Political talk from outside of the UK
By new puritan
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China prepares to liberalise finance as hedge funds and estate agents salivate

It's a long way from Beijing to Belgravia but London's upmarket estate agents would be well advised to keep a close eye on developments in China over the next 10 days. The price of a mansion in London's more fashionable districts is rising fast. Cash buyers from overseas have snapped up houses with little or no regard of the cost, creating a property microclimate divorced from the rest of the market.

The Bank of England is keeping tabs on the boom, concerned that the flood of foreign cash pushing up the price of mansions could – if left unchecked – herald the start of the next bubble.

Well, you ain't seen nothing yet. The freeing up of China's economy over the past 35 years has been methodical. First it was agriculture. Then it was industry. Now, the next phase of liberalisation planned by the ruling cadre of the Communist party includes finance.

A host of possible reforms are being considered. These include offering higher interest rates for domestic savers backed up by deposit insurance for savings accounts and making China's currency, the renminbi, convertible.

Unfettered movement of capital out of China is not going to happen overnight, but it could happen within five to 10 years. That's why George Osborne was in China last month seeking to make London the global hub for dealings in the renminbi. That is why fund managers, hedge funds, private equity firms and property specialists in Britain are licking their lips.

I for one don't see how this could possibly end badly.
By Bones McCoy
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Some would say it's time that the Chinese economy bears the same Handicaps as ours.
By new puritan
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Interesting article from Peston here on China's banking sector and concomitant property bubble.

But what makes much of the spending and investment toxic is the way it was financed: there has been an explosion of lending. China's debts as a share of GDP have been rising at a very rapid rate of around 15% of GDP, or national output, annually and have increased since 2008 from around 125% of GDP to 200%.

The analyst Charlene Chu, late of Fitch, gave a resonant synoptic description of this credit binge:

"Most people are aware we've had a credit boom in China but they don't know the scale. At the beginning of all of this in 2008, the Chinese banking sector was roughly $10 trillion in size. Right now it's in the order of $24 to $25 trillion.

"That incremental increase of $14 to $15 trillion is the equivalent of the entire size of the US commercial banking sector, which took more than a century to build. So that means China will have replicated the entire US system in the span of half a decade."

Anyone living in the rich West does not need a lecture on the perils of a financial system that creates too much credit too quickly. And in China's case, as was dangerously true in ours, a good deal of the debt is hidden, in specially created, opaque and largely financial institutions which we've come to call "shadow" banks.

There are no exceptions to the lessons of financial history: lending at that rate leads to debtors unable to meet their obligations, and to large losses for creditors; the question is not whether this will happen but when, and on what scale.

By new puritan
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Could be big problems ahead for China. The CCP has to strike the right balance between reining in credit expansion and maintaining GDP growth - not easy by any stretch of the imagination. Up to now, whenever there have been signs of a slowdown Beijing has panicked and unleashed major investment on infrastructure. It might not do so in future.

China's economy lost momentum in the first quarter and growth in 2014 could fall short of the government's official target, according to a CNNMoney survey of economists.

Gross domestic product is forecast to have grown by 7.3% in the first quarter, compared with the same period a year ago, according to the median of 12 estimates. Looking ahead, the economists surveyed also expect full-year growth to slow to 7.3%, below the official target of 7.5%.

http://money.cnn.com/2014/04/08/news/ec ... index.html
By new puritan
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Interesting FT article on the Chinese property bubble.

Chinese property is the most important sector in the global economy. It has been pivotal in the country’s economic development, provided lucrative business for industrial commodity producers from Perth to Peru, and been the backbone of the surge in world exports to China. In the past few years, predictions that the sector was about to implode at any moment have not been borne out – but now is the time for the world to pay attention. Property activity indicators have been trending lower since mid-2013, and the downturn in the sector now threatens to turn into a bust. At best, China is entering a deflationary phase at a time of global fragility.

http://www.ft.com/cms/s/0/6cd98926-d9e1 ... z31aPBuFQY
By new puritan
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Would generally advise taking Ambrose Evans-Pritchard with a pinch of salt, but this is worth reading.

China's authorities are becoming increasingly nervous as the country’s property market flirts with full-blown bust, threatening to set off a sharp economic slowdown and a worrying erosion of tax revenues.

New housing starts fell by 15pc in April from a year earlier, with effects rippling through the steel and cement industries. The growth of industrial production slipped yet again to 8.7pc and has been almost flat in recent months. Land sales fell by 20pc, eating into government income. The Chinese state depends on land sales and property taxes to fund 39pc of total revenues.

“We really think this year is a tipping point for the industry,” Wang Yan, from Hong Kong brokers CLSA, told Caixin magazine. “From 2013 to 2020, we expect the sales volume of the country’s property market to shrink by 36pc. They can keep on building but no one will buy.”

The Chinese central bank has ordered 15 commercial banks to boost loans to first-time buyers and “expedite the approval and disbursement of mortgage loans”, the latest sign that it is backing away from monetary tightening.

The authorities are now in an analogous position to Western central banks following years of stimulus: reliant on an asset boom to keep growth going. Each attempt to rein in China’s $25 trillion credit bubble seems to trigger wider tremors, and soon has to be reversed.

http://www.telegraph.co.uk/finance/chin ... onomy.html
By Silkyman
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This explosion looks absolutely horrendous. If there really is only double figure fatalities it will be a miracle. But it looks like it has damaged/destroyed a large swathe of the city.
By The Red Arrow
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Huge explosions in container port south of Bejing. Appears to be an accident in an explosives storage facility. Death toll at thirteen and likely to rise.
By Malcolm Armsteen
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That's bad. I haven't seen the news tonight.

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