


 


The city"s housing prices have skyrocketed in recent years, driven by low interest rates and mainland Chinese buyers. Lack of affordable housing has become a top social issue as the city"s poor crowd into "cage homes" and dangerous, subdivided apartments.



To cement its leadership position in the realm of obscene property valuation, the South China Morning Post (SCMP) notes that the record price per square foot for a residence in Hong Kong has just been smashed…twice…by the same buyer…for two apartments in exclusive “The Peak” district. 


Mount Nicholson, the luxury housing development atop Hong Kong’s highest elevation, has clinched the crown as the priciest address in the most expensive residential market on earth, selling two apartment units for HK$1.16 billion (US$149 million) to a single buyer.



A buyer paid HK$600 million, or HK$131,000 per square foot, for a property measuring 4,579 square feet at Mount Nicholson, according to Wheelock Properties, which oversees sales of the joint project between Wheelock & Co. and Nan Fung Development, without divulging the buyer’s identity.



The same buyer splurged another HK$560 million on the same day on a second flat measuring 4,242 sq ft, or about HK$132,000 per sq ft. In square footage terms, the second property is the most expensive residence in Asia.



“From the perspective of an ordinary Hong Kong resident, we’ll never understand why” the city’s wealthiest people pay such sums for homes, said Knight Frank’s head of valuation and consultancy Thomas Lam.




As the SCMP laments, Hong Kong’s new Chief Executive is facing a losing battle in providing affordable housing and containing the bubble.


The prices of Hong Kong’s private housing advanced in September for the 18th consecutive month to a record, underscoring the challenges facing Chief Executive Carrie Lam Cheng Yuet-ngor, as she puts housing front and centre as the most important policy priority in her four-month-old administration. In her maiden policy address to the city, she pledged to create a “Starter Home” scheme to increase home ownership in the city for first-time buyers.



The transactions at Mount Nicholson, comprising 19 detached houses and 48 flats over three phases, broke the city’s previous price record, when a buyer paid HK$105,000 per sq ft for a HK$522 million duplex penthouse at Henderson Land Development’s 39 Conduit Road project at the Mid-Levels.



Hong Kong’s private home prices have increased by 430 per cent since 2003, making it the world’s most expensive urban centre among 406 cities to buy a home in, according to the Demographia International Housing Affordability Survey.




For the time being, Carrie Lam’s plan has about as much chance as that of King Canute.
 









Saturday, November 18, 2017

Katy Perry, Gigi Hadid Banned From China As Victoria"s Secret Fashion Show Unravels

As we reported yesterday, this year’s Victoria’s Secret fashion show, which is slated to take place in Shanghai in just two weeks, is unraveling like a cheap lace thong thanks to Chinese authorities’ refusal to cooperate with its producers, and Communist Party"s decision to deny visas to some of the biggest stars who were slated to participate in the show.


The latest update on the deteriorating state of affairs comes via the New York Post, which has reported that US pop sensation Katy Perry – who was slated to perform at the show – and supermodel Gigi Hadid, who was supposed to walk in the show, have been indefinitely banned from China.


Sources told the Post’s infamous Page Six gossip section that the “Roar” singer had tried applying for a visa to enter the Communist nation, but was denied by Chinese officials.


And while she was initially informed that she’d be able to gain access, the decision was apparently reversed after the government caught wind of a controversial incident from 2015, in which Perry donned a bright, glittery dress with sunflowers on it during a performance in Taipei, the capital of Taiwan.



Gigi Hadid


The innocent gesture wound up causing widespread outrage in China because the sunflower had been adopted the year before by anti-China protesters.


However, Perry also waved a Taiwanese flag during the concert in show of support for the country, which has been clashing with the mainland for years over its autonomy.


“She was initially granted a visa to perform at the VS show in Shanghai, then Chinese officials changed their minds and yanked her visa,” a source explained. “For every artist who wants to perform in China, officials comb through their social-media and press reports to see if they have done anything deemed to be offensive to the country. Maroon 5 was banned a few years ago because one band member wished the Dalai Lama happy birthday on Twitter.


Meanwhile, Hadid and a handful of other models were banned because of social media posts that apparently offended Chinese government officials.


Hadid, who was booked for the show back in August, was banned because of a February Instagram video — in which she held up a biscuit shaped like a Buddha and imitated the religious figure by squinting her eyes.


The clip was posted by the model’s sister, Bella Hadid, in February. It was later deleted following a storm of criticism as Chinese social-media users warned her not to come to Shanghai, calling her racist.


Apparently, Victoria’s Secret has decided that the show will go on, with or without Hadid:


 



 


Some of Victoria’s Secret’s biggest names have been denied entry to China, in addition to lesser-known models, such as Julia Belyakova, Kate Grigorieva and Irina Sharipova.


Model Adriana Lima’s visa has been held up due to an ongoing “diplomatic problem."


Harry Styles will reportedly replace Perry as the show’s performing artist.
 









Friday, November 10, 2017

35 Chinese Cities Have Economies As Big As Countries

Gaining perspective on China’s monstrous economy isn’t always the easiest thing to do.


As Visual Capitalist"s Jeff Desjardins notes, with 1.4 billion people and the third-largest geographical area, the country is a vast place to begin with. Add in explosive economic growth, a market-oriented but Communist government, a longstanding and complex cultural history, and self-inflicted demographic challenges – and understanding China can be even more of a puzzle.



Courtesy of: Visual Capitalist

CITY BY CITY


To truly grasp the emergence of China, one approach is to look at the impressive economic footprint made by the country’s cities.


Of course, cities like Shanghai, Beijing, and Hong Kong are the metro economic powerhouses that most people are familiar with. But have you heard of cities like Shijiazhuang, Wuxi, Changsha, Suzhou, Ningbo, Foshan, or Yantai?


There are literally dozens of Chinese cities that most people in Western countries have never heard of – yet they each hold millions of people and have an economic output comparable to nations.


The infographic above illustrates 35 of them, but here’s a list of 10 of them, the size of their local economy, and a comparably sized national economy:



MEGAREGIONS


It’s also important to remember that these cities don’t exist in isolation, and are instead cogs in the wheels of larger megaregions. Such areas would be comparable to the Northeast U.S., in which New York City, Philadelphia, Boston, Baltimore, and Washington, D.C. are all hours apart and remain largely integrated as a regional economy.


In China, there are three main megaregions worth noting:


Yangtze River Delta
With a combined GDP of $2.17 trillion, which is comparable to Italy, the Yangtze River Delta contains cities like Shanghai, Suzhou, Hangzhou, Wuxi, Ningbo, and Changzhou.


