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Over-capacity in the market, and "no option to quit", has created distortions in the market. This might be one of the key reasons, that steel is cheaper than cabbage in China, which is ridiculous... 
Zombie factories stalk the sputtering Chinese economy
BEIJING — Mr Miao Leijie loses money on each tonne of cement his company produces. But stopping production is not an option.
When Lucheng Zhuoyue Cement Plant opened in 2011 to supply the real estate and infrastructure industries in the northern Chinese city of Changzhi, the company raised most of the initial money from banks. Now, Mr Miao, the factory’s general director, needs to keep churning out cement simply so the company can pay the interest on its loans.
It will be tough for the business to get out of the hole. Customers and investments are drying up, and the company is borrowing even more money to stay afloat.
“If we ceased production, the losses would be crushing,” Mr Miao said. “We are working for the bank.”
Changzhi and its environs are littered with half-dead cement factories and silent plants, an eerie backdrop to the struggling Chinese economy.
...
http://www.todayonline.com/chinaindia/ch...se-economy
“夏则资皮，冬则资纱，旱则资船，水则资车” - 范蠡
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Sure sounds like a recession is coming around in china..
sent from my Galaxy Tab S
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Buffett's trading system for sale...^^
2015.08.30開放新中國／ 一億人都在炒 大陸瘋談「股」論金
https://www.youtube.com/watch?v=U8IRWSBvtrM
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China’s debt problem is the real concern
- PETER CAI
- BUSINESS SPECTATOR
- AUGUST 31, 2015 12:59PM
[b]In the last few weeks, global investors have been spooked by the sudden and unexpected devaluation of the Chinese yuan and the dramatic collapse of the Chinese sharemarket.[/b]
Jittery investors and analysts see these two events as harbingers of a looming financial crisis in the world’s second largest economy.
However, these two events, though significant, pale in comparison to China’s ever increasing debt mountain. How Beijing tackles this issue should be of far greater concern to global investors and China watchers than following the daily speculative movements on China’s sharemarket, which has a limited connection to the real economy.
Local government debt has increased dramatically over the past two years. According to recently released official data, local government debt increased from 10.9 trillion ($2.4 trillion) to 15.4 trillion ($3.4 trillion) between June 2013 and December 2014. That is an increase of 41.3 per cent within 18 months.
However, this amount is only part of the local government’s debt obligations. Apart from these explicit debts, they have also guaranteed or partially guaranteed another 7 trillion yuan worth of debt, according to figures released by the National Audit Office in June 2013. The latest data reveals that these debts have increased by 22.9 per cent to 8.6 trillion yuan.
So in total, the Chinese government had debt obligations of 24 trillion yuan at the end of December 2014. Given the pace at which this debt has expanded over the last 18 months, assuming it continues to grow at an annualised rate of 25.9 per cent, the explicit debt component could add another 4 trillion yuan by the end of this year.
So, at the end of this year, we could be staring at a 30 trillion yuan ($6.5 trillion) local government debt pile. Unlike the casino-like sharemarket, local government debt was, is and will continue to be a significant drag on the economy as well as a major source of instability for the country’s fragile financial system.
At the moment, Beijing is adopting a two-pronged strategy to tackle this problem. The Chinese government is introducing a local government debt ceiling for the first time in its history and it will be capped at 16 trillion yuan for fiscal year 2015. This means that collectively local governments can only borrow an additional 600 billion yuan this year.
Apart from the debt ceiling, the government has also set a debt-to-revenue ratio of 100 per cent as a red line.
China’s Finance Minister, Lou Yiwei, told the Standing Committee of the National People’s Congress last week that the local government debt-to-revenue ratio could reach 86 per cent at the end of 2015.
This attempt to introduce a debt ceiling at a time when fixed-asset investment is falling rapidly is likely to put further pressure on economic growth. Chinese local governments are no longer allowed to use local government financing vehicles to raise fresh debt, cutting them off from the shadow banking system.
The most significant part of the government’s policy is the debt swap program. Since March this year, the government has been issuing long-term, government-backed debt to replace short-term, high-interest local government debt. The initial program involved about one trillion yuan.
Since then, the government has introduced two new rounds of the debt-swap program, totalling 3.2 trillion yuan. The program will address several urgent issues.
Firstly, a lot of short-term borrowing was due in the first half of 2015: the program has swapped short-term debt into longer-term debts with a lower interest rate. This will ease the immediate burden of repayments as well as win time to resolve the debt problem.
The debt restructuring program is also forcing local governments to air their dirty laundry and to increase transparency. At the moment, Chinese regulators are still trying to find out how much local governments have borrowed. The size of local government debt is likely to swell still further as auditors continue to examine their books.
The large issuance of new debt, as well as replacement debt, is putting a lot of pressure on large commercial banks, who are by far the largest buyer of these bonds. A fixed-interest analyst from Minsheng Securities says around 500 billion yuan in new government bonds are being issued every month and says pressure on demand is considerable.
For example, the Liaoning provincial government didn’t manage to sell all of its bonds at a public auction held at beginning of August. Markets are clearly concerned about the speed of economic growth in the province, which only managed to expand by 2.6 per cent during the first half of 2015. The province’s tax revenue also declined 22.7 per cent during the first six months of this year. Liaoning has one of the worst performing economy in the country due to its reliance on heavy industry.
The Chinese government’s decision to put a lid on the growth of debt is a sound one but as with the American congressional debt ceiling, it can always be lifted.
We will have to wait and see what impact it will have on the fiscal discipline of local governments. The debt swap program will also help to ease the debt burden, but it will not reduce its size.
Beijing has introduced sensible measures to contain the growth of debt but the biggest challenge is how to reduce it over time before it explodes. If that were to ever happen, it could have devastating consequence for the global economy.
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(17-08-2015, 10:02 AM)CityFarmer Wrote: RIP for the 112, and best wishes for the 95, and those remained in hospitals...
Rescuers work to clear China blast site of chemicals before rain falls
TIANJIN, China - Chinese soldiers and rescue workers in gas masks and hazard suits searched for toxic materials in China's port of Tianjin on Sunday as Premier Li Keqiang arrived to offer condolences, days after explosions flattened part of a national development zone.
The goal is to clear the chemicals before any rain falls, which could create further toxic gas.
The death toll rose to 112 from Wednesday's disaster, which sent