Category Archives: China P.O.

P.O. (BBG) Unprecedented Hong Kong Chaos Raises Fears About What’s Next


People around the World have finally came to the conclusion that HK’s hand over to mainland China was flawed one and a terrible mistake made by all parties involved.

Hong Kong, as we knew it,is no more.

It’s gone forever.

Whether we like it, or not.

And regardless if Beijing likes it, or not.

Any possible solution would be a face loosing one for Beijing, which is not acceptable at all in the Far East.

I don’t know what the eventual outcome might be.

But one thing i think i know, is that the situation in HK will became much much worse before it quiets down.

And i am afraid that a terrible tragedy might occur.

I am sorry not to have better news.

Francisco (Abouaf) de Curiel Marques Pereira


  • Public schools suspended, events canceled as violence worsens
  •  Chinese state media steps up rhetoric, warns of intervention

Hong Kong has seen many violent days since the unrest began in June, but the disruption this week has taken things to a new level — and fears are growing as to what may come next.

Protesters paralyzed the city on Wednesday for a third straight day, disrupting subway lines and blocking roads. Tear gas emanated through the Central financial district, while police also battled university students far from the city center. The government ordered schools from kindergarten to college to shut on Thursday, the first time it’s done so during the unrest.You’re browsing incognito.Subscribe to c

P.O. Hong Kong as we knew it is no more

Hong Kong as we knew it is no more.
Whether Beijing likes it or not.
A gigantic capital flght has been going on and the creativity and free spirit is no longer there.
The PRC will own the land, but not much else.
As a major international hub HK is finished.
The atrocities of the last two days only confirm my view.
What a disgusting sight and what a tragedy.
I call your attention to these two videos, which are not suited for minors.


M.P.O. Japan sounds warning on China military might


Unfortunately this has been in the cards forever.

The Third and probably last Wordl War is going to happen  with the West’s confrontation with China.

China is a dominant culture, run as an imperialjstic dictatorship of Mandarin families
Already in the 70’s Alain Peyrefitte a french scholar and politician, member of the Academie Française, and a confident of General Charles de Gaulle wrote:
“Quand la Chine s’eveillera le Monde tremblera”
Among many books he wrote The immobile Empire” and “The Trouble with France” are the best  known.
He survived an asassination attempt in which his driver was killed and was buried with the highest State Honors at Les Invalides.
He was a visionary much ahead of his time.
I read most of his books when they were published, so this situation with China does not came as a surprise.
What came as a surprise was the time it took Western learders to figure the obvious.
That a confrontation with China will happen. I have no doubt.
Also because, as I wrote years ago, of the exhaustion of the chinese model.
It seems now it is going to be rather sooner than later.

Francisco (Abouaf) de Curiel Marques Pereira.

P.O. (FT) Why China is preparing to ditch Hong Kong’s chief executive Carrie Lam

In the Far East, a face loosing situation, is as bad as it gets abd should always be avoided.
But  this idea being floated around on Mrs Carrie Lam being eventually replaced, is in my opinion a serious face loosing situation for Beijing, who appointed to start with, and a tremendous victory for the demonstrators.
But the reality is that the Hong Kong we knew is no more.
Mainland China has lost it forever.
A substancial part of the big money has already left,and so as the young enterpreneurship.
Mainland China will always have the land.
But it will never have Hong Kong back.

Francisco (Abouaf) de Curiel Marques Pereira

The FT’s global China editor James Kynge says that while Beijing doesn’t want the departure of Carrie Lam to be seen as a concession to the sometimes violent protests in Hong Kong, it will probably be greeted as a small victory by demonstrators.

O.P. Os dois grandes problemas do Mundo


São, na minha opinião as duas questões mais importantes do Mundo:
A deflação e o fim do milagre económico chinês.

Tudo o resto gravita à volta destes problemas.

Quanto à deflação, o aumento da eficiência económica torna os produtos mais abundantes e mais baratos, e causa desemprego.

Que é , aliás, muito mais elevado que as estatísticas dizem, porque não contabilizam as pessoas que deixaram de procurar emprego.

Há excesso de produção de quase tudo no Mundo.

E não há volta a dar lhe com o actual status quo.

Nunca fui de esquerda na minha vida e acho que na sua grande maioria , as ideias que as esquerdas defendem são erradas, e comprovadamente falhadas.

Agora que não é possível aumentar a procura no Mundo, com o actual sistema, não é.

As estatísticas oficiais dizem que 1% da população mundial detém 99% da riqueza mundial.

Como é evidente as pessoas desse um por cento não vão consumir mais, haja o que houver, e dê por onde der.

E como é óbvio os outros 99%, em que nós nos incluímos, não têm condições financeiras para o fazer.

Consequência provável:
Uma crise como nunca se viu.

Reparem que eu chamo a atenção para a deflação há muitos anos.

Desde que escrevi as 28 ou 29 Opiniões Pessoais a atacar aquele inteligente Chiel Economist do BCE que dizia que havia perigo de inflação.

Com inteligentes destes só pode vir por aí uma grande crise. Eu não sei qual é a solução. Mas julgo saber que assim só pode vir uma grande crise no Mundo.

Como nunca se viu.

E historicamente, as grandes mudanças no Mundo só ocorreram na sequência de guerras.

O confronto entre civilizações anuncia precisamente este facto.

Vem por aí um confronto mundial como nunca se viu.


Francisco (Abouaf) de Curiel Marques Pereira

M.P.O. (BBC) Hong Kong activists arrested: Joshua Wong and others charged

China has lost forever Hong Kong as we know it.
It will have the land, but not it’s skills or money.
The capital flght from HK is already huge.
It will become out of control any time.
China’s reputation will be harmed for a long time for not respecting the 50 years agreed of maintaining the HK rights and style of living.
Efectively the US has won the first match against China.
Hong Kong as we know it will be no more.
Only a foul would stay after this.

Francisco (Abouaf) de Curiel Marques Pereira


Media captionHong Kong activists Joshua Wong and Agnes Chow vow to continue protests after their release on bail

A number of prominent pro-democracy activists and lawmakers have been arrested by police in Hong Kong.

Joshua Wong and Agnes Chow, from the Demosisto party, were arrested and charged on Friday, while party chairman Ivan Lam, who is not currently in Hong Kong, was charged in his absence.

Three pro-democracy lawmakers have also been arrested.

It comes after a mass march, scheduled for Saturday, was banned by officials and called off by organisers.

If demonstrations went ahead, it would mark the 13th consecutive weekend of protests in Hong Kong.

The movement started as rallies against a controversial extradition bill – now suspended – which would have allowed criminal suspects to be sent to mainland China for trial.

They have since expanded in scope, becoming a broader pro-democracy movement in which clashes have grown more violent.

Who has been arrested?

At least three activists and three lawmakers were detained during the 24-hour police crackdown.

The Demosisto party said Mr Wong, 23, was “suddenly pushed into a private car on the street” while walking to a train station at around 07:30 (23:30 GMT Thursday).

Both he and Ms Chow were taken to police headquarters in Wan Chai and were charged with unlawfully organising a rally on 21 June, at which protesters blockaded police headquarters for 15 hours.

Media captionJoshua Wong: Why activists broke into parliament

The case was adjourned until November and the activists were released on HK$10,000 (£1,045) bail.

Mr Wong tweeted on Friday to say their “fundamental rights” were being “eroded”.Skip Twitter post by @joshuawongcf

Joshua Wong 黃之鋒@joshuawongcf

My arrest shows the government answers our request for a dialogue with batons, tear gas, rubber bullets and mass arrest. Our freedom of assembly and other fundamental rights are eroded.13.9K12:19 PM – Aug 30, 2019Twitter Ads info and privacy6,892 people are talking about thisReport

End of Twitter post by @joshuawongcf

The 23-year-old first rose to prominence as the poster boy of a protest movement that swept Hong Kong in 2014.

Andy Chan, founder of the Hong Kong National Party which campaigns for the territory’s independence, also said he was detained on Thursday night while trying to board a flight from Hong Kong airport.

Amnesty International called the arrests “an outrageous assault” on free expression and EU foreign policy chief Federica Mogherini labelled the latest developments “extremely worrying”.

“We expect the authorities in Hong Kong to respect the freedom of assembly, expression and association as well as the right of people to demonstrate peacefully,” she said.

Three pro-democracy lawmakers, Cheng Chung-tai, Au Nok-hin and Jeremy Tam Man-ho, were also arrested for offences relating to past protests.

About 900 people have been arrested since the demonstrations began in June.

Analysis box by John Sudworth, China correspondent

In almost three months of increasingly violent clashes, hundreds have already been detained, but the latest, high-profile arrests are being seen as much more political in nature.

At a press conference, the police insisted they were following the law, with commander Kwok Pak Chung making it clear there might be further arrests.

With unconfirmed reports that Beijing has turned down a request by Hong Kong’s chief executive to formally scrap the controversial extradition bill that first sparked the protests, the authorities are toughening their message.

That may dissuade some protesters, but past experience suggests others are likely to be enraged even further.

Presentational grey line

What about Saturday’s march?

The Civil Human Rights Front, a group behind other record-breaking gatherings, cancelled an anti-extradition law march scheduled for Saturday after failing to overturn a police ban against it.

Organiser Jimmy Sham apologised to the public, but said their priority was to hold protests that were both legally and physically safe.

Another organiser, Bonnie Leung, told the BBC she believed that people would “be clever” and find “legal and safe ways” to protest in spite of the cancellation.

Media captionHow Hong Kong got trapped in a cycle of violence

“I don’t think the movement will end at all,” she said. “If the government is trying everything to threaten people away, or it’s trying to wait for the movement to die down, it’s not going to achieve that.”

Hong Kong police on Friday appealed to members of the public to cut ties with “violent protesters” and warned people not to take part in the now-cancelled march.

The recent protests have been characterised as leaderless and activist Nathan Law, who co-founded Demosisto, said nobody was inciting protesters.

“There is no leader or platform in this movement,” he said. “If someone is inciting citizens to go to the streets, it must be the harsh political violence of [Hong Kong’s leader] Carrie Lam.

Media captionHong Kong police fired a gunshot and used water cannon during Sunday’s protests

“Demosisto has never been ‘leaders’ of the movement. Every Hong Kong citizen who has come out has done so according to his own conscience. No matter how the Chinese Communist Party attempts to smear this, nothing can change that fact.

“We appeal to the public not to be afraid of political violence… and continue to fight for their rights. Hong Kong people, go!”

How is China responding?

Beijing has repeatedly condemned the protesters and described their actions as “close to terrorism”. Reuters news agency reports that earlier in the summer China denied a request by Carrie Lam to fully withdraw the extradition bill to help ease tensions and end the unrest.