Pearl River Delta
With a combined GDP of $1.89 trillion, which is comparable to South Korea, the Pearl River Delta has cities like Hong Kong, Guangzhou, Shenzhen, Foshan, Dongguan, and Macao.


Beijing-Tianjin
With a combined GDP of $1.14 trillion, which is comparable to Australia, this megaregion holds the two largest cities in northern China, Beijing and Tianjin. The two cities are a 30-minute bullet train ride apart.









Thursday, November 9, 2017

China Detains 3 UCLA Basketball Players For Shoplifting As Trump Lands In Beijing

Hours before President Donald Trump landed in Beijing earlier today, news of a potential diplomatic crisis in the making emerged when the Wall Street Journal and other media outlets reported that three UCLA college basketball players had been detained in China for shoplifting.


While authorities wouldn’t confirm if the three players - allegedly including high-profile freshman LiAngelo Ball, a member of a prominent college-basketball family - were detained in China, WSJ managed to confirm the news with several sources, including the staff at the hotel where the  Bruins, ranked No. 21, were staying before beginning their college basketball season Saturday in Shanghai against Georgia Tech.


Sources said the other two players detained were Cody Riley and Jalen Hill.


UCLA has acknowledged the incident.



LiAngelo Ball


“We are aware of a situation involving UCLA student-athletes in Hangzhou, China,” UCLA said in a statement. “The university is cooperating fully with local authorities on this matter, and we have no further comment at this time."


The team was staying at a hotel  in Hangzhou, where a representative of the team said:  “We are not taking questions right now."


Details on the alleged shoplifting were unclear, though ESPN reported that the incident occurred at a Louis Vuitton store. A spokeswoman for the luxury brand said by email: “There is an investigation going on at the moment and we are not able to further comment."


It was unclear where the three players are, or if they’re in the custody of Chinese authorities. According to WSJ, Hangzhou police have been involved in an investigation that began Monday and included the questioning of three players at a station-house but they, along with a team staff member, have returned to their hotel in the city as evidence is being gathered, according to a person in the news department of the local Public Security Bureau. She said the three aren’t formally under arrest. “We didn’t limit their personal freedom."


Three Georgia Tech players were questioned by local authorities at their hotel, according to a Georgia Tech spokesman, and it was determined they “were not involved in the activities being investigated.” Those players have resumed their activities with the team.


Speaking in Beijing, a Chinese Foreign Ministry spokeswoman, without confirming details on the matter, said “China will handle this case in accordance with the law and ensure the legitimate rights and interests of the people involved."


A US State Department official told WSJ via email “We are aware of reports of three U.S. citizens arrested in China. We stand ready to provide consular assistance for U.S. citizens. Due to privacy considerations we have no further comments."


A representative of the Hyatt Regency Hangzhou hotel said the UCLA team had stayed there and three players were detained by local police. She said she had no further information.


The two teams were in the country as guests of Hangzhou-based Alibaba Group Holding Ltd. and its billionaire co-founder, who recently bought into the Brooklyn Nets professional basketball team. Alibaba has since 2015 sponsored an annual regular-season Pacific-12 Conference basketball game in Shanghai.


While the incident may not have received so much attention under normal circumstances, the timing - coinciding with Trump’s first official visit to China - and Ball’s celebrity have become complicating factors, as WSJ explains.


Lonzo’s rise to stardom was accompanied—and in the eyes of many, superseded—by the brash outspokenness of LaVar Ball, his father, who entertained and infuriated fans as he loudly promoted his family, himself and their brand. He became a celebrity in his own right by making the boldest, headline-grabbing claims to anyone who would listen. He said he could have beaten Michael Jordan in 1-on-1 and that his son would be better than Golden State Warriors superstar Stephen Curry.


 


These theatrics combined with Lonzo’s ability made the Ball family a national phenomenon—especially with Lonzo’s two younger brothers, LiAngelo and LaMelo, talented basketball players set to follow in Lonzo’s foot steps by playing at UCLA. LaMelo is still in high school.


 


LaVar converted the family’s fame into a Facebook reality series “Ball in the Family” that has drawn tens of millions of viewers. He and Lonzo also eschewed the mega shoe deals that players of his caliber typically get out of college to start their own venture—Big Baller Brand—with a signature shoe that cost $495, a decision that only added to the spectacle.


 


LaVar Ball didn’t respond to messages left at his Shanghai hotel room.



Even if Chinese authorities give them a pass, by the sound of it, the three players will face some type of disciplinary action when they return to California.


In a statement, Pac-12 Commissioner Larry Scott said: “We are very disappointed by any situation that detracts from the positive student-athlete educational and cultural experience that this week is about.” He said players are expected to uphold the highest standards and that the league is monitoring the situation.


Luckily for the players, Trump"s fueding with athletes has been confined mostly to professional sports leagues. Let’s hope, for their sake, that Trump has three extra seats on Air Force One. If the three get jammed up, maybe Trump can work something out - assuming they"re prepared to promise never to kneel during the National Anthem.
 









Wednesday, September 27, 2017

How Much Space Does $1,500 Rent In The World's 'Most Magnetic' Cities?

New Yorkers who wince every time they slip a $1,500 rent check under their super’s door should consider moving to Shanghai, or maybe Berlin.


According to a new study published on RentCafe, $1,500 will buy you three times more space in Shanghai than in Los Angeles and twice as much in Frankfurt. Meanwhile, rents per square foot are five times higher in San Francisco than they are in Berlin.


Rentcafe used data from the Global Power Index and data on price-to-square footage ratios that it had collected for a previous study to compare how much space $1,500 will buy in the world’s 30 “most magnetic” cities - i.e. cities that are popular tourism hubs.


The study’s authors presented their results in an interactive graphic that allows users to compare costs between cities. Some of the most expensive markets include San Francisco, Manhattan and Zurich. Among the least expensive are Istanbul, Shanghai and Berlin.




Manhattan, for example, offers only 277 square foot (26 m2) for $1,500.  In Seoul, the same amount of money will rent you no less than a 1,389 square foot (129 m2) apartment, ample space for one person.



In San Francisco, $1,500 a month will rent you a 316 square foot apartment. Meanwhile, in Austria, $1,500 will rent you 1,009 square feet – almost three times as much. Rentcafe adds that, while SF has some of the most widely regarded cultural amenities in the world, Vienna - the City of Music – has plenty of entertainment options, from museums, vintage cinemas, live shows to recreational parks and hiking trails.


That is to say that one doesn"t necessarily need to pay sky-high rents to live in a fun urban environment.
 

Wednesday, September 13, 2017

This Fascinating City Within Hong Kong Was Lawless For Decades

There are very few places on Earth that remain ungoverned, and even the tiniest islands and city-states tend to have rules in place for things like taxation and citizenship.


