Steel Firms Set to Hit Production Cut Targets

Many SOEs are expected to hit their targets by the end of October, with several provinces ahead of annual targets as higher prices blunt the cost.

In addition to the central level, a number of provinces and cities are iron and steel production capacity to start end road sprint. Jiangsu provincial government said recently, before the end of October will be completed ahead of the year to 3.9 million tons of steel production capacity. It is reported that, "Thirteen Five" period, Jiangsu Province will Yajian crude steel production capacity of 17.5 million tons before the end of 2018 70% of the total schedule. Click to view the progress, however, the next two years, Jiangsu Province, the pressure can be enormous pressure to cut.

Sichuan Province this year will be fully Yajian steel production capacity of 4.2 million tons at the end of October. According to the "Sichuan Daily" 18, 2007, six main steel-making equipment, Sichuan Province signed target responsibility of three companies (production capacity of 4.2 million tons) have been removed.

Some relatively minor tasks to the capacity of the provinces has been completed ahead of the annual target in the third quarter. Hunan Provincial Development and Reform Commission published in August, CERI (Xiangtan) Heavy Equipment Co., Ltd. 50-ton electric furnace was sealed shut, marking the province's 2016 steel production capacity to the task has been completed. In early September, the Commission by letter of Shandong Province issued a document that, in 2016, Shandong Province, the steel industry has been completed Yajian 2.7 million tons of pig iron, crude steel production capacity to 2.7 million tons of tasks related to business equipment has been shut down to exit and begin deployment in 2017 capacity to work plan.

The most difficult task of the steel city of Hebei Province also plans before the end of November this year exceeded plan. "Hebei Province in 2016 to resolve the overcapacity of steel monthly schedule" shows, is expected to the end of November, Hebei Province, the cumulative phase-out 18.4 million tons of iron production capacity, 16 million tons of steel production capacity, 17.26 million tons more than the original iron Yajian , 14.22 million tons of steel production capacity target.

Official statistics show that as of the end of August, 28 steel-producing regions and the central enterprises total exit capacity of 34.68 million tons of crude steel, accounting for about 77% of the amount of the annual task

iFeng: 钢铁去产能年终冲刺:央企预计10月底完成任务

Mainland Buying Restrictions Sends Giant Ball of Liquidity Into Hong Kong

港媒:内地资金涌入香港买楼避险 或推高香港房价
Hong Kong media said that since the yuan since joining IMF Special Drawing Rights (SDR) basket of currencies, the RMB has continued the trend of depreciation; plus more than 20 cities in the Mainland, have introduced market regulation policy, more and more mainlanders Hong Kong to buy property hedge against inflation, is expected to push up the Hong Kong property market.

According to Hong Kong "Economic Daily" reported on October 20, according to Bloomberg quoted the Hong Kong Inland Revenue Department data show that last month, the non-permanent Hong Kong resident buyers total 250 transactions, rose to a new high since 14 months, compared with June to September higher than the average of 36%; Stamp Duty September non-Hong Kong permanent resident buyers paid up to HK $ 506 million, 26% higher than the average of the past four months.

Hong Kong Inland Revenue Department did not provide the nationality of these buy property in Hong Kong non-residents, but the industry believes that, from the mainland.

Ryan Lam Research Shanghai Commercial Bank in Hong Kong director, said, "Investment in non-resident investors in the property market in Hong Kong, mainland buyers is definitely the protagonist, they recently purchased property in Hong Kong is accelerating pace. Under the expected devaluation of the renminbi, the mainland buyers are decreased by RMB exposure to dollar assets is a good choice hedge. "

Home Sales Plummet Across China

Buying restrictions are working for now in the hot second-tier cities:
From a national perspective, sales fell last week versus the three-month average sales rate, in which Suzhou, Jinan, Xiamen, fell over 70%, while Foshan, Nanjing, Nanchang, fell more than 40%.

iFeng: 10月全国楼市或迎拐点 部分城市成交量速冻

This Chart Looks Familiar

From a good article on China's overseas buying spree.

Bloomberg: How China's Dealmakers Pulled Off a $207 Billion Global Spree

What happened in 2014?

Not Yuan Weakness, Dollar Strength

I expected a breakdown in the yuan not only because of inherent imbalances between credit inflation and accumulated reserves, but also due to U.S. dollar strength. Weakness in the yuan is due to the latter at the moment.

First on the imbalances. There was enough inflation baked into the Chinese monetary system for a double-digit depreciation several years ago. The situation only grows worse with the Chinese economy growing at 6 percent and credit growth at double-digits. The theoretical target price (as opposed to market price) for USDCNY is ever rising until these trends change.