The protests have frequently escalated into violence between police and activists, with injuries on both sides, and activists are increasingly concerned that China might use military force to intervene.

On Thursday, Beijing moved a new batch of troops into Hong Kong. Chinese state media described it as a routine annual rotation.

But an editorial in the China Daily newspaper emphasised the presence of Chinese troops was not symbolic, and they would have “no reason to sit on their hands” if the situation deteriorated.

P.O. (SCMP) China’s yuan currency slides to fresh 11-year low, sparking fears of capital flight from Asia

We don’t know if this is an intentional devaluation or if it is the result of market forces.
China has currently huge problems.
Please make some time and revisit my Personal Opinions on China.
One thing i know, which President Xi seems to have forgoten.
And that every Western politician knows…
It is never a good idea to mess up with the United States of America.
And China, under President Xi, has challenged the US in just about everything there was to challenge.
If one messes up with the US the consequences will always arrive, sooner or later.
And they will be always huge , vide gigantic.
The US has such an influence in just about every international organization, that the defiant country will be hit from everywhere at the same time
Not a good idea…
Obvious my dear Watson, quoting Sherlock Holmes.

Francisco (Abouaf) de Curiel Marques Pereira

(SCMP) China appears to be preparing to offset the impact of Donald Trump’s new US trade war tariffs, increasing fears of regional currency declines and further equity exodus

On September 1, the US is set to implement the first phase of a 10 per cent tariff on a wide range of Chinese manufactured consumer goods worth around US$130 billion

Chinese authorities let the yuan drop to its weakest level since March 2018, the seventh straight daily decline, on Friday. Photo: AFP

Chinese authorities let the yuan drop to its weakest level since March 2018, the seventh straight daily decline, on Friday. Photo: AFP

The value of the Chinese yuan fell to a fresh 11-year low against the US dollar on Friday, fuelling worries that China has given up on achieving any progress to end the trade war with the United States in the near term and so is moving to offset the effect of new tariffs with a weaker exchange rate.

The weaker yuan, in turn, dragged down regional currencies, aided by central bank interest rate cuts, that would lead to an acceleration of capital outflows from Asia this year.

Recent signs appear to indicate that China was preparing its economy for a scenario in which no progress is made at the face-to-face trade negotiations between US and Chinese officials expected to take place in Washington next month, analysts said.And despite the US labelling China a currency manipulatorearly this month to address what it sees as the unfair trade advantage resulting from a cheaper yuan, Chinese authorities let the yuan drop to its weakest level since March 2018, the seventh straight daily decline.

The drop in the yuan followed a reduction in interest rates by the People’s Bank of China (PBOC) this week. The central bank set its new one-year lending prime rate at 4.25 per cent, down from the old lending benchmark rate of 4.35 per cent, which analysts believe is the start of an easing cycle to prop up economic growth.

“Perhaps the PBOC is sending a message to the US trade hawks that it will let the yuan gradually weaken as a policy weapon to neutralise the effect of increased tariffs,” said Stephen Innes, co-founder of Valour Markets.On September 1, the US is poised to implement the first phase of a new 10 per cent tariff on a wide range of Chinese manufactured consumer goods worth around US$130 billion, bringing US-China bilateral relations to a new low, the Economist Intelligence Unit warned, so businesses should prepare for a prolonged conflict and be aware that the trade war could escalate in other ways.

The weaker yuan and prospects that other Asian currencies would follow, could exacerbate the sharp increase in capital outflows from Asia already underway, analysts warned.

Perhaps the PBOC is sending a message to the US trade hawks that it will let the yuan gradually weaken as a policy weapon to neutralise the effect of increased tariffsStephen Innes

Money has been fleeing stock markets almost across the entire Asian region this month, a trend that could worsen during the rest of the year, said Irene Cheung, ANZ Bank’s senior Asia strategist. Taiwan has seen equity outflows of US$2.4 billion so far this month, South Korea US$1.9 billion and Thailand US$1.6 billion, Cheung said.

While some Asian bond markets were attracting inflows because Asian issues still provide positive investment returns compared to the negative yields offered in Europe and Japan, the inflows were not big enough to completely outweigh equity outflows from the region, Cheung said,

“Investors are avoiding equities because of risk aversion. But we do see some bond inflows because the fixed income market is a place to go to when the economic outlook is negative,” Cheung said.

Given the worsening outlook for global growth and the escalating trade war between China and the US, a wave of rate cuts in a number of countries across the world have been exerting downward pressure on their currencies.

The US Federal Reserve, as well as the central banks from Australia, New Zealand, Thailand and the Philippines, have all cut rates in the last month. On Thursday, the central bank of Indonesia cut its benchmark interest rate for the second consecutive month despite the recent weakness of the rupiah exchange rate.

In Hong Kong, the foreign exchange market has been showing mounting fears of massive capital flight from the city in the future. Forward contracts, which bet on a currency’s value at particular point in the future, rose to their highest level since 2016, reflecting belief that the Hong Kong dollar would weaken below the key level of 7.85 per US dollar in a year’s time.The Hong Kong dollar was pegged at 7.80 to the US dollar in 1983, with a trading band of 7.75 and 7.85 introduced in 2005. On Friday, the Hong Kong Monetary Authority said that even though Hong Kong dollar forwards had fallen below the 7.85 level, that would not diminish the effectiveness of the city’s linked exchange rate regime.

“There seems to be a new wave of depreciation pressure in the region given that the leading currency [,the yuan,] is falling,” said Ken Cheung Kin-tai, chief Asian currency strategist. “Expectations that central banks would keep cutting rates are also keeping the currencies weak.”

Jason Lui, head of equity and derivative strategy at the Hong Kong branch of BNP Paribas, said southbound inflow had been picking up since March, with an apparent acceleration in August as mainland Chinese investors net purchased more than US$3 billion worth of HK-listed shares during the first two weeks of August, on track for the fifth highest monthly inflow since the Stock Connect scheme was introduced.

There seems to be a new wave of depreciation pressure in the region given that the leading currency [,the yuan,] is fallingKen Cheung Kin-tai

So far China’s investors have been piling into Hong Kong shares via the Stock Connect channel in the longest shopping spree in 18 months.

Funds from mainland China helped Hong Kong’s capital market weather the turmoil in the global financial markets during the yuan devaluation in 2015 and amid heavy international betting on yuan depreciation in 1998, when the city faced down hedge fund tycoon George Soros with an unprecedented HK$118 billion (US$15 billion) stock-buying spree to prop up equity prices and defend the currency peg.

Gene Ma, head of China Research at Institute of International Finance, forecast capital outflows of US$150 billion from China this year, up from US$30 billion in 2018, but much smaller than the US$647 billion in 2015.

Outflow pressure from Chinese residents has been persistent, as US tariffs have encouraged both Chinese and foreign manufacturers to relocate their factories outside of Chinese, damping foreign direct investment into the country, Ma said.

M.P.O. (ejinsight) Hong Kong’s contentious extradition bill spurs capital flight

…As per my written and published yesterday.

M.P.O. (GUA) Sound of Hong Kong’s defiance reverberates in Beijing


To mix water with olive oil is impossible.

Every Portuguese knows this.

The Special Status of Hong Kong is effectively incompatible with Mainland China’s current system.

Now and in the future.

I have no idea what the outcome will be.

But one thing i think i know.

These problems are going to became worst and worst with time.

If the credibility of Hong Kong is affected a massive capital flight will occur, in proportions never seen before anywhere around the World.

And Mainland China has already a severe capital flight problem.

In the case of this happening it will be a severe blow to several of Beijing’s aspirations.

Only then the future will be clear.

Thank you for your patience.

Francisco (Abouaf) de Curiel Marques Pereira

(EJinsight) The Hong Kong government has decided to suspend the controversial extradition bill following massive demonstrations and clashes between protesters and police. 

But the issue’s negative impact on the local economy will not simply go away. First of all, more mainland billionaires may decide to move their money out of the city.

To some extent, the former British colony has become a safe haven for fugitives, which is one of the main reasons why Chief Executive Carrie Lam Cheng Yuet-ngor had tried to push her legislative initiative. But that’s one of the main attractions of Hong Kong.

Mainland China’s legal system remains immature, while there are many gray areas in the economic sector. Businessmen may find themselves in trouble as a result.

That’s why not a few mainland billionaires have obtained citizenship in Hong Kong and moved part of their assets here to diversify the risk.

However, their assets in Hong Kong could be frozen or confiscated under the proposed Mutual Legal Assistance in Criminal Matters Ordinance that forms part of the extradition bill.

That means that upon the request of the central government, the Department of Justice could ask the court to grant an injunction to freeze or confiscate certain assets.

Local tycoons and those from other Asian countries who have assets here are also spooked.

Many billionaires have set up family offices in the city for worldwide allocation of their assets. But they might feel Hong Kong is no longer an ideal destination for such offices and consider moving elsewhere.

Singapore, which also boasts low tax rates, a common law system and a complete wealth management industry chain, is likely to be the biggest winner.

The Hong Kong SAR government pledges that there is no timetable to relaunch the suspended legislation, but Chief Executive Lam insists that she is doing “the right thing” and plans to relaunch the bill after proper consultation. 

That is hardly reassuring for anybody. 

P.O. (BBG) China Handed First Moody’s Downgrade Since 1989 on Debt Risk


On China

As per my numerous Personal Opinions watch China carefully.

The future of the World will be shaped according to what happens in China and nearby Countries.

And one should not only watch political developments but also the economic ones.


(BBG) Moody’s Investors Service cut its rating on China’s debt for the first time since 1989, challenging the view that the nation’s leadership will be able to rein in leverage while maintaining the pace of economic growth.

Stocks and the yuan slipped in early trading after Moody’s reduced the rating to A1 from Aa3 on Wednesday, with markets paring losses in the afternoon. Moody’s cited the likelihood of a “material rise” in economy-wide debt and the burden that will place on the state’s finances, while also changing the outlook to stable from negative.

It’s “absolutely groundless” for Moody’s to argue that local government financing vehicles and state-owned enterprise debt will swell the government’s contingent liabilities, according to a response released by the Ministry of Finance. The ratings company has underestimated the capability of the government to deepen reform and boost demand, the ministry said.

It wouldn’t be the first time a rating company was behind the curve, nor is such pushback unique — U.S. Treasury officials questioned the credibility of a 2011 downgrade from Standard & Poor’s. Still, the move underscores broader doubts over whether President Xi Jinping’s government can simultaneously cut excessive leverage and steady growth, all with a twice a decade reshuffle of top party posts looming later this year.