Government control is an established reality for most of the world, but what would happen if a neighborhood in your city suddenly became a lawless free-for-all? What type of industries would emerge, and how would people cooperate within that environment to ensure basic services continued to operate?


As Visual Capitalist"s Nick Routley details below, one example from recent history sheds light on just how such a situation could work: Kowloon Walled City.





Kowloon Walled City


Today’s infographic is a fantastic editorial illustration from South China Morning Post from 2013 that takes a detailed look at the inner workings of Kowloon Walled City (KWC).


Often described as one of the most remarkable social anomalies in recent history, this bizarre enclave was more dense than any other urban area on the face of the planet.


Kowloon Walled City Timeline


The story of the KWC site begins in the Song Dynasty (960-1297) when a small fort was constructed to house soldiers who helped safeguard the salt trade. In the latter half of the 19th century, the small fort was expanded into a full garrison town as the threat of a British invasion hung over China.


In 1898, the 99-year lease of Kowloon and the New Territories was established with one exception: the 2.7 hectare walled fortress. Because China never dropped its claim on the site and the British took a hands-off approach, the site became a sort of lawless enclave.


After WWII, squatters began to fill the site and more permanent structures followed. By 1950, the population had grown to 17,000, and by 1990 over 50,000 people lived within a property the size of two rugby fields.


kowloon walled city density people


From Squatter Camps to Functioning Neighborhood


There was a tendency to view KWC is an isolated bubble of vice within the city, but the sheer volume of business activity within the informal settlement shows that outside customers were more than happy to benefit from lower priced goods and services. This symbiosis has few parallels in modern history, and it makes KWC a fascinating situation to look back on.


KWC is best known as an enclave of criminal activity and illicit businesses such as brothels and gambling dens, but that only tells one side of the story. Despite the lack of space and formal links to utilities, the neighborhood was remarkably productive. In fact, KWC was often been described as Hong Kong’s shadow economy because the hundreds of tiny workshops and factories scattered throughout the site provided products for businesses across Hong Kong.


Kowloon Walled City Businesses


People moved to KWC for many reasons, including bankruptcy, poverty, or to avoid deportation. Others went there to take advantage of the lack of law enforcement and regulations.


One prominent example of skirting regulation was the high concentration of dental and medical practitioners operating within KWC. In addition to lower rents, doctors who immigrated to Hong Kong from China could avoid expensive licensing and retraining required by the colonial government. Industrial businesses were free to ignore fire, labor, and safety codes to produce goods at a lower cost, or to sell items that were considered taboo in the formal economy (e.g. restaurants serving dog meat).


Law and Order


Triads acted as a de facto city council by resolving civil conflicts, creating a volunteer fire brigade, and organizing garbage disposal. The tight-knit community within the settlement would also coordinate among themselves to conserve electricity and make repairs to shared infrastructure.


Despite the lack of formally recognized land ownership, people still bought and sold property within KWC. In one example, a construction company struck an exchange deal with the owner of a four-story building. The owner would retain a ground floor flat in a newly constructed thirteen-story building on the site.


The Bitter End


In 1993, after intense rounds of buy-out offers and forced relocations, Kowloon Walled City was demolished and converted into a park. Many of the businesses were forced to close forever as rents in the rest of Hong Kong were not affordable for most of the owners.





All this intensity of random human effort and activity, vice and sloth and industry, exempted from all the controls we take for granted, resulted in an environment as richly varied and as sensual as anything in the heart of the tropical rainforest. The only drawback is that it was obviously toxic.



– Greg Girard, author of City of Darknes

Saturday, September 9, 2017

Some Journalists are Just Arsonists Pointing Fingers

Via The Daily Bell


Setting a fire is easier than putting one out.


And sometimes the people who fail to put out a fire are persecuted by the ones who don’t show up at all–or worse yet, fan the flames.


A recent Gizmodo article basically criticizes a volunteer fire department. No, not literally. This has nothing to do with actual fires of fire-fighters.


This has to do with an article called, “Some Crypto-Capitalists Just Want to See The World Burn.


Conspicuously lacking in the article is… how exactly the “crypto-capitalists” want to see the world burn?


The article tears apart all the ways the attendees of the Startup Societies Summit are trying to put out the fires of the world. It tries to torch innovative ideas about how to end poverty, clean up the environment, stop government abuse, feed the hungry, and advance modern medicine.


The author of the Gizmodo piece, Bryan Menegus, is like an arsonist saying, “awfully suspicious that every time there’s a fire, all these firefighters are on the scene…”


If Menegus had a superpower, it would be the uncanny ability to find nefarious motivations for even the most innocuous solutions to serious problems.


Summoning his powers, he first cherry picks two sentences from a 15-minute presentation on how to solve the refugee crisis using Special Economic Zones (SEZs).



Among the most extreme examples of expanding SEZs was Michael Castle Miller’s presentation on “refugee cities”—a proposal to turn refugee camps into their own Shenzhens. “We can actually convert refugees into economic assets that drive us towards the economic and social progress we want to achieve,” he says. Through one lens it gives those stuck in political limbo a semblance of normalcy; through another it sees immigration as a problem in need of solving and turns refugee camps into company towns running off the labor of the displaced. “It’s an investment opportunity because now all of a sudden there’s a huge labor force out there of untapped skills that nobody else can access.”



Maybe in the utopia in Menegus’ mind, immigration is not a problem in need of solving. But in the real world, millions sit in camps not allowed to work for their own economic benefit.


Apparently, governments setting up camps and then funding them without end fits into the Savior Complex of Gizmodo and associates. Instead of freeing and empowering individuals, they think of people as weak, in need of constant nurturing by mother government. Yet these refugees are being smothered by their matriarchal providers. Governments don’t let them work and refuse to let them integrate into economies surrounding the encampments.


You might think allowing someone the opportunity to work and provide for themselves and their families would be a good thing. All Menegus sees is exploitation. Somehow, he casts company towns as worse than the literal prisons in which refugees now live.


When he wants to criticize, Menegus has no difficulty conjuring up images of a burning world, ripe for greedy capitalists to take advantage of desperate victims in need.


Yet all these troubles evaporate when he questions the suspicious actions of the event’s speakers.



When asked what he’s running from that requires a man-made island on the ocean, Joe Quirk says “pretty much all the governments that exist.”



Menegus had countless examples of how the naive attendees, refugees, the poor, and others would be taken advantage of by greedy capitalists. But suddenly the scary world in need of government protection disappears. What’s so bad that you need to run?


I don’t feel like rehashing the genocides, wars, exploitation, nor the racial, gender, and religious discrimination perpetrated by various governments. From Jim Crow laws to Ruby Ridge, from the Tuskegee experiments to torture at Gitmo, there is plenty to run from in reference to the U.S. government alone.