China is pouring credit into a saturated market,. Like pouring water into an already filled bowl, the overflow goes somewhere, in this case into housing and outflows. As the U.S. dollar rises in relative value against other fiat currencies, the yuan rises with it. The valuation gap between Chinese assets and foreign assets widens as the currency appreciates versus much of the world, and this is on top of the high domestic inflation of prior years which has yet to be accounted for in the currency market.

The outflows to date are still mostly the result of fundamentals. Chinese investors are buying overseas assets because they're cheap and they will keep buying as long as they remain cheap. Depreciation expectations have yet to play a major role in outflows. The PBoC would like to keep it that way, but the wildcard is the U.S. dollar.

China has effectively said currency appreciation is over. The yuan flatlined versus the euro following the adoption of the currency basket at the end of 2015, and the two move in near lock-step since, albeit with less volatility for the yuan.

The U.S. dollar is fully in control here. An appreciation of less than 1 percent will push USDCNY past 6.83, erasing all yuan appreciation since the re-peg ended in 2010. Depreciation expectations have not played a large role in the market to date, but once 6.83 is taken out, technical traders will look for a breakdown. Even without any shift in expectations, if the U.S. Dollar Index moves past 100 and on to new highs, USDCNY will climb past 7. A move towards 105, 110 or even 120, and the yuan could be down 5, 10 or 20 percent without any need for depreciation expectations.

Note that if Trump wins the presidency, China will not be able to count on the U.S. export market and will have little incentive to hold down USDCNY appreciation.

Related: ‘Something’ In ‘Dollars’; August


Trouble Brewing For Land Kings

The headline in Caijing reads in part: dark horse weapon turns into hot potato.

Centaline's Zhang Dawei summarizes land king risk into one sentence: if prices don't rise 50 percent in the next year, many land kings will lose money on their land purchases.

Buying restrictions have seemingly ended rising prices, but we won't know for sure until credit growth adjusts. Presumably it will slow because most of the credit growth was demand side driven by homebuyers.

Caijing: 调控进行时 地王或从黑马利器沦为烫手山芋
In the history of Chinese real estate development, some radical developers played a "dark horse" role. With their high leverage, high debt ratio and bold action get high success, going from regional enterprises to become the country's leading enterprises. In the current round of real estate regulation, the "king" would from the "dark horse weapon" become a "hot potato"?

China Slams U.S. Activities in the South China Sea

China will never allow US to run amok in South China Sea: People’s Daily
A US Navy guided-missile destroyer, the USS Decatur, sailed through Xisha Island waters, part of the South China Sea as Chinese territorial waters, on Friday without the approval of Chinese authorities. The Chinese government resolutely opposes such provocative behavior and will take a series of effective counter-measures.

In the statement of the Chinese government on the territorial sea baseline issued in May 1996, China clarified the baseline of the Xisha Islands. The Law of the People's Republic of China on the Territorial Sea and the Contiguous Zone and other international laws also stipulates that all foreign warships need to gain approval from the Chinese government before entering Chinese waters.

The illegal entry of US warships into Chinese waters without permission seriously violates China's sovereignty and security interests, breaches both Chinese and international laws as well, and poses threats to peace, security as well as order in the relevant waters.

What the US did aims to encroach upon the sovereignty, security and maritime interests of regional countries in the so-called name of a "freedom-of-navigation operation." But such provocative acts once again expose the negative energy of its "Rebalance to Asia" strategy, and at the same time verify the US' role as a real trouble-maker in the South China Sea.


Coup Threat Pushes Philippines into Russia-China Camp

Less than a month ago: US mood hardens as leader of ally Philippines stokes outrage
"I think it would be a serious mistake in a democratic country like the Philippines to underestimate the power of the public's affinity for the U.S. That's people power," Assistant Secretary of State Daniel Russel told The Associated Press.

Russel did not draw a direct comparison, but past Philippine presidents have been toppled by popular protests dubbed "people power," including former dictator Ferdinand Marcos, who was ousted in 1986.
Now: In China, Duterte announces split with US: 'America has lost'
In a state visit aimed at cozying up to Beijing as he pushes away from Washington, the Philippine President announced his military and economic "separation" from the United States.

"America has lost now. I've realigned myself in your ideological flow," he told business leaders in Beijing on Thursday. "And maybe I will also go to Russia to talk to Putin and tell him that there are three of us against the world: China, Philippines and Russia. It's the only way."
A de-Americanized world is coming. America doesn't know how to deal with it yet. At the moment it faces a choice between an anti-globalist who will shore up American power through strategic retreat, or a globalist who will accelerate American military, political and economic decline.