“It is a psychological blow that China will not take kindly to and absolutely speaks to the rising financial pressures,” said Christopher Balding, an associate professor at the HSBC School of Business at Peking University in Shenzhen. That said, “it doesn’t matter much in the grand scheme of things because so much of Chinese debt is held by state or quasi-state actors and minimal amounts are international investors.”

The Aussie dollar slumped and iron ore led a decline in industrial commodities. Stocks were mixed, while oil rose.

Debt Holdings

Total outstanding credit climbed to about 260 percent of GDP by the end of 2016, up from 160 percent in 2008, according to Bloomberg Intelligence. At the same time, China’s external debt is low by international standards, at around 12 percent of gross domestic product, according to the International Monetary Fund, meaning that a downgrade isn’t likely to be as disruptive as it would be for nations more reliant on international funding.

Overseas institutions’ holdings of onshore bonds dropped to 830 billion yuan ($121 billion) as of the end of March, from 853 billion yuan three months earlier, People’s Bank of China data show. That’s less than 1.5 percent of 63.7 trillion yuan of outstanding notes, according to Bloomberg calculations based on the central bank data.

Moody’s last cut China’s sovereign rating in 1989, when it downgraded the sovereign to Baa2 from Baa1, according to spokesperson, Manvela Yeung.

Rating Warnings

Moody’s lowered China’s credit-rating outlook to negative from stable in March 2016, citing rising debt, falling currency reserves and uncertainty over authorities’ ability to carry out reforms. About a month later, S&P Global Ratings also warned that rising local debt was pressuring the nation’s rating.

S&P currently rates China’s foreign and local-currency long-term debt at AA- with a negative outlook, and Fitch places an A+ rating on both foreign and local currency long-term debt with a stable outlook. Moody’s move puts China parallel in their rankings with countries including Japan, Saudi Arabia and Estonia.

Those ratings contrast with home-grown Dagong Global Credit Rating Co.’s AA+ on China’s sovereign debt in local currency terms and AAA in foreign currency terms, the highest level. By contrast, Dagong rates the U.S. as A- in both currency terms, below Russia and France.

Risks Balanced

Still, Moody’s isn’t hitting the panic button.

“The stable outlook reflects our assessment that, at the A1 rating level, risks are balanced,” Moody’s said in the statement Wednesday. “The erosion in China’s credit profile will be gradual and, we expect, eventually contained as reforms deepen. The strengths of its credit profile will allow the sovereign to remain resilient to negative shocks, with GDP growth likely to stay strong compared to other sovereigns, still considerable scope for policy to adapt to support the economy, and a largely closed capital account.”

While China’s debt risks have been swelling for years, the cut by Moody’s comes as some of those pressures ease. Nominal economic growth in the first quarter rose at the fastest pace since 2012 — 11.8 percent in current-price terms — making the problem of excess leverage a little more manageable, while the return of factory price inflation is beefing up profits for indebted state-owned industries, helping them service and repay loans.

With the economic structure improving and government debt under control, the economy will continue to expand at a medium-to-fast pace, helping prevent debt risks, the finance ministry said in its statement Wednesday.

“This cut is not solidly grounded,” said Wen Bin, chief analyst at Minsheng Securities in Beijing. “Policy makers have been well aware of the debt and leverage issues, and actions have been taken. It is a smart move if no one sees the problem and you are the first to flag it. But less so if it has already been noticed and addressed.”

The move may still discomfort China investors in that it highlights the risks to the economy rather than the ability of the government to control them.

“The downgrade comes at a bad time,” said Tom Orlik, chief Asia economist at Bloomberg Intelligence in Beijing, adding that it will make it more expensive to open the country’s bond market. “China’s leaders from President Xi Jinping down have said that structural reform and financial stability are priorities. Still, progress remains faltering and in some respects movement is in the wrong direction.”

P.O. (NYT) China Warns of Arms Race After U.S. Deploys Missile Defense in South Korea

As per my Personal Opinion:

If China wanted they could have easely provoked the downfall of the North Korea regime.

But they never wanted that…

It just suits them fine, even if they are officially a strong critical voice of that regime.

Please revisit my +++ P.O./V.V.I. (BBG) Kim Jong Un’s Estranged Brother Murdered in Malaysia


(NYT) HONG KONG — The United States said on Tuesday that it had begun deploying an advanced and contentious missile defense system in South Korea, prompting China to warn of a new atomic arms race in a region increasingly on edge over North Korea’s drive to build a nuclear arsenal.

The American announcement came a day after the simultaneous launch of four missiles by North Korea into waters off the Japanese coast, which Pyongyang said was a drill for striking American bases in Japan. The feat, footage of which was broadcast on state television, raised concern about the North’s ability to overwhelm the new defense systembeing deployed.

Hours later, North Korea further unnerved the region by declaring it was blocking all Malaysians from leaving its soil, sharply escalating a dispute over last month’s assassination of Kim Jong-nam, the half brother of North Korea’s dictator, Kim Jong-un.

Malaysia has accused several North Korean citizens of using VX nerve agent to kill Mr. Kim in a case that has reminded the world of Pyongyang’s access to a stockpile of banned chemical weapons on top of its nuclear program — and its willingness to take extreme measures.

The flurry of developments heightened anxiety in Asia over signs that Pyongyang is closing in on its goal of developing an intercontinental missile that can deliver a nuclear payload to the United States — and what the new Trump administration might do to prevent it. And they came as the United States and South Korea participated in large-scale military exercises that North Korea has condemned.

The New York Times reported Sunday that President Trump’s national security deputies have discussed both the possibility of pre-emptive strikes that would almost certainly provoke an attack on South Korea and a reintroduction of nuclear weapons to the South. Intelligence officials say North Korea is already able to hit much of South Korea and Japan with a nuclear-tipped missile.

A spokesman for the Chinese Ministry of Foreign Affairs, Geng Shuang, denounced the United States’ decision to deploy the Terminal High Altitude Area Defense system, or Thaad, and vowed that Beijing would “take the necessary steps to safeguard our own security interests.”

“The consequences will be shouldered by the United States and South Korea,” Mr. Geng added, warning that the two countries should not “go further and further down the wrong road.”

For days, the official Chinese news media has warned that deployment of Thaad could lead to a “de facto” break in relations with South Korea and urged consumers to boycott South Korean products. The Chinese authorities recently forced the closing of 23 stores owned by Lotte, a South Korean conglomerate that agreed to turn over land that it owned for use in the Thaad deployment, and hundreds of Chinese protested at Lotte stores over the weekend, some holding banners that read, “Get out of China.”

Xinhua, the official Chinese news agency, warned that Thaad “will bring an arms race in the region,” likening the defensive system to a shield that would prompt the development of new spears. “More missile shields of one side inevitably bring more nuclear missiles of the opposing side that can break through the missile shield,” it said.

But in another article, the news agency rebuked North Korea, saying it must “face the reality that it can neither thwart Washington and Seoul nor consolidate its security in a breeze with its immature nuclear technology.”

The United States’ decision to deploy the missile technology brought new scrutiny to China’s policies toward North and South Korea and suggested that its attempts to please both countries in hopes of averting a crisis had fallen short.

“To put it bluntly using a common Chinese expression, it has wanted to have a foot in two boats,” said Deng Yuwen, a current affairs commentator in Beijing who has sharply criticized North Korea.

Yang Xiyu, a former senior Chinese official who once oversaw talks with North Korea, said China was worried that the deployment of the system would open the door to a broader American network of antimissile systems in the region, possibly in places like Japan and the Philippines, to counter China’s growing military as much as North Korea.

“China can see benefits only for a U.S. regional plan, not for South Korea’s national security interest,” he said.

The developments come as South Korea is consumed by turmoil over the impeachment of PresidentPark Geun-hye, whose administration agreed to the Thaad deployment. But with the president facingpossible removal from office over a corruption scandal, the fate of the system has been in doubt. Its accelerated deployment could make it harder, if not impossible, for her successor to head off its installation.

Moon Jae-in, an opposition leader who is the front-runner in the race to replace President Park, acknowledged that it would be difficult to overturn South Korea’s agreement to deploy the system. But he has insisted that the next South Korean government should have the final say on the matter, saying that Ms. Park’s government never allowed a full debate on it.

Under its deal with Washington, South Korea is providing the land for the missile system and will build the base, but the United States will pay for the system, to be built by Lockheed Martin, as well as its operational costs.

A C-17 cargo plane landed at the United States military’s Osan Air Base, about 40 miles south of Seoul, on Monday evening, carrying two trucks, each mounted with a Thaad launchpad. More equipment and personnel will start arriving in the coming weeks, South Korean military officials said.

The South Korean Defense Ministry declined to specify when the system would be operational. But the South Korean news agency Yonhap reported that the deployment was likely to be completed in one or two months, with the system ready for use by April.

Paul Haenle, director of the Carnegie-Tsinghua Center at Tsinghua University in Beijing, said that policy makers in China had failed to grasp how Washington and its allies regarded North Korea’s nuclear program as getting closer to a dangerous threshold of being able to place a warhead on an intercontinental ballistic missile that could hit American cities.

“That’s a game-changer,” said Mr. Haenle, who was director for China on the National Security Council under Presidents George W. Bush and Barack Obama.

China has long opposed American missile defenses, in part because of fears that they might embolden American decision-makers to consider a first strike to destroy China’s relatively small nuclear arsenal. Chinese strategists warn that the United States might consider such an attack if it was confident a defense system could intercept Chinese weapons that escaped destruction.

China is believed to have already embarked on a program to modernize its arsenal and develop new weapons designed to avoid missile defenses, and analysts said the deployment of Thaad could prompt it to accelerate those efforts.

Takashi Kawakami, a professor of international politics and security at Takushoku University in Tokyo, said the deployment of Thaad could put the United States in a stronger position to consider a pre-emptive strike on North Korea. If the United States took such action, he said, “North Korea is going to make a counterattack on the U.S. or Japan or another place, so in this case they will use Thaad” to defend against the North’s missiles.

The Japanese prime minister, Shinzo Abe, said he spoke for 25 minutes on Tuesday with Mr. Trump, who reiterated his pledge to stand by Japan “100 percent,” according to the public broadcaster NHK. “I appreciate that the United States is showing that all the options are on the table,” Mr. Abe said, adding that Japan was “ready to fulfill larger roles and responsibilities” to deter North Korea.



+++ P.O./V.I. (BBG) Trump Chooses the Wrong Way to Stand Up to China: Editorial

Dear All

Please be so kind and revisit my Personal Opinions on China.

One should never take our eyes off developments in China and the Countries around.

The future of the World is at stake there.