But also, why ignore the failures? The failure of the government to end poverty, the failure to solve crime, the failure to restore the environment, heal the sick, and so much more?


As much as Quirk runs from the psychopaths in government, he tackles the problems they have never been able–or willing–to solve. I suppose Menegus would just have us wait for our saviors to get around to rescuing us poor helpless souls.


But the people involved in Startup Societies prefer to take matters into their own hands.


Let’s Talk About Failure


Don’t all the people at this conference know how many times these ideas have failed, the article suggests.


If only we could all be like Edison, The Wright Brothers, and Einstein, who all got the lightbulb, the airplane, and the theory of relativity right on their first try.


Of course, failure alone does not mean you will eventually succeed. But Menegus has to ignore the mountains of evidence in order to pretend the projects discussed have no future.


And ignore the data, or twist it, is exactly what he does.



The hope, for those like Strong, is that these experiments will not only alleviate global poverty, but show otherwise oppressive nations a better way forward—a concrete oasis that paves a path to more liberalized future governance—but it’s unclear if that’s been the case in any of the dozens of countries currently hosting an SEZ. If wages and conditions improve in one zone, what prevents corporations from packing up and finding a new crop of foreign bodies to run the machines?



It’s only unclear if you haven’t bothered to look into it.


Read another way, here is what Menegus is actually asking:


A special economic zone could improve the lives of workers and residents so much that companies no longer have cheap labor in the SEZ. Now that their former workers have the economic freedom to choose other options, what’s to stop a company from finding new crops of foreign bodies to lift out of poverty with the same methods?


Imagine the horror! What if these companies just bop around the world creating wealth, and empowering individuals until there is no one left to exploit!? Then who will Gizmodo and Bryan Menegus save with their snarky articles and sassy critique?


Relevant comparisons are ripe for analysis.


Why do South Koreans live in a normal wealthy nation, while North Koreans have not advanced since the two countries split? Before the Korean War, the populations were equally matched economically.


What’s the difference between China and Hong Kong that makes Hong Kong one of the wealthiest places on Earth? What about Singapore’s rapid development after their independence in the 1960’s?


Joe Quirk’s book Seasteading: How Floating Nations Will Restore the Environment, Enrich the Poor, Cure the Sick, and Liberate Humanity from Politicians, highlights how experimenting with government could lift people out of poverty, solve overcrowding in cities, feed the masses while reducing the environmental impact of farming.


And yet he is likened to snake-oil salesmen. Menegus doesn’t miss the opportunity to take a shot at Quirk’s hair–which I think is lovely–and “frat boy” attitude.


Ironically, some of these experiments that Menegus is so quick to torch as libertarian fantasies, are not very libertarian at all.


Sure, economically speaking Singapore is very free. But Joe Quirk points out in his book that it also has universal health care and an annual government budget surplus. On the other hand Singapore has no minimum wage and 2% unemployment.


Hong Kong requires no licenses for any business. They also boast “no sales tax, no capital gains tax, no goods and services tax, no value added tax, no annual net worth tax, no inheritance tax, and no estate tax.”


Yet 50% of the residents of Hong Kong live in a form of subsidized housing and every resident receives free emergency medical care. The top 8% of Hong Kong residents shoulder 60% of the tax burden, and the bottom 60% of residents pay no income taxes.


So why is Menegus so quick to rule out these projects, when some of them resemble the progressive dream?


Quirk’s point is not that progressives are wrong and libertarians are right. He says “While the West argued, the East experimented.” There simply have not been enough modern experiments in government to yield any concrete data. We need more experiments. 


No Thanks, I’ll Take My Business Elsewhere


Menegus dismisses one of the clearest signs that the “exitarian” strategy is viable.


Peter Thiel helped found the Seasteading Institute. Among other things, they promote the idea of islands or ships hosting medical tourism offshores from restrictive or expensive countries.



Offshore medical research is something Thiel is already engaged in, and which has been described as “patently unethical.”



What the Menegus refers to is the testing of a herpes vaccine. You know, the thus far incurable virus.


Instead of being thwarted by the costs and bureaucracy of the FDA, or waiting 20 years and hoping the “valley of death” doesn’t scare off investors, Thiel took action.


So some shmucks connected to the U.S. government call it unethical. Big surprise.


Volunteers with herpes are getting a chance to be cured, without having to wait 20 years for the FDA to–maybe–approve it. What’s so unethical about skirting an agency known to be corrupt, which derives a big chunk of its revenue from being paid off by pharmaceutical companies?


In truth, Menegus’ Gizmodo article reads like a Newsweek article from 1995 triumphantly declaring the internet would never catch on.


This is, of course, laughable now. In a few years, it will be laughable to think we should have continued another 1,000 years of government identical to the last 1,000 years of government.


Startup Societies are primed to revolutionize the way government works. Singapore, Hong Kong, countless special economic zones, and even innovative cruise lines stand as clear signs of times to come for anyone paying attention.


In 1995, the internet was sometimes more hassle than it was worth. It didn’t do any of its functions particularly well. There was still a lot of experimentation needed to flesh out the proper applications.


Twenty-two years later, it is hard to imagine the world without it.


Everyone has an Agenda


I don’t want to be misleading here. The event organizer, Joe McKinney, who Menegus trashes in the opening of his article, is a friend of mine. I don’t like to see my friends maligned, especially when they are working their asses off to seriously improve the world. And yes, that is going to make me somewhat biased.


But the idea that Menegus is a neutral journalist is laughable. He, and Gizmodo, have an agenda.


They promote the idea of helplessness. They sell a victim mentality. If someone’s making money, someone else must be getting screwed. If someone aligns with a particular political agenda, then everything else they say should be ignored.


Of course, their political beliefs are altruistic and legitimate. They are just trying to fight Nazi’s and help the poor. But when Joe Quirk talks about how to help the poor, he’s just a used car salesman trying to make a buck.


Menegus assumes the worst of any business and assumes government has the best intentions. But people are people. Some are motivated by greed, and others by altruism, regardless of whether they join the government or the private sector.


But you can disengage from businesses. Menegus didn’t have to be at the Summit, and he doesn’t have to join any Startup Society. No one does.


Yet all 7.5 billion people on Earth must choose between 195 countries. And in reality, most of them can’t choose to leave or enter any particular country at will.


All the Startup Society Foundation is saying is that we should have more options. Let’s get more experiments going, and we can see what type of government works the best.


Menegus can start or join one with a universal basic income and censorship if he wants.


