- Caixin and George Chen of the South Morning Post are both reporting that the China Security Finance Corporation is borrowing another RMB 1.4 trillion to prop up the stock market. Now considering they already had access to RMB 3 trillion, it would only make sense that they are requesting additional borrowing because they need more money. If you are keeping score at home sports fans, that would bring us up to RMB 4.4 trillion in support.
- I have a piece coming out on FT Alphaville about output in the Chinese economy today which will basically detail why Chinese growth is probably near zero. The one thing that I will jump the gun on here is the divergence between official retail sales data and output in consumer products from clothes to electronics. Garments, footwear, leather, textiles, passenger traffic, and consumer electronics output in China are all flat to falling significantly. Especially in a deflationary price environment, as we are for these categories, how is retail sales growing 10 percent or more annually? What are retailers selling if consumer product output is down? This to me seems like a glaring inconsistency because it certainly isn’t coming from a flood of imports.
- As I have said repeatedly, watch liquidity. The PBOC is shoveling liquidity into the market as fast as possible indicating bank liquidity is in extremely short supply. I haven’t even kept up with the near daily injections of RMB 100 billion. Watch this as it’s a major issue.
- I have increasingly become convinced that there is a policy divide in Beijing. The PBOC appears resistant to propping up the stock market but is willing to accept injecting liquidity and defending the RMB. It is interesting to note that most capital to prop up the stock market is coming from commercial banks. This is exposing the banks to enormous risk and is essentially a type of margin loan but probably without the asset security. Beijing appears very divided over how much to defend the stock market and even how much to defend the RMB. Though not large, the RMB fix has been weaker everyday this week.
- Pay close attention to the 500 or more stocks in China that are still frozen. Earlier it was reported virtually all these firms borrowed money with pledged stock near the peak of the market in May and June. If these reports are true, it is likely that given the length of time these stocks have remained frozen, that these firms would be in technical bankruptcy. That would be a major blow and cause all kinds of panic so clearly something will be worked out to soften the blow here. These 500 firms might be the epicenter.
Policy Divisions Rife in Beijing Over How to Defend the Stock Market and RMB
Christopher Balding , August 28, 2015 9:32am
Tags: PBOC, RMB, stock market
Trending
Pick-Up Artist Traveling Around Asia Angers Chinese Press with “Best Of” Video
“Strongly despise the acts of this womanizer"
Charles Liu | 4 days agoShenzhen Opens Largest Railway Station In Asia
Shenzhen to downtown Hong Kong in 15 minutes
Charles Liu | 3 days agoThe Shenzhen Landslide: Before and After
Over 70 victims still unaccounted for
Charles Liu | 5 days agoWould You Marry an American? Peking University Students Overwhelmingly Say “No”
"I prefer Chinese girls"
Charles Liu | 4 days agoPercentage of Chinese That Smoke Unchanged Since 2010
Total number of smokers increased 15 million to 316 million
Charles Liu | 3 days agoChinese Ridicule Viral Video Praising Japanese Bathrooms
Video makes no mention of China, but comparisons ensue
Charles Liu | 2 days agoNow You Can Dine Like a President by Ordering State Meals Through Taobao
"China's most expensive take-out"
Charles Liu | 5 days agoMore People From China Are Traveling Abroad Than From Any Other Country
It's 19 times higher than the figures from 1998
Charles Liu | 4 days ago