Francisco (Abouaf) de Curiel Marques Pereira

(BBG) Aides to President-elect Donald Trump say that his precedent-shattering phone call with Taiwanese leader Tsai Ing-wen on Friday was not a diplomatic blunder but a deliberate move to signal resolve against China. If so, he needs to rethink his strategy.

There are valid arguments for the U.S. to be more assertive toward China, and Trump has even articulated some of them. China’s island-building efforts in the South China Sea, and its harassment of Japan in the East China Sea, are destabilizing. In many ways, the Chinese economy remains unfriendly to foreign competition, with certain areas closed off entirely. On North Korea, China has not done nearly enough to temper the regime’s bellicose instincts.

Any successful strategy to change China’s calculations and behavior, however, requires several elements — chief among them clarity and consistency. This Trump has not provided. After news broke of the call, the first between a U.S. president or president-elect and Taiwan’s leader since the U.S. established diplomatic relations with Communist China in 1979, Trump initially seemed to suggest it hadn’t been his idea. Then he protested that critics were overreacting. Then he lashed out at China for its supposed hypocrisy. Claims that he was challenging conventional State Department thinking won’t impress leaders in Beijing. The incoming administration now stands to lose credibility if it fails to follow through.

Moreover, any attempt to reorder the chessboard in Asia requires buy-in from allies. Chinese leaders weren’t the only ones left wondering what exactly Trump intends or how he plans to pursue his goals. America’s friends in the region are already worried about the president-elect’s isolationist impulses and frustrated with his sinking of the Trans-Pacific Partnership trade agreement. Several were hedging toward China even before Trump’s victory, and now more will be reluctant to participate in any attempt to pressure the Chinese regime. That knowledge is sure to stiffen rather than weaken Chinese resolve.

The new U.S. administration will have more luck if it calibrates the pressure it places on China rather than engages in showy gambits. The Barack Obama administration did actually manage to alter Chinese behavior with specific threats on some issues — cyberspying and on land reclamation at Scarborough Shoal in the South China Sea, for example. By contrast, Taiwan’s status remains the foremost of China’s core interests, and pressing further there will make compromise in other areas virtually impossible.

And advancing U.S. interests does require cooperation with China. It might seem silly, as Trump tweeted, for the U.S. to sellbillions of dollars’ worth of weaponry to Taiwan but not accept a phone call from its legitimately elected leader. Yet the U.S. position on the island has enabled decades of peace and relative stability across the Taiwan Strait — not to mention trade and economic development that’s benefited Taiwan as well as the U.S. and China. It’s also allowed for cooperation between Washington and Beijing — not as much as one might like, but crucial nonetheless — on fighting global warming, limiting Iran’s nuclear ambitions and sanctioning North Korea. Such deals make the U.S. stronger — and a President Trump may find he needs to strike more of them.

+++ P.O. (BBG) CHINA INSIGHT: Zombie Firms, Monster Bad Loans – Horrific Charts


As per my numerous P.O. and warnings on China and on China’s financial situation.


(Bloomberg Intelligence) — For many investors, the scariest thing in the world economy right now is China. Trick-or-treating neighborhood kids can be bought off with candy.
China’s problems – from ghost towns of unsold property, to zombie firms with high debts and no profits, to what lies beneath banks’ rosy non-performing loan figures – won’t be so
easily solved. In the Halloween spirit, here are four of Bloomberg Intelligence Economics’ scariest charts on China’s economy:

What Lies Beneath China’s Non-Performing Loan Data?

Non Performing Loans Vs ‘At Risk’ Loans

How many bad loans are there in China? Based on the official data, the non-performing loan ratio is a very manageable 1.75%. A dive into the balance sheets of listed Chinese firms provides a different answer. At the end of 1H, some 8.4% of loans were to firms without enough earnings to cover their interest payments. To give a sense of scale, 8.4% of
corporate borrowing is 9.6 trillion yuan – bad loans about equal to the GDP of Korea.
Read BI Economics comprehensive analysis on China financial risks.

Will Zombie Borrowers Ever be Able to Repay their Debts?

Return on Assets – Private, State, Local Government Firms

One reason to suspect China’s non-performing loans could be higher than reported is because a lot of credit has been allocated to low-performing borrowers. Average return on assets for state owned firms is just 4%. For the local government financing vehicles that borrow to pay for infrastructure projects, it’s 3%. Given the one year benchmark loan rate is 4.35%, it’s not clear that even average firms in those sectors – let along poor performers – will be able to repay their borrowing.
Read BI Economics assessment of risks from local government debt.

Will Turn in Property Cycle Leave Ghost Towns Unpopulated?

Property Supply and Demand

China’s property cycle is turning again. Policy is shifting from all-out stimulus to a differentiated approach, with controls on speculators in major cities. The result, a few
months down the line, will be a downturn in sales and prices. Based on BI Economics’ calculations, China already has about 10 million empty apartments. The fear is that by stoking a fresh round of building, without doing anything to alter underlying supply-demand dynamics, the latest cycle has added to that store.

Who Will Reform China’s Monster State Sector?

SOE Revenue vs GDP of Major Economies

It’s common knowledge that reform of the lumbering state sector is the biggest unfinished business for China’s government. But pause for a moment to consider the scale and complexity of that challenge. China’s state owned enterprises have revenue only slightly shy of the Japan’s GDP. The biggest firms employee hundreds of thousands of staff, sprawl across numerous provinces, and operate in multiple sectors. Small wonder reform remains more discussed than delivered.

P.O./V.V.I. (BBG) Shoal May Become Military Line in Sand on South China Sea


The South China Seas dispute is getting nastier by the day.

And there is no end in sight for this dispute.

Unfortunately, and for various reasons, and I refer you to my Personal Opinions on China, all things are arranged and set in a way that makes a peaceful ending of this whole affair less and less likely.

Please see my +++ M.P.O./V.V.I. (FT) Chinese fighter jets intercept US spy plane over South China Sea, May 19, 2016.

It has most of the links to my previous P.O. on China.

Prepare for trouble.

At least…

Francisco (Abouaf) de Curiel Marques Pereira

(BBG) Global defense chiefs meeting in a plush hotel in Singapore on the weekend were faced with one of Asia’s biggest looming security challenges, but left without any tangible sense of how to tackle it.

The elephant in the room at the Shangri-La security forum was a uninhabited shoal about 230 kilometers (143 miles) from the Philippine coast, a triangle of reef and rocks that barely stretches above high tide. Occupied by China since 2012, the Scarborough Shoal threatens to become the biggest flash point in disputes over the South China Sea.


U.S. Admiral John Richardson raised the prospect of China building on the shoal in March and the following month the U.S. sent air force planes into its vicinity. An airstrip there would add to China’s network of runways and surveillance sites that U.S. Pacific Command chief Harry Harris said last year would create “a mechanism by which China would have de facto control over the South China Sea in any scenario short of war.”

The potential motivation for China to build on the shoal is a coming international arbitration ruling on a case brought by the Philippines against its South China Sea claims. China didn’t take part in the hearings, arguing the tribunal lacks jurisdiction.

If the non-binding ruling is unfavorable to China, it might respond by putting structures on the shoal to give it a military outpost right on the Philippines’ door. Chinese Admiral Sun Jianguo said on Sunday Chinawill not accept the tribunal’s ruling, expected by mid year.

While countries including the U.S. have warned China against doing so, it’s unclear how they might respond if it it did. Speaking at the Singapore forum, U.S. Defense Secretary Ash Carter said the U.S. as an ally of the Philippines would take action, without elaborating on the consequences of a Chinese move.

Carter said on Saturday he had nothing new to say on any Chinese activities in the area around the shoal, but “any actions there would be provocative and destabilizing.” Southeast Asian defense chiefs avoided commenting on the possibility.

China contests more than 80 percent of the South China Sea, through which more than $5 trillion in seaborne trade passes every year, overlapping claims from the likes of Vietnam and Malaysia. It has reclaimed 3,200 acres of land on seven features in the Spratly Islands and added some military infrastructure.

Carter “was very careful to choose his words to leave the impression that there would be some action taken, but not to draw any red lines,” said Bonnie Glaser, a senior adviser for Asia at the Washington-based Center for Strategic and International Studies. “This is a critically important question,” she said. “I believe they want to restrict U.S. access over time.”

The U.S. has been wary of setting red lines after the Obama administration promised in 2012 that if Syrian President Bashar al-Assad used chemical weapons against his people he would cross one. After his regime killed at least six people and injured dozens in a chlorine gas attack, the U.S. failed to act, undermining its credibility.

Air Zone

The U.S. says it doesn’t take sides on the South China Sea claims, but its officials have sought to deter China from consolidating its hold over the waters. Secretary of State John Kerry said Sunday in Mongolia the U.S. would consider the establishment of an air defense identification zone over the area to be “provocative and destabilizing,” repeating Carter’s phrase.

China declared an ADIZ over part of the East China Sea in 2013, where it claims islands contested by Japan. Analysts consider China as yet unequipped to patrol such a zone over the South China Sea, but the possibility it might one day do so has spooked countries that border the waters.

To deter China from installing more military equipment on the Spratlys, the U.S. since October has sent warships three times within the 12 nautical mile zone around several artificial islands China has created, to demonstrate the right to transit what it considers international territory.

“The South China Sea’s freedom of navigation hasn’t been impeded because of the territorial disputes,” Admiral Sun said in a speech Sunday. “If freedom of navigation is undermined then China would not be to blame.”

‘Exclusion Zone’

China’s foreign ministry says it has the right to build on the features because they are its “indisputable” territory and it’s mainly to provide civilian services like search and rescue. Still, security analysts are concerned China will continue taking actions that are too minor to prompt a response, but which over time equate to substantial change.

“The question is whether we should allow China to establish an exclusion zone in the South China Sea, which would effectively turn it into a Chinese lake,” Richard Heydarian, a professor of political science at De La Salle University in Manila, said on the sidelines of the forum. “Who knows what happens down the road,” he said. “China may impose restrictions on other countries, depending on what is its whim.”

For the moment, it isn’t likely that China will rush to build on Scarborough, according to Luo Yuan, a retired PLA major general and deputy general secretary of the China Society of Military Science in Beijing.

“For the time being China is trying to maintain the status quo, mainly because of the size of the project, the investment required, and the sensitivity of the issue,” Luo said on the sidelines of the meeting.

But the question that remains is, should China decide to proceed, how can the U.S. and others prevent it from going ahead without risking setting off a full-scale conflict.

“I would like to think that what Carter said was a polite way of publicly alluding to a red line that has been privately communicated,” Rory Medcalf, head of the National Security College at the Australian National University, said on the sidelines of the forum.