The people at the Startup Society Summit are looking for peaceful solutions. Yes, some of them want to exit, and no longer consort with the type of people who read Gizmodo. How crazy to want to disengage from people who say things like:



These people are so entrenched in a helpless victim mindset, they can’t think of any way to solve simple problems of security without government. But they do highlight the biggest threat which faces Startup Societies: violent governments enabled by angry, hateful voters.


Why exactly do these people want to see everyone with differing views murdered by terrorists and governments?


Other commenters were quick to point out the similarities of Startup Societies to the video game Bioshock. The attendees of the event preferred history and science to inform their comparisons.


But the best comment has got to be this one:



I feel that we would get a lot more realistic and useful tech and vision from these people if we shipped them to a government-free island for a few years. Then when they come back they should have at least a basic understanding of what the government is here for, for better or worse, and how to get what they need they will need to work within the current system because it’s not possible to just exclude themselves and create another – they are wholly dependent on it.



This comment reveals the clear misunderstanding between the Startup Societies project and the uninformed critics.


First, the people involved in Startup Societies are attempting to put themselves on “islands” without traditional government. They are begging to not be attacked by governments for simply trying out their own forms of governance. If the critics aren’t afraid of the results, why are they so violently opposed to the experiment?


Second, the Startup Societies may be critical of typical government, but they aren’t opposed to any governing structure whatsoever. Every project proposes mechanisms for how to govern the territory. It is just that the methods of rule-setting don’t involve coercion, theft, and violence.


The truth is they would never come back from the island. But plenty of people would be begging to come join–just like in Singapore and Hong Kong.


This won’t be the last hit piece on Startup Societies as the ideas catch on. But who cares? The whole point is to disengage from people who want to control us, who thinly veil their violent aggression with altruistic excuses a Savior Complex.

Saturday, August 12, 2017

Thrill-Seeking Chinese Tourists Rush To Visit North Korea "Before The Regime Collapses"

While nearly two-thirds of Americans view North Korea as a “serious threat” and most would rather vacation literally anywhere else following the death of college student Otto Warmbier, Chinese adventure-seekers are visiting the North in ever-greater numbers, according to Reuters. The wave of tourism has been inspired by the fear that the latest escalation between Pyongyang and Washington might lead to the toppling of the Kim regime, which has successfully kept the forces of modernization at bay for decades, offering tourists a rare opportunity to catch a glimpse into the past that some say reminds them of a "young" China.



North Korea has become a favorite destination among wealthier, more adventurous Chinese travelers. Another tour operator who targets the affluent said he’s been fielding more questions about whether it’s safe to visit the North, Reuters reported.





"But those that inquire often already have their heart set on going," the operator, who declined to be named, told Reuters. "The idea of a bit of danger adds to the thrill and mystery of North Korea."



While the looming threat of nuclear annihilation is keeping some tourists at bay, more daring travelers say they are trying to visit the North before regime change brings the country into the 21st century, according to one tour guide.





"There have been quite a few tourists in my groups who say they want to see North Korea in its reclusive state while they can," he said.



"It won"t be the same if the regime collapses."



China stopped publishing national data about tourism to North Korea in 2012. But regional data show that more than 580,000 Chinese from the province of Dandong crossed the border into North Korea during the second half of 2016, more than the double the 237,000 Chinese who visited the country during 2012.





“China"s tourism authority has not published a breakdown of the total number of Chinese visitors to North Korea since 2012, when it said 237,000 made the trip.



But the number traveling just from Dandong spiked to 580,000 in the second half of 2016 alone, according to the state-run China News Service. The report said 85 percent of Chinese tourist visits to North Korea originated from Dandong.



That"s still only a fraction of the 8 million Chinese who visited South Korea in 2016.”



According to Reuters, tourists can take ferries or charter speedboats down the Yalu River – the border between the North and China – to catch a glimpse of North Korea villages and the heavily armed guards who patrol the border.



Other fun activities include paying respects to a statue of Kim il-Sung.





“A flyer for the one-day tour to Sinijiu tout a trip to the city’s central plaza, where you can pay respects to a bronze statue of North Korea"s founding president Kim il-Sung, as well as visits to a cosmetics factory, a revolutionary history museum, art history museum and a cultural park.



"You can feast on the North Korean specialty food by warm and hospitable North Koreans," it says.



As we reported last month, trade between China and North Korea expanded by 10% during the first half of the year, as have the number of border crossings. Meanwhile, traffic, especially on lower-end group tours, has grown steadily to one of the world"s most isolated states over the past few years, despite North Korea"s persistent nuclear and missile tests, which have elicited increasingly tight U.N. sanctions.


Few of the Chinese who spoke to Reuters were concerned about the North’s missile tests, or the economic sanctions imposed by the UN. Most said they saw the opportunity to visit a “piece of history” as too attractive to pass up.





“Undeterred by escalating tensions between Pyongyang and Washington rattling nerves globally, a steady stream of tourists from China each morning passes through the immigration checkpoint at the border trading hub of Dandong.



Greeting them on the North Korean side are dozens of tour buses, collecting them for itineraries ranging from a day in neighboring Sinijiu to a week visiting North Korea"s main cities, including the capital Pyongyang.



 "We"re curious. We want to see how they live," Xu Juan said on Thursday before crossing the Yalu River, which marks the border between the two countries. Xu was traveling with friends and family from Hangzhou, in eastern China.



"I just want the sense of nostalgia, to see a country that is poor, like (China was) when I was young," said a man in his early 50s, from Jilin province, declining to give his name.”



If the Chinese government has its druthers, the North’s status as a living wax museum likely won’t change any time soon: According to an article in the Global Post, the Communist Party has vowed to step in if the US or South Korea tries to topple the Kim regime.



Though no official US records are available, it’s believed that hundreds of adventure-seeking US tourists would visit North Korea every year. Typically, they would arrange tours through Switzerland, or sign on with a Chinese tour company based near the border. However, relations between the two countries have deteriorated to such a degree that any US tourist crazy enough to visit the North should get it over with soon: The State Department has banned US passport holders from traveling to the North after Sept. 1.


For any American hoping to visit a foreign country ruled by a hostile government, we hear Eritrea is beautiful in the fall.
 

Sunday, July 16, 2017

Can't Afford A Shanghai Apartment? Try Sleeping In A "Shared Compartment"

Shanghai’s status as an emerging tech hub is bringing with it problems related to overcrowding experienced by US cities like San Francisco and certain parts of New York City – namely out-of-control rents and home prices.


But now, the cities’ mid-tier office drones, some of whom may not have enough cash saved to “commit” to an apartment, have a new low-cost housing alternative. They"re called shared compartments, and they"re are popping up in office buildings around Shanghai. Users pay to sleep in the compartments for a set amount of time. They’re given disposable bedding to make sleeping more comfortable, and the compartments are disinfected automatically by ultraviolet light after each use.