“Nothing will roll back their physical presence but if China doesn’t achieve some kind of de facto extension of authority as a consequence of the island building, then that is still a significant effect that the international community has achieved.”

+++ M.P.O./V.V.I. (FT) Chinese fighter jets intercept US spy plane over South China Sea


If you have read my Personal Opinions on China, you wouldn’t be surprised…

+++ P.O. V.V.I. (FT) China deploys missiles on disputed island

+++ P.O./V.V.I. (FT) China builds ties as well as airstrips in South China Sea

+++ P.O. and V.V.I. (FT) China must learn how to be a great power

+++ V.V.I. (FT) Chinese activity on disputed islands raises doubt over halt claim

+++ (BBG) Slimmed Down Chinese Military to Help Xi Counter U.S. Dominance 

+++ M.P.O./V.V.I. (FT) US warships to challenge Chinese claims in South China Sea

+++ P.O./ V.V.I. (FT) Pomp, circumstance and combat vehicles at Beijing parade

+++ P.O./V.V.I. (FT) Chinese navy sails off Alaska coast as Obama visits Arctic 

+++ P.O./V.V.I. (FT) China parades ‘carrier-killer’ missile through Beijing

+++ V.I. (FT) China set to parade its ‘carrier-killer’ missile through Beijing 

+++ (BBG) China Military Parade Sets Spin Machine Into Overdrive

+++ V.I. (FT) Militarism is a risky temptation for Beijing
This incident is described by the FT:

“Two Chinese fighter jets carried out an “unsafe” intercept of a US military aircraft that was flying over the South China Sea, the Pentagon said on Wednesday.”

With the correspondent US response also in the FT:

“US defence officials said a US maritime reconnaissance aircraft was flying a “routine patrol” and was in international airspace on Tuesday when it was intercepted by two Chinese tactical fighters.”

*“Initial reports characterised the incident as unsafe,” a Pentagon statement said.*

In my opinion, this incident marks an escalation in the “conflict” between the US and China, which is claiming vast areas in the South China Sea.

Please see the very good article in the FT:

“US warship sails near Chinese-claimed reef in South China Sea”

In the FT:

“An American warship on Tuesday morning sailed close to Fiery Cross Reef, a contested feature in the South China Sea, in the latest US pushback against Chinese claims in the disputed maritime region.”

The Pentagon said the USS William P Lawrence had conducted a “routine freedom of navigation operation” near Fiery Cross, a feature in the Spratly island chain that is claimed by the Philippines, Taiwan and Vietnam.

Beijing slammed the move as endangering its staff, facilities and the prospect for regional peace.

The reef is one of several features on which China has constructed runways as part of its effort to boost its ability to project military power in regional waters.

“This operation challenged attempts by China, Taiwan and Vietnam to restrict navigation rights around the features they claim, specifically that these three claimants purport to require prior permission or notification of transits through the territorial sea, contrary to international law,” said Commander Bill Urban, a Pentagon spokesman. “This operation demonstrates, as President Obama has stated, that the United States will fly, sail and operate wherever international law allows.”

The move comes as the Obama administration takes a tougher stance on China over its activities in the South China Sea.

The White House has until recently been reluctant to take aggressive action in the region that could antagonise China and jeopardise other facets of the Sino-US relationship. But as China has ramped up construction of man-made islands, the US navy has had more success in convincing the White House of the need for a more aggressive response.

A spokesperson for the Chinese foreign ministry said the US vessel had been warned for illegally entering Chinese waters.

“This action by the US side threatened China’s sovereignty and security interests, endangered the staff and facilities on the reef and damaged regional peace and stability,” Lu Kang told reporters.

The naval manoeuvre, which was first reported by the Wall Street Journal, came less than two weeks after Beijing denied the USS Stennis — an aircraft carrier that had been on patrol in the region — permission to dock in Hong Kong.

US naval vessels routinely make port calls in the semi-autonomous Chinese territory, although Beijing has on occasion blocked visits during periods of increased friction.

Before the decision by Beijing, Ashton Carter, the US secretary of defence, had flown out to the Stennis in the South China Sea alongside his Philippines counterpart. On board, he reiterated the US opposition to claimants “changing the status quo unilaterally”, a jibe at Beijing.

Tensions between Beijing and Manila have also risen in recent months as an international tribunal at The Hague prepares to rule on a case brought against China by the Philippines.

However, Philippine president-elect Rodrigo Duterte on Monday struck a conciliatory note, emphasising multilateral diplomacy and telling reporters that if China backed away from it claims, Manila would follow suit.

The comments are a marked departure from his previous rhetoric, in which he pledged to personally ride a jet ski to a disputed island to stake the Philippines’ claims.

And is it happening now…?

Because of China’s build up in the zone, and unilaterally claiming vast disputed areas,entering in challenges/”conflicts” with almost every State in the zone.

The whole “adventure” by Beijing is a smoke screen to disguise it’s very serious internal problems, on which I have been extensively writing about.

I refer you to my various Personal Opinions on China and particularly to M.P.O. The exhaustion of the Chinese Model

All the reasons and my forecasts are in there.

And it also happens now, because, and I quote the FT again:

“The incident comes at a time of increased tensions in the South China Sea ahead of a trip to the region next week by US President Barack Obama when he will visit Vietnam, which is becoming a closer American partner, and Japan.”

“It also comes weeks ahead of an expected ruling by an international court that could question some of the expansive territorial claims that China has made in the South China Sea.”

And China is becoming unfriendly with any Country in the area that is becoming closer to the US.

This is precisely what I meant when I wrote in the above mentioned M.P.O.

“Let’s hope it stays peaceful.”

Francisco (Abouaf) de Curiel Marques Pereira

(FT) Pentagon reports ‘unsafe’ incident during ‘routine patrol’ this week in international airspace.

The Republic of China Air Force fighter jets fly next to a chartered China Airline aircraft carrying Ma Ying-jeou, Taiwan's president, as he heads to Singapore for a summit in Taiwan on Saturday, Nov. 7, 2015. The leaders of China and Taiwan started a carefully managed meeting in Singapore that marks the first summit since the two sides clashed in a civil war seven decades ago. Photographer: Tomohiro Ohsumi/Bloomberg
© Bloomberg
Two Chinese fighter jets carried out an “unsafe” intercept of a US military aircraft that was flying over the South China Sea, the Pentagon said on Wednesday.

US defence officials said a US maritime reconnaissance aircraft was flying a “routine patrol” and was in international airspace on Tuesday when it was intercepted by two Chinese tactical fighters.

“Initial reports characterised the incident as unsafe,” a Pentagon statement said.

The incident comes at a time of increased tensions in the South China Sea ahead of a trip to the region next week by US President Barack Obama when he will visit Vietnam, which is becoming a closer American partner, and Japan.

A spokesman for China’s foreign ministry on Thursday rejected the US version of events, saying the US aircraft was close to China’s island province of Hainan and that the Chinese aircraft had acted both safely and professionally.

“We demand that the US immediately cease this type of close reconnaissance activity to avoid having this sort of incident happening again,” he said.

The intercept came within weeks of an expected ruling by an international court that could question some of the expansive territorial claims that China has made in the South China Sea.

The US says it is neutral on specific Chinese claims in the South China Sea but is using an increased presence in the area to push back against efforts by China to claim control of the seas surrounding many of the small islands and land features.

As Chinese and American aircraft and ships come into more regular contact with each other in the South China Sea, the risk is that an accident or miscalculation by an overly aggressive pilot could prompt some form of confrontation.

A 2001 attempted intercept of a US surveillance plane by a Chinese fighter jet led to a collision that killed the Chinese pilot and forced the American aircraft to make an emergency landing on China’s Hainan island.

Last week China scrambled fighter jets after a US warship sailed close to a land feature claimed by China that has been part of its extensive land-reclamation project over the past two years.

The Pentagon said it was addressing the latest incident through diplomatic and military channels. It also said that over the past year, after the US and China signed an agreement about how to deal with air-to-air encounters, there had been “improvements” in the professionalism of Chinese pilots.

China claims control over most of the South China Sea and has territorial disputes with Vietnam, the Philippines, Taiwan, Malaysia and Brunei. On a visit to the White House last year, Chinese President Xi Jinping said Beijing did not intend to “militarise” the Spratly Islands, one of the disputed areas of the South China Sea.dddjjklyynggtnnjrrtyuwqsd1

+++ P.O. (BBG) Fears of China Unrest See Investment Firms Evicted to Preempt It


It looks like the worst scenario is taking shape, as I have written many times.

One can see signs everywhere.

The fear of unrest,the crackdown on data sales,the closing down of casa Míddis

Please revisit the China archive in this site.

Francisco (Abouaf) de Curiel Marques Pereira

(BBG) China’s authorities, seeking to forestall potential social unrest due to growing failures of investment firms and online lenders, are ordering many to break leases and close their storefronts on busy streets — lest they become magnets for protesters.

And that’s not all. Registration of all new companies with finance-related names was suspended nationwide in April, according to people familiar with the matter who asked not to be identified because they’re not authorized to speak publicly. In Shenzhen, office building management now must submit contact information for employees of all finance industry-related tenants to the local security bureau. Local governments from Shanghai to central Henan province have put up new signs outside residential compounds to warn the public against illicit fundraising activities.

Chinese investors gather outside Wealthroll office in Shanghai on April 6.
Chinese investors gather outside Wealthroll office in Shanghai on April 6.
Photographer: Imaginechina

The government, which had been encouraging theflourishing of investment firms and online lenders in the past two years to give small businesses that can’t get bank loans alternative funding — and to expand investing options for millions of Chinese — had largely failed to put regulations in place that would have prevented failures. The burgeoning ranks of peer-to-peer online lenders, or P2Ps, began opening storefronts on busy streets or in luxury office buildings to garner investment from the general public, hiring thousands of staff to sell products promising extraordinary returns. Other bricks-and-mortar firms sprang up offering wealth-management products with big payoffs, and many of those moved online, too, giving visibility to what was previously the nebulous and hidden world of shadow banking.

Now, with almost 1,000 online lenders having collapsed in the past year and fraud becoming more prevalent at China’s countless wealth management firms, authorities are acting to curb their growth and head off potential instability.

“The tightening control against P2P lenders highlights the growing concerns of the government that such operations can get hairy and out of their control,” said Hu Xingdou, an economics professor at the Beijing Institute of ­Technology. “Such P2P operations could involve hundreds of thousands of people, and could easily cause social unease if the companies run out of cash.”

Private wealth manager Credit Hengchang, which operates branches in more than 30 Chinese cities, had to close three offices in Hangzhou at short notice on government orders, said a person familiar with the matter. Its operation in southern Guangdong province was probed by local police, while its offices in central Henan province received tighter auditing and more frequent visits from the government, the person said. A representative of Hengchang didn’t respond to a request to comment on the measures.

Visible Remains

All over Hangzhou, a relatively wealthy city 100 miles (175 kilometers) from Shanghai, evidence of the crackdown is visible. In the downtown central business district, only financial institutions that need regulatory approval, such as banks and brokerages, can stay. At Golden Plaza, a high-end office tower on Hangzhou’s financial street, investment and wealth-management companies had snapped up almost 30 percent of the 26-floor building and pushed up its rents by about 15 percent in a year through last June, according to commercial real estate agent Tao Libin, whose office is on the ground floor.

Then things started to unravel as angry investors, mostly the elderly, started showing up to demand their money back from some failed firms, and police visits became more frequent, Tao said. The district government forced the companies to break leases and leave the downtown area late last year for fear that more failures would stoke social unrest and hurt the image of the city where the G-20 summit is to be held in September, he said. Now all those finance startups are gone, leaving massive vacant space and the rent plummeting, Tao said.

Citywide Extension

At Golden Plaza, its was local police who served notice late last year that all non-regulated finance industry tenants must move out, regardless of the terms of their leases, according to a building manager there. The eviction was later extended citywide, according to several building managers in different districts and local police. Any investment firm wanting to keep a physical presence must move to the outskirts of the city. An officer at Hangzhou’s Public Security Bureau said police were conducting an investigation of such firms and declined to give further details.

Investigations by the police, as opposed to financial regulators, are an indicator that authorities now fear demonstrations against investment firms could turn into anti-government sentiment. In Guangdong province’s Foshan, the city’s vice mayor Huang Zhihao said in an interview in April that police were taking the lead role and working with local governments to head off instability.

“We feel a strong sense of urgency to solve the problem,” he said.

Heightened Monitoring

In Shanghai, the city government required heightened monitoring of firms engaging in investment, wealth management and online lending, and said office buildings, technology parks and business centers will be held responsible for the tenants they brought in, in order to “curb risks from their origin.”

In China, wealth-management products offer high short-term interest rates and aren’t officially guaranteed. The range of products offered by the unregulated collection of P2Ps, investment firms and wealth managers can include anything from an engaged couple directly seeking online funding for a wedding on guarantee of repayment after cash gifts are received, to high-yield loans for risky property or mining projects that used to be offered as part of what was known as the shadow banking world in cities such as Wenzhou, Shanghai, Beijing and elsewhere.

Spreading Risk

Now that much of the shadow banking business has moved online, the risk has grown and geographic scope has spread. Often the firms themselves don’t reveal the underlying investments, simply offering returns that typically range from 8 percent to 24 percent — and sometimes higher.

“China’s Internet finance industry has strayed too far from the mandate set by the government,” said Yang Dong, a professor at Renmin Law School in Beijing. “With its high funding and operating costs, yet barely existing risk control, the model to copy banks under the disguise of financial innovation and inclusive finance is fundamentally flawed and unsustainable. It’s a shame that the government didn’t act earlier.”

In the past, investment firms could easily obtain operating licenses from the local business administration for engaging in financial activities without approvals from the nation’s banking or securities regulators.

Wealthroll Shutdown

Shanghai-based Wealthroll Asset Management Co. was shut down by police on April 6 after raising more than 30 billion yuan ($4.6 billion) from more than 130,000 investors. Wealthroll, a seller of wealth management products nationwide, is being probed for allegedly raising public funds illegally by defrauding investors with fake investment projects and allegedly inflating revenue since it began operating in 2012, according to the official Xinhua News Agency. Among its products, one promised a 40 percent return every year on condition that the principal can never be redeemed, according to its brochure.

Protesters took to the street after the shutdown, gathering near the People’s Square, the base of the Shanghai government, and the Bund, the city’s most popular tourist street, holding signs calling for the government to repay their “blood-and-sweat money.” They were later dispersed by police. Some investors blamed the government for shutting down a “legitimate and solid” enterprise because it has never missed a payment, according to postings and videos in one of the WeChat instant messaging groups formed by the victims.

“We should make this big because social unrest has political fallout,” wrote an investor under the pseudonym “Give Me a Way to Live” in the message group, urging fellow victims to keep gathering and exerting pressure on the government. “That’s the way to strike their nerve and get our money back.”

Fraud Susceptible

Unlike the shadow banking crisis that hit the eastern Chinese city of Wenzhou in 2012, where most victims of failed shadow lenders were local, the collapse of Internet-based financing platforms is far more wide-reaching in terms of the number of people affected and the amounts involved.

Chinese consumers are more susceptible to fraud as only one-third of formal savers in the nation are financially literate and 48 percent don’t understand the concept of interest payments, according to a December survey by S&P Global Ratings.

In December, China’s biggest-ever Ponzi scheme was exposed after Internet lender Ezubo defrauded more than 900,000 people out of the equivalent of $7.6 billion in 18 months. The founders squandered the money on luxury items including cars and a pink diamond ring worth 12 million yuan, according to Xinhua.

Locked office of Ezubo in Hangzhou on Dec. 17, 2015.
Locked office of Ezubo in Hangzhou on Dec. 17, 2015.
Photographer: Imaginechina

Wake-up Call

Lu Xiaomin, a finance director in the Huizhou city government in southern Guangdong province, said in April that the Ezubo scandal was a wake-up call, and that the local government is taking action.

“We will pay more attention to the financing companies, to strengthen the monitoring and guidance to the firms,” he said at a press conference in April. “We will also work with associated parties to study the guidance of the central government to prohibit financial risks from happening.”

China’s cabinet on April 14 started its first campaign to clean up illicit activities in Internet finance, with the focus on areas such as third-party payments, peer-to-peer lending, crowdfunding and online insurance. The China Banking Regulatory Commission in December laid out restrictions for the first time, banning such firms from taking public deposits, pooling investors’ money or guaranteeing returns.

Too Late?

It may be too late. More than 90 percent of China’s almost 4,000 remaining lending platforms were promising their 2.9 million investors annual returns ranging from 8 percent to 24 percent in March, according to Yingcan Group, which tracks the data. That compares with China’s official deposit rate of 1.5 percent, and comes a time when the economy grew at the slowest pace in a quarter century, while corporate borrowers’ ability to service their debt has dropped to the weakest on record.

Such high returns are unrealistic in an economic downturn, and more platforms are bound to fail, Renmin Law School’s Yang said.

“Who in the world can generate 24 percent? It’s impossible,” said Soul Htite, founder and chief executive officer of Shanghai-based online lender, who foresees only about 20 P2Ps ultimately becoming successful, based on his experience in Silicon Valley and co-founding the LendingClub Corp. in the U.S. “Companies disappear for multiple reasons. One of them is they’re criminals, and they’re caught. For others, they have a non-realistic business model.”

Back in Hangzhou’s new central business district,, an Internet-based wealth manager established last year that is marketing a three- to 15-day product with an annualized yield of 16 percent, was told by the police it must leave Dicara International Center, where it had rented 900 square meters (9,700 square feet), by May. Its lavish reception area is decorated with statues representing traditional Chinese symbols of wealth and a large altar to worship the three Chinese gods of status, prosperity and longevity.

“We plan to move to another district,” said a company executive, who would only give her surname as Tong. “But I don’t know exactly where.”

+++ P.O./V.V.I. (FT) China builds ties as well as airstrips in South China Sea


China is pursuing a very dangerous policy.

Please revisit my P.O. on China including M.P.O. The exhaustion of the Chinese Model:


On China, the anti-corruption drive, and the latest developments.

The World was surprised by the sudden disappearance and the following reappearance of Mr Guo Guangchang the Chairman of Fosun, China’s self styled Warren Buffett.

Fosun has been on an acquisition spree abroad, and owns  quite a number of very well known companies in the West, and has substantial investments in Portugal.

The official explanation for the four days absence , and a face saving one, was ” four days out of sight while assisting a judicial investigation” (Financial Times).

Even if it is not uncommon in China for public and private officials to assist an investigation, no one is buying that version of the events.

Because Mr Guangchan was not charged of any wrongdoing, and Fosun said that the investigations had nothing to do with the Company.

This bizarre situation comes after Mr Guangchang having been advised, more than a year ago,  to get a second, and of different Country, passport.

But he said he did not need one because he had been “behaving well”…

A lot of private entrepreneurs have been “pested” by the various authorities since the Communist Party General Secretary Xi Jinping announced his anti-corruption campaign following the 18th National Congress which was held in November 2012.

And recently, in another article in this site, Mr Xu Ming, a former business ally of disgraced Chinese politician Bo Xilai has died in prison of illness, months before he was due to be released.

Probably he knew too much…

From The FT:

“The death of Xu Ming, founder of property conglomerate Dalian Shide Group, who testified against Bo’s wife Gu Kailai in 2013, is the second high-profile death in recent months of a person involved in the downfall of Bo and Gu, the biggest political scandal in China since the trial of the Gang of Four more than three decades ago.”

Then you have the military confrontation with the US, clearly provocative, the interference in Taiwan’s elections, with the “meeting of two gentlemen, the admission, (finally), that there is a serious pollution problem, the trial of lawyers including the famous and prominent Mr Pu Zhiqiang , the massive capital flight, the persecution of financial market players, blaming them because he market went down, etc, etc, etc.

The statement by Fosun saying that from now on , the Company was going to focus on China, clearly is in response to pressure by the authorities, that have been trying to control the massive capital flight.

And that have been pesting the companies that try to list abroad, because it is an obvious way to expatriate capital.

President Xi Jinping is a very astute person, and reportedly the most powerful Chinese leader since Mao Tse Tung.

Or even more powerful,some people say.

He knows that the growth model based on exports with  cheap labour and highly polluting factories is no more.

He also knows that the clean up is going to take decades.

He also knows that China , traditionally, has been a corrupt society, in part due to the very low wages.

He knows that his currency is devaluating and that he can do very little about it.

He wants to keep the power in the Communist Party.

And in consequence, and as usual in these kind of Countries (vidé Russia), he has to crackdown on anything that resembles power, and promote everything else that distracts the people’s attention from the fact that China is not growing what it used to in the past.

And that past growth was the people’s excuse to tolerate the system.

Which is under more and more scrutiny.

This is what all this is about, in my opinion.

Let’s hope it stays peaceful.»

And also +++ P.O. V.V.I. (FT) China deploys missiles on disputed island:



This issue is has important as it gets.

To understand on what we are talking about, I refer you to my P.O. on China.