Photos of these compartments have been circulating on Chinese media:



People can enjoy a rest in the compartment by scanning the QR codes for payment.



A man experiences a shared compartment in Shanghai...



The inside of a shared compartment...



The disposable bedding...



They have been rising precipitously now for at least a decade, with an average 1,000 square foot apartment in Shanghai going for $725,000, or around five million yuan. Shanghai"s average salary per month is 7,108 yuan ($1,135) or 85,300 yuan a year. That puts local property in Shanghai at about 50 times median salaries in the city, according to Forbes. By comparison, housing prices in New York City are 32 times salaries of average New Yorkers.


With those figures in mind, showering at the company gym doesn’t sound so bad.

Saturday, May 20, 2017

Rising Occupancy In China's Fake Manhattan Is "Mostly Government Driven"

China"s copy of Manhattan is no longer a ghost town, Bloomberg reports. But that doesn"t mean it has forever forestalled a "day of reckoning" for its debt-fueled growth.


The northern city of Tianjin drew negative press coverage a few years ago because of a newly built replica of Manhattan complete with a mock Rockefeller Center that was created as part of a massive government infrastructure project but for years was little more than a ghost town.  But the city is now occupants are finally clocking to the city: Bloomberg reports that once empty skyscrapers, vacant office towers and unfinished hotels and apartments are gradually filling up amid the central government’s renewed push to refashion the city into a crucial gateway for a revitalized Northern China.



As Bloomberg reports:


There still may still be a financial reckoning for Tianjin looming in the future, but right now there are green shoots of economic life in the urban districts at the center of the city’s unprecedented construction boom.


But there"s a catch, of course: As is true for the broader Chinese economy, the growth in Tianjin "is mostly government driven, though there are signs private industry is coming."


Here"s more from Bloomberg:


In the Binhai district, empty offices are filling up with staff from private companies as well as employees of some of the biggest state-owned enterprises, such as China National Chemical Corp., railcar manufacturer CRRC Corp., and China Poly Group Corp., a conglomerate with businesses ranging from explosives manufacturing to real estate." While many local governments across the country are struggling with heavy dependence on debt-fueled growth, Tianjin benefits more than almost any city from its position at the vanguard of two of the country’s biggest national projects.


*  *  *


Bloomberg saves one notable detail for the last paragraph of the story, citing an official who offers some local perspective: The city is supposed to play in important role in China"s "one belt, one road" initiave, another massive debt-fueled trade and transport infrastructure project meant to replicate the ancient Silk Road trade routes that connected Europe and Asia. The government-funded expansion aims to join Beijing with the surrounding Hebei Province to create a mega city of 100 million people.



It should come as no surprise that Tianjin has...backing from heavy hitters in the party.





"We want the city to become one of the world’s largest ports like Singapore or Hong Kong," said Xiao Sheng, vice director of the free trade zone in Tianjin. "We want to develop a new business and development model that could be promoted to other regions in China."



But even as China signs up foreign partners for its latest scheme, offering financial inducements like a $50 billion infrastructure investment in Pakistan, a key U.S. ally, some at least are showing unease at the massive debt-fueled spending necessary to bring the project into reality. 


In a diplomatic showcase years in the making, Chinese President Xi Jinping invited leaders from 29 countries to hear his pitch about the "one belt, one road." But what"s notable is that India, the worlds fastest growing and second-most populous country, didn"t even bother to send a delegation, warning that the "unsustainable debt burden" required to launch the project would be a disaster for the countries involved.


The story notes that though Tianjin"s growth rate slipped to 8% last year – down from 9% the year before – it still outpaced 6.8% YoY rate for the broader Chinese economy in 2016. But that"s a pretty low bar: China"s economy grew in 2016 at its slowest pace in 26 years.

Thursday, May 11, 2017

Chinese Black Swans? No Problem!

With bonds, stocks, and commodities collapsing amid a renewed wave of Chinese monetray conditions tightening, concerns over potential butterfly effects and potential "black swans" are beginning to appear. However, as The South China Morning Post reports, the people of Shanghai have a solution for that...



Two deliverymen have been accused of stealing a black swan from a park in Shanghai and cooking and eating part of it, according to a TV report.


Residents living near Xujiahui Park noticed that one of five black swans living in the area was missing, Radio and Television Shanghai reported.


Surveillance footage showed the pair grabbing the swan late at night.



The men, whose full names were not given, had originally planned to catch fish, but were deterred by security patrols in the park. The bird died before the men got it home and they then boiled its carcass and froze it, according to the report. The following day they cooked it with carrots, ate half, but threw the rest away because it tasted bad. The men have been arrested by the police for hunting and killing a protected species, the report said.


*  *  *


On a serious note, we have come to expect this kind of behavior from the increasingly despeate Venezuelans, but if this is becoming the norm in Shanghai, then China"s problems run far deeper than collapsing capital markets.

Friday, April 21, 2017

A New "Anomaly" Emerges In Chinese Markets

The Shanghai Composite Index, notorious for its wild swings over the past two years, has gone 85 trading days without a loss of more than 1% on a closing basis, the longest stretch since the market’s infancy in 1992.




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




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





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



For some investors, it’s a sign that state-directed funds are putting a floor under daily market swings - a development that presents short-term buying opportunities when the Shanghai Composite dips more than 1%  during intraday trading - but when this happens in the US its completely normal and defended as animal spirits that mean "stocks just want to go higher."

Tuesday, April 4, 2017

China Starts 2017 With Highest Number Of Corporate Defaults In History

Back in October 2015, roughly around the bottom of the recent commodity cycle, we reported a stunning statistic: more than half of Chinese companies did not generate enough cash flow to even cover the interest on their cash flow, and as we concluded "it is safe to assume that up to two-third of Chinese commodity companies are now at imminent danger of default, as they can"t even generate the cash to pay down the interest on their debt, let alone fund repayments."



While commodity prices have staged a powerful bounce over the past 18 months, and despite the government"s powerful drive to avoid major defaults over concerns about resulting mass unemployment, the inevitable default wave has finally arrived, and as Bloomberg reports overnight, "China’s deleveraging push has racked up the most defaults on corporate bonds ever for a first quarter, and the identity of the debtors is pretty revealing."





Seven companies have defaulted on a total of nine bonds onshore so far in 2017, versus 29 for all of last year, according to data compiled by Bloomberg. In a sign of the struggles facing China’s old economic model, most of them depend on heavy industry and construction. While it’s still far from a crisis point, the defaults shows how policy makers’ efforts to reduce the liquidity that had propelled the bond market until late last year is exacting casualties.