To start with, I call your attention to this M.P.O. that lays out the “scenery” for it all.

But please use the link and go to the M.P.O. itself , and use the links provided there.

And then please visit the older P.O. on the military confrontation itself.

Please go through the articles and P.O. with the links below.

This issue is as important as it gets.

Francisco (Abouaf) de Curiel Marques Pereira


+++ P.O. and V.V.I. (FT) China must learn how to be a great power

+++ V.V.I. (FT) Chinese activity on disputed islands raises doubt over halt claim

+++ (BBG) Slimmed Down Chinese Military to Help Xi Counter U.S. Dominance 

+++ M.P.O./V.V.I. (FT) US warships to challenge Chinese claims in South China Sea

+++ P.O./ V.V.I. (FT) Pomp, circumstance and combat vehicles at Beijing parade

+++ P.O./V.V.I. (FT) Chinese navy sails off Alaska coast as Obama visits Arctic 

+++ P.O./V.V.I. (FT) China parades ‘carrier-killer’ missile through Beijing

+++ V.I. (FT) China set to parade its ‘carrier-killer’ missile through Beijing 

+++ (BBG) China Military Parade Sets Spin Machine Into Overdrive

+++ V.I. (FT) Militarism is a risky temptation for Beijing»


What do the governments of Belarus, Brunei, Cambodia, Laos and Russia have in common, apart from their lack of enthusiasm for participatory democracy?

Beijing claims they have all recently come out in support of its position on the South China Sea. It says they back its arguments, either that maritime disputes should be resolved bilaterally or that the arbitration case brought by the Philippines against Beijing’s claims is illegitimate.

This is no accident. A judgment on the Philippines case is expected within months. Beijing is working hard to persuade other countries that the court of arbitration in The Hague has no right to adjudicate on its claims.

During recent weeks, Wang Yi, the wily Chinese foreign minister, has been courting counterparts with renewed vigour, with visits to Brunei, Cambodia and Laos designed to keep Southeast Asia divided in its approach to China.

Sergei Lavrov, the Russian foreign minister, last week became the latest senior diplomat to side with China’s opposition to external interference — read the US — in the South China Sea.

China has drawn huge attention — and criticism — for its construction of islands and military facilities on contested reefs. But diplomacy is an equally important part of its strategy for dominating these waters, which contain rich fisheries, vast oil and gas reserves and key global trade routes.

The unfolding public relations battle over the Philippines arbitration case shows that policymakers in Beijing are worried China will look like a rogue international rule-breaker because of its defiance of The Hague tribunal.

The Philippines contends that China’s claim to “historic rights” over almost the entire South China Sea — based on its “nine-dash line” map — has no basis in international law. Manila also claims large parts of these waters, as does Brunei, Malaysia, Taiwan and Vietnam.

Although the judges are not considering overt questions of sovereignty, if they rule in the Philippines’ favour on this issue, it would significantly undermine China’s claims.

The US and the EU, which are concerned about China’s increasingly strident behaviour, have thrown their weight behind Manila, arguing that Beijing should respect the outcome of the case.

China is lining up its own team of supporters and is neutralising potential opponents with the promise of big infrastructure investments for those who play ball.

Beijing wants to ensure that the Association of Southeast Asian Nations, the only regional body that regularly discusses security issues, remains divided and weak when it comes to the South China Sea.

Regional diplomats fear that it is succeeding.

Mr Wang claimed after the visit to Brunei, Laos and Cambodia that Beijing had reached a “consensus” with these nations to oppose “unilateral” actions, a euphemism for the Philippines case.

Laos and Cambodia, which rely heavily on Chinese investment, have long done Beijing’s bidding by preventing Asean from taking a harder line on the maritime disputes. But oil-rich Brunei, which is feeling the pressure of lower crude prices, has not previously sided so openly with China.

Meanwhile, Southeast Asia’s biggest nation, Indonesia, is trying hard to stay out of the disputes, insisting that a recent clash with China’s coastguard over illegal fishing has nothing to do with China’s geostrategic ambitions.

This is music to Beijing’s ears.

Donald Weatherbee, a visiting fellow at Singapore’s Institute of Southeast Asian Studies, says that “Indonesia and the other four targets of China’s South China Sea policy are in the same boat, but there is no captain or sailing directions”.

Divisions among China’s Southeast Asian neighbours have left the way open for it to alter the “facts on the water” by building military installations from runways to radar stations in the South China Sea.

Ashley Townshend, a research fellow at the University of Sydney, compares Beijing’s actions to those of a rebel group trying to amass as much bargaining power as possible before being forced eventually to agree a ceasefire.

The next test of Beijing’s appetite for risk could come at the Scarborough Shoal, which it snatched from Philippines control in 2012. It is rumoured to be the next destination for China’s island-building barges.

If China does try to build up a reef that lies not far from Manila, the US would come under pressure to respond with more freedom of navigation operations or some other show of military force.

But Beijing is hoping it can continue to get away with incrementally changing the status quo and neutralising opposition.ddbntyuiohgf

+++ A.O./V.I. (BBG) Global Stocks Rally Sputters as Crude Slides, China Shares

Anchor Opinion

…Watch China…

…It is the most important thing to watch, in my opinion.

…If the Chinese markets collapse, the destruction of money will be of such proportions that it will cause major deflationary head winds around the globe.

…And of an unimaginable scale.

…I personally doubt, that if events would turn out that way, and let’s hope they don’t, that it would be possible to control events.

…Just think…

…If Japan has not been able to get rid of deflation for more years than I can    remember, how could deflationary head winds of a much greater scale be tamed?

   But China is not a democracy like Japan.
   Consensus decision-making is not exactly what is usual in China…
   So the government has more powers to control events.

   Anyway, let’s hope that nothing of this happens.

Francisco (Abouaf) de Curiel Marques Pereira

Post Scriptum: As a suggestion please read the superb book by David Graeber
“Debt: The First 5000 Years”

(BBG) The global stocks rally stumbled as Chinese equities dropped by the most since February and oil sank toward $40 a barrel, while demand for haven assets lifted sovereign bonds.

The Stoxx Europe 600 Index failed to extend a three-month high and the Shanghai Composite Index fell more than 2 percent as the People’s Bank of China signaled a reduced appetite for monetary easing. Crude oil also weighed on equities after Kuwait workers said they would end a strike and Japanese government bond yields fell to records. BHP Billiton Ltd. and Rio Tinto Group paced miners higher after BHP cut its iron ore production forecast for its Australian operations, spurring gains in the material’s price.

Global equities have climbed more than 15 percent from this year’s low, spurred by signs of stabilization in China’s economy and oil prices, after a sliding yuan and tumbling crude costs drove a $7 trillion selloff in the first half of January. Wednesday’s pullback in Shanghai shares came after PBOC research bureau chief economist Ma Jun said late Tuesday that future policy operations, while observing the need to continue supporting growth, will pay attention to heading off macroeconomic risks. Also casting a chill on global financial markets was an end to aworker strike in Kuwait, which had propped up oil prices after major producers failed to agree to output curbs at weekend talks in Doha.

“It’s difficult to find a major positive trigger from here,” said Otto Waser, chief investment officer at R&A Research & Asset Management. “Central banks are done so we don’t expect anything positive from them anymore. Earnings trends are not positive enough in Europe to support a major positive market.”

The MSCI All-Country Index was little changed at 7:01 a.m. New York time after falling as much as 0.2 percent. West Texas Intermediate crude dropped 2 percent to $40.26 a barrel.

Turkey’s central bank to cut its overnight lending rate in line with economist forecasts. U.S. companies including Coca-Cola Co. and American Express Co. are releasing earnings on Wednesday. A U.K. jobs report Wednesday showed unemployment rose for the first time in seven months and pay-growth excluding bonuses was unchanged.


The Stoxx 600 fell 0.1 percent with health care and retail companies posting the biggest losses. BHP Billiton and Rio Tinto added more than 2 percent.

Despite recent gains, the European gauge has still tumbled 16 percent since reaching a record a year ago, and optimism over European Central Bank stimulus has given way to skepticism about its ability to boost growth.

Investors are also awaiting the ECB’s next meeting on Thursday for clues about the path of monetary policy. While economists are virtually certain ECB President Mario Draghi won’t touch interest rates, recent history shows that increased stock volatility is still likely. Intraday swings for the Euro Stoxx 50 Index averaged 4.1 percent during the ECB President’s past four policy updates, or about double that for all meetings since 2010.

Futures on the Standard & Poor’s 500 Index were little changed after the gauge closed above 2,100 for the first time since since Dec. 1. Of the benchmark’s 60 members to have reported first-quarter earnings by Tuesday, 77 percent have beaten profit estimates, according to data compiled by Bloomberg.

Intel Corp. dropped 2.4 percent in premarket trading after its first-quarter revenue and forecast for the next three months missedanalysts’ estimates. U.S. Bancorp slid 2 percent after its quarterly profit fell.

Benchmark share gauges fell across Asia’s developing economies and the MSCI Emerging Markets Index retreated from a five-month high. Japan’s Topix index closed up 0.2 percent, after earlier climbing as much as 1.3 percent. Mitsubishi Motors Corp. tumbled 15 percent, its biggest loss in more than a decade, after the company said it would brief media on “improper fuel economy” tests. It subsequently admitted to manipulating test data involving 625,000 vehicles in order to improve fuel-economy claims.

The Shanghai Composite Index posted its lowest close this month and Hong Kong’s Hang Seng Index was down 1.2 percent.


The yen was little changed at 109.22 per dollar after strengthening as much as 0.4 percent following comments by Bank of Japan Governor Haruhiko Kuroda that monetary easing is not a promise of a weaker currency or stronger equities. Japanese exports dropped 6.8 percent from a year earlier in March, while imports declined 14.9 percent, data showed Wednesday.

The New Zealand dollar retreated from its strongest level since June. The kiwi weakened 0.6 percent to 70.04 U.S. cents after breaching the 70-cent mark on Tuesday for the first time since June.

The won rose as much as 0.7 percent to a five-month high, before closing 0.1 percent higher in Seoul. China’s yuan weakened for the first time in four days.

The MSCI Emerging Markets Currency Index rose 0.3 percent to the highest since July.
India’s rupee climbed 0.6 percent, the most in a month, after the nation’s trade deficit narrowed to a five-year low. Malaysia’s ringgit rose 0.6 percent.

Turkey’s lira rose 0.6 percent. Policy makers, who met for the first time under their new central bank chief, Murat Cetinkaya, cut the upper band of a three-pronged rate corridor by 50 basis points to 10 percent.


West Texas Intermediate crude oil was lower after rising 3.3 percent on Tuesday amid a three-day labor strike that reduced Kuwait’s output by as much as 1.7 million barrels a day. The country is OPEC’s fourth-largest producer.

“The size of the disruption, had the strike persisted, would have been quite significant,” Ric Spooner, a chief market analyst at CMC Markets in Sydney, said by phone. “It took quite a lot of oil out of production.”

Silver gained as much as 1.8 percent, before trimming its advance to 0.4 percent. The metal surged 22 percent this year and entered a bull market on Tuesday after money managers last week increased their net-long positions by 30 percent to a record.

Iron ore futures traded on the Dalian Commodity Exchange climbed as much as 5.9 percent to the highest level since June 2015 on BHP Billiton’s production forecast cut. Rio de Janeiro-based Vale SA, the largest iron-ore miner, is expected to report record output for the first quarter on Wednesday.


Treasuries rose as demand for the safest assets was fed by declines in stocks and oil. The yield on 10-year U.S. Treasuries fell one basis point to 1.77 percent. It may drop to a never-before-seen 1.25 percent in 2016 as investors seek alternatives to lower-yielding securities elsewhere in the world, according to Robert Tipp, the head of global bonds and foreign exchange for the fixed-income division of Prudential Financial Inc.

While the yield on 10-year Treasuries was less than half a percentage point from its record low reached in 2012, the securities offered a yield pick-up of 160 basis points over similar-maturity German bonds and about 188 basis points over Japanese government debt.

Japan’s 40-year bond yield fell to a record low, meaning all the nation’s sovereign bonds yield less than 0.3 percent, as investors rush for securities with positive income.

The cost of insuring corporate debt against default rose for the first time this week. The Markit iTraxx Europe Index of credit-default swaps on investment-grade companies climbed one basis point to 72 basis points. A measure of swaps on junk-rated businesses rose two basis points to 305 basis points. Both indexes remain near the lowest in about a month.

Malaysia is moving closer to selling global Islamic bonds. It may price the 10- and 30-year dollar notes at 150 and 165 basis points over U.S. Treasuries, according to a person familiar with the matter who isn’t authorized to speak publicly. Based on current market yields, that would suggest a coupon rate of 3.27 percent for the shorter-maturity notes and 4.23 percent for the longer-term debt.

+++ P.O. V.I (BBG) Investors Are in Denial About China’s Slump: Christopher Balding


I have been saying this for a very long time.

The numbers did not, and do not add up.

Here are a few P.O. on China:

M.P.O. The exhaustion of the Chinese Model

+++ P.O. V.V.I. (BBG) Is China’s Economy Growing ? – China Cement Demand

+++ P.O. V.I (BBG) China Carry Trade Outflows Won’t Overwhelm FX Reserves

In my opinion there is no way China is growing what the government claims it is.

And that’s it.

Francisco (Abouaf) de Curiel Marques Pereira

(BBG) As you’ve no doubt noticed, companies and investors around the world are feeling the pain of China’s economic slowdown. They’re worried about all the layoffs, cuts to surplus capacity and deleveraging to come on the mainland, which will further depress demand. The natural temptation is to blame China for the world’s woes. But outsiders should focus just as much on their own missteps — starting with the widespread misperception that “this time” would be different.

Back in 2009, as China unleashed a massive fiscal stimulus and investment spree in response to the global financial crisis, the rest of the world was all too willing to believe the impossible. Aided byconsultant research predicting decades of explosive growth, companies placed huge bets on China and expected to ride the never-ending boom to riches.

Amid the gold rush, they bulked up to sell China t-shirts or tons of iron ore. They urged their governments to sign free-trade deals with Beijing. Commodity producers heedlessly expanded capacity, believing that 10 percent growth would continue indefinitely. Consumer brands rushed to set up flagships in third-tier Chinese cities. Shipping companies scrambled to build new fleets to meet an expected explosion in global trade.

However, as with so many previous bouts of irrational exuberance, this time wasn’t really different. The ruthless rules of supply and demand still applied. And now, the longer that painful decisions are delayed, the harder they’ll become.

Commodities firms, in particular, are learning that lesson the hard way. As prices rose with Chinese demand, they made large upfront investments financed by borrowing — often on a 20-year timeline, in the expectation that growth would last and last. Now, with China’s economy slowing and the prices of everything from oil to metals plummeting, the bills are coming due.

Major iron ore firms, which had predicted that Chinese steel demand would keep rising until about 2030, are now looking at substantial overinvestment and deteriorating credit. Dairy farmers, who increased their herds with future Chinese consumer demand in mind, are feeling the pinch as milk prices plunge.

After years of ramping up production to fuel China’s expected growth, oil-producing countries from Saudi Arabia to Norway are facing grim decisions about their public finances. Russia is rapidly draining its sovereign wealth fund. Venezuela is pleading with China for loans — on top of the nearly $60 billion already doled out — to stave off collapse. Pundits are warning that the large debt load of U.S. shale-gas and oil producers could pose greater risks than sub-prime lending did a decade ago.

No less so than China, the rest of the world needs to face up to some new realities.

First, the golden age of Chinese construction is over. There’s now enormous surplus capacity in virtually every industry that requires fixed-asset investment. Companies can no longer rely on the “Beijing put” of new government stimulus to boost growth. Iron ore producers and copper miners all need to begin a painful process of downsizingand deleveraging — just as China’s bloated state-owned enterprises do. Producers around the world haven’t faced up to the new normal.

Second, companies of all stripes have to put in the effort to understand China better. Expectations of double-digit growth, regardless of how poor the performance, have vanished. Luxury brands that once hoped their Beijing flagships would smooth the balance sheets at European headquarters need to recognize that different markets require different strategies, and that shops in China won’t run on autopilot. They need to compete.

Third, companies and countries alike need to face up to their own irrational exuberance. Whether it’s failing to diversify, spending recklessly on the back of high prices, or taking on too much debt, fundamental mistakes can’t be blamed on China. Doing so only delays the inevitable.

Few investors seem to fully appreciate the balance-sheet reckoning that is coming. Failing to address the global supply glut only increases the risk of a larger correction. We know that because this time isn’t different: The bill always comes due.

+++ P.O. V.I (BBG) China Carry Trade Outflows Won’t Overwhelm FX Reserves


China has one trillion USD of foreign debt due for repayment in 2016.

And a gigantic capital flight has to to be added to this.

People say, that in 2015 capital flight was also one trillion USD, and that a similar figure could be expected for 2016.

Please note that people are using all sorts of unconventional ways for capital flight in China.

This issue has to be monitored very carefully.

I call your attention to this fantastic FT Video, here in this site.

A Must See: +++ (FT) The end of the Chinese miracle (VIDEO)

And please revisit my M.P.O. The exhaustion of the Chinese Model

Francisco (Abouaf) de Curiel Marques Pereira

(Bloomberg Intelligence) — A major factor driving the drop in China’s foreign exchange reserves is the unwinding of the carry trade. With foreign debt levels manageable and incentives shifting away from rapid outflows, that is unlikely to exhaust China’s $3.2 trillion in FX reserves.

In past years, China’s high interest rates and expectations of yuan appreciation looked like a winning bet. The result has been a lucrative carry trade, with substantial offshore
borrowing in dollars and funds parked in China. In 2014, that changed. Expectations of a shrinking interest rate differential, combined with fears of yuan depreciation, made the trade less appealing. Funds that were flowing in started to flow out.

How much foreign debt did China accumulate on the way up, and how much has already been paid off on the way down? Answering that question is made more difficult by breaks in the statistical series and the likelihood that not all overseas borrowing is captured in China’s data. With that in mind, it makes sense to look at low- and high-end estimates:

Estimates of China’s Foreign Borrowing

* The low-end estimate is based on People’s Bank of China data
on foreign debt, with historical numbers adjusted to take
account of a break in the series. The peak was about $2 trillion
in 3Q 2014 and foreign debt fell to $1.5 trillion in September
2015, the latest data available. Since then, about $495 billion
has flown out of China, based on Bloomberg Intelligence
Economics’ estimates. Assuming that went mainly to repay foreign
debt, the total could have dropped to $1.0 trillion.

* The high-end estimate is based on the same PBOC data, but adds
in an estimate of overseas borrowing by Chinese firms that might
not be captured in the official numbers. That could happen if,
for example, borrowed funds came onshore illegally through the
trade account. Assuming 50% of lending by Hong Kong banks ended
up in the mainland, and holding all the other elements of the
calculation unchanged, China’s foreign debt would be $1.3

Neither of those estimates are particularly alarming. In
both cases, China’s capital outflows likely have some distance
still to run. But in both cases also, even if the entire
quantity of foreign debt flowed out, China would still be left
with substantial FX reserves.

There are additional reasons to steer clear of excess

* Since the middle of January, the yuan has stabilized and
expectations of U.S. rate increases have been reduced. That
tamps down incentives for moving funds out of China.

* Not all overseas borrowing is a short-term play on rate
differentials and yuan appreciation. Some — perhaps most — is
invested in stickier long-term projects.

* Not all overseas borrowing is in dollars. With negative rates
in Europe and Japan, anyone borrowing in euro or yen will
probably be content to leave it in China.

China’s capital outflows are unnerving and uncertainty
remains. The carry trade is not the entire story and an outflow
in foreign portfolio funds or (worse) domestic household funds
would add to the alarm.

But based on evidence from the size of China’s overseas
borrowing, and the shift in incentives as the yuan stabilizes,
carry trade outflows should slow and ultimately end long before
China’s FX reserves are exhausted. February’s reduced drop in
reserves — $29 billion versus $99 billion in January — may
prove to be the shape of things to come.

+++ P.O. V.V.I. (BBG) Is China’s Economy Growing ? – China Cement Demand


…Is China’s Economy Growing…?

…Or Growing what the Government claims…?

…One thing we think we know…

…An economy cannot grow without increases in sales of electricity, cement and steel.

…Because of changes in cement quality used the data is not clear.

…And the current cement glut in China, and also the current excess cement capacity, which at the end of 2015 was of 400 million tons or 15 % of the total, make any assessment very difficult.

…And, anyway, all data from China is everything but clear…

…But I still would argue that the odds are that China is not growing at all.

…And certainly not what Beijing claims it is growing.

…Additionally data released yesterday shows an export slump that deepened in     February,with overseas shipments that tumbled 25.4 percent in U.S. dollar terms from a year earlier.

…And imports felt for the sixteenth month in a row, an estimated 13.8 percent.

…In conclusion,and has I have said in previous occasions, I am of the opinion that China’s economy is not growing at all.

…And this is very dangerous.

    Francisco (Abouaf) de Curiel Marques Pereira