Cited by Bloomberg, Liu Dongliang, a senior analyst at China Merchants Bank Co. in Shenzhen said that “weak companies can’t sell bonds, which adds to the pressure on their cash flow." As a result, "the pace of defaults will continue. It will be even more difficult for weak companies to sell bonds because corporate bond yields may rise further -- the current yield premium doesn’t provide enough protection against credit risks.”


As discussed in recent months, the Chinese central bank has been curbing leverage in money markets leading to a spike in borrowing costs...




... which has also hit issuance: making rolling over of existing debt prohibitive for many. Firms rated AA, generally considered junk in China, sold 33 billion yuan ($4.8 billion) of bonds in the first quarter, the least since 2011, Bloomberg data show. Chinese companies have scrapped 129 billion yuan of bond sales since Dec. 31, a jump of more than 50 percent from the same period a year before.


Continuing the deleveraging push, and further tightening financial conditions, over the weekend, the PBOC boosted rates on loans aimed at small- and medium-sized financial institutions while as reported last weekend, smaller and mid-size banks have been caught in the cross hairs of shadow banking deleveraging, with some said to have missed debt payments in March.


Not surprisingly, Bloomberg reports that four of this year’s nine defaulted bonds were issued by companies based in the northeast rust-belt province of Liaoning, which has been among the areas hit hardest by China’s focus on reducing capacity in industries such as steel and coal. Another key Chinese commodity producing province, Hebei, which is the nexus of China"s steel-production has so far been spared as a result of lying about its production cuts, however recent revelations have prompted Beijing to crack down on local factories, resulting in the recent decline in iron-ore prices, which will likely have adverse impacts on Chinese upstream steel suppliers, and result in even more defaults in the coming months.


Courtesy of Bloomberg, here is a summary of the companies that have defaulted so far in 2017:


1. Dalian Machine Tool Group Corp.


The top perpetrator, this Liaoning manufacturer defaulted on three bonds this year, after issuing new securities as recently as October. The tool making industry has a large number of players, and is ripe for consolidation, according to Bloomberg Intelligence. Dalian Machine is also based in a province that tumbled into an outright recession last year. The securities involved include a note due in May 2017, one due in July and another due in January 2019.


2. Dongbei Special Steel Group Co.


This steelmaker based in Dalian, a port city on the Yellow Sea, is a good example of Liaoning’s troubles. The company, partially state owned, was already bailed out in the early 2000s before it had to grapple with the challenges of China’s economy decelerating from around 10 percent growth to sub-7 percent. It’s now defaulted on its sixth bond since its latest financial difficulties began a year ago. The company is in bankruptcy proceedings. The note defaulted on was originally issued in 2013 and is due in January 2018.


3. Inner Mongolia Berun Group Co.


This investment company is based in the heart of the northern province of Inner Mongolia, which saw a surge in construction during the record credit boom unleashed during the global financial crisis. Berun Group’s home city, Ordos, was dubbed China’s biggest “ghost town,” for all the vacant buildings that went up during the stimulus period. This was the second default within two months for the company, which invests in chemicals and logistics. The defaulted security was a note issued last year that was due in January.


4. China Shanshui Cement Group Ltd.


While this company is based in Shandong, a province southeast of Beijing that’s better off than its neighbor across the Yellow Sea, Liaoning, cement has become a tougher industry since regulators took steps to rein in China’s property sector. China Shanshui Cement Group has defaulted on several bonds since November 2015 after a boardroom fracas stymied financing. Its Hong Kong-traded shares are suspended. The bond in question was three-year note issued in February 2014.


5. China City Construction Holding Group Co.


This builder is based in the national capital, but Beijing’s ongoing property boom wasn’t enough to prevent it from missing interest payments. A change in the contractor’s ownership last April triggered early redemption of a Dim Sum bond, and then China City faced difficulties transferring funds offshore to repay the debt. The shifting shareholder structure has had a “serious” negative impact on the company’s ongoing ability to secure funding, according to China Lianhe Credit Rating Co. The company defaulted again early last month. The security was a bond due in March 2021.


6. Huasheng Jiangquan Group Co.


Another Shandong-based company, this steelmaker suffered “huge losses” after its subsidiary cut manufacturing of the alloy, according to Dongxing Securities Co., the lead underwriter on the defaulted bond. Premier Li Keqiang said in his address to the National People’s Congress last month that China wants to reduce steel capacity by about 50 million tons. Huasheng Jiangquan repaid the overdue amount on the debt March 22. The 800 million-yuan bond that was defaulted on was due in March 2019.


7. Zhuhai Zhongfu Enterprise Co.


A bottle maker for Coca-Cola Co., this company sticks out because it hails from Guangdong, China’s powerhouse exporter province. Zhuhai Zhongfu said in a statement last week that it’s running at a loss amid competition in the industry and weak demand. The company’s controlling shareholder says Zhuhai Zhongfu is planning to make an overdue payment by April 26 on the bond that it defaulted on March 28. The firm defaulted on a separate bond in 2015 and repaid the debt five months later.

Tuesday, March 28, 2017

Iron Ore Tumbles As China Steel-Producing Hub Found Lying About Production Cuts

Very much like the self-imposed output cut by OPEC and non-OPEC members which successfully boosted the price of crude over $50 even if global crude inventories "inexplicably" continue to hit new all time highs, one of the main reasons why commodity metal prices have seen a dramatic increase in prices over the past year has been China"s solemn vow to cut back on overcapacity and excess production. In 2016, China’s state council set out plans to eliminate 100 -150 million tonnes of steel capacity in a bid to restructure the economy from one driven by government-led infrastructure investment and exports to a more consumption and services-oriented model. Last January, the hub of China"s steel production -  the northern province of Hebei - announced it would cut output to ease pollution and help curb oversupply. Hebei said it planned to reduce steel output by 8 million metric tons in 2016, its Governor Zhang told local lawmakers, while Iron ore production would be cut by 10 million tons.


More than one year later, it appears that Governor Zhang lied about Hebei"s intentions, and according to a provincial notice by the Chinese province, it has emerged that China"s compliance with its own mandatory production cuts has been "problematic."



A steel factory in Wu"an, Hebei province


According to Reuters, the same Hebei province, China"s biggest steel-producing area, launched a probe into steel overproduction in the city of Tangshan "amid concerns that firms have continued to raise output despite mandatory capacity cuts."


Tangshan is the heartland of Chinese steel production. The city is home to the headquarters of the state-owned Tangsteel Group, which in 2006 merged with other companies to form Hebei Steel Group, the second-largest steel producer in the world. Located around 100 miles east of the capital Beijing, Tangshan is on the frontline of the country"s "war on pollution", and was seventh on the list of China"s ten smoggiest cities in the first two months of this year.


Hebei was ordered by China"s central government to investigate firms in Tangshan that have "restricted but not cut production, restricted production but not actually cut emissions, and cut capacity but actually increased output," the provincial dated March 25 said, and circulated by traders on Monday.


Cited by Reuters, an industry source based in Tangshan confirmed the veracity of the document, but said it was unclear whether the new round of inspections would have any immediate impact on production or prices. The document was issued by a special provincial policy team responsible for restructuring the steel industry. It said Hebei has already established an inspection team and Tangshan must begin its own investigations immediately.


The FT adds, that the notice, sent on Saturday, cites orders from President Xi Jinping and Zhang Gaoli, the vice-premier, for Tangshan to investigate the problem of falsely reported plant closures and rising steel output.


Tangshan produces around 90 million tonnes of steel a year, more than the whole of the United States. While China has pledged to slash steel capacity by between 100 million and 150 million tonnes over the 2016-2020 period to shore up prices and ease sector debts, there have been lingering suspicions that this may have been a ruse to push commodity prices higher, boosting cash flows of overindebted domestic producers, who employs millions of low-skilled workers and whose mass defaults could result in widespread social unrest.


The FT confirms as much:





local authorities have dragged their feet on implementing orders to shut down steel mills because doing so would potentially eliminate hundreds of thousands of jobs.



“The local government will always want to protect its own industries because company officials get promotions based on growth,” says Scott Laprise, the founder of steel research firm LTH Consulting. “No one gets a promotion because they lost jobs and their local economy did poorly.”



In addition to the cuts noted above, at the start of the year, Tangshan promised to shut a further 8.6 million tonnes of annual crude steel capacity in 2017. It pledged to make cuts of 40 million tonnes over the 2013-2017 period and had already shut 31.9 million tonnes by the end of last year. Hebei promised to cut crude steel capacity to less than 200 million tonnes a year in the province by the end of 2020, down from 286 million tonnes in 2013. It aims to shut 15.6 million tonnes in 2017.


However, in light of the recent revelation, it appears that local producers did not take the directives too seriously, and may have simply been stockpiling the excess production.


As Reuters adds, the Ministry of Environmental Protection has routinely named and shamed municipal governments in Hebei for failing to implement pollution rules; so far it has failed to achieve the desired result.


Of course, if one province is reneging on its production cut agreement, why not more?


That may indeed be the case: one month ago, Greenpeace said that China"s active steel capacity actually rose by 35 million tonnes in 2016 after the high-profile closure program focused mainly on shutting plants that had already been idled. Additionally, production of crude steel in 2016 actually rose about 1% from the year before, to 808m tonnes, according to preliminary data from the National Bureau of Statistics.


"The steel industry"s capacity reduction targets need to be upgraded to reductions in actual production - only then will we see real improvements in air quality," said Lauri Myllyvirta, senior global campaigner at Greenpeace East Asia.


The problem is that just like with OPEC, there is no credible way of enforcing capacity cuts.


"Local governments will report back and simply say certain companies eliminated capacity or were closed or went bankrupt,” said LTH Consulting"s Laprise. “No one is checking what is supposedly already closed and what is actually closed.”


Excess production notwithstanding, China"s jawboning alone, and stated commitment to removing overcapacity, has managed to send prices of core commodities such as iron ore soaring as shown in the chart below.



Should it be confirmed that China was merely jawboning about removing excess supply then the appreciating commodity complex, a core driver of the global reflation trade which in recent months appears to have plateaued may soon see prices tumbling, in the process launching the latest deflationary wave to emerge out of China, and putting an end to the "global coordinated recovery" as so many analysts have called it in recent months.


It may already be happening: prices of iron ore, the key material used in steel production, tumbled fell 6.7% on Monday as inventories of the commodity at China’s ports rose. The fall brings the price to its lowest since January 10, down nearly 18% from its peak in March.

Monday, January 30, 2017

Futures Tumble On Heavy Volume As China Golden Week Begins

As China celebrates the new year and begins Golden Week vacation, it appears US equity futures are off to a rough start on heavy volume as perhaps this weekend"s Trump dysphoria finally took the shine off the rally...







With China, Hong Kong, Taiwan, Singapore and South Korea are all shut for holidays, there is no desperate capital outflow bid of last resirt to save stocks (for now).

Thursday, January 5, 2017

Chinese Cruise Ship With 2,000 Passengers Stuck At Sea For Two Days Due To Smog

Beijing"s pollution problem is getting worse by the day.


On Wednesday, the Chinese capital issued its highest "red fog alert" for only the second day in history, keeping highways closed in and around the city which is already under a smog alert after weeks of choking winter pollution. China"s weather bureau warned of visibility of less than 50 meters in some areas, leading many airports to cancel flights.



The heavily polluted Hebei province, which surrounds most of Beijing, said on Tuesday it had ordered all polluting firms in Tangshan, China"s biggest steel-producing city to the east of Beijing, to shut down which likely means that China is in for a substantial "manufacturing" shock in the coming months. 


Hebei, which was home to seven of China"s 10 smoggiest cities in 2015, will build the world"s biggest dust prevention barrier, stretching nearly two miles, at the major coal port of Qinhuangdao in a bid to cut pollution, state media said on Wednesday.


For now, however, China is very much defenseless against the toxic byproduct of its rapid industrialization, which also happens to be a major factor permitting the Chinese economy to grow at the goalseeked 6-7% level or somewhere thereabouts. Unfortunately for Beijing, it"s a choice of either stable manufacturing growth or clean air: the two are mutually exclusive.


And nowhere was that more visible today, so to speak, than near the port of Tianjin, where according to the Beijing Evening News, a large cruise ship with more than 2,000 people on board was stuck at sea for two days because it was unable to dock in the heavy smog that has enveloped much of northern China. The vessel finally returned to the Port of Tianjin on Monday afternoon after drifting for two days at sea. The thick air pollution had earlier made it impossible to safely berth the vessel, according to the article


A passenger was quoted as saying that the ship was scheduled to return on New Year’s Eve after traveling to South Korea and Japan. But she was told by the crew that the ship could not dock as visibility was severely compromised by the smog. She said the passengers had been unsure how long they would be stuck at sea but were grateful there was plenty of entertainment on board to kill time.


“Unlike passengers who are stuck at some public facilities like an airport, we got to use the pool and the gym to keep ourselves busy,” she said.


As Reuters adds, poor visibility prompted three major northern ports to suspend the loading of ships on Tuesday, maritime safety agencies said.


Unless Beijing"s leadership is willing to take draconian measures to curb smog production, which inevitably means an economic slowdown, expect scenes such as the ones shown below to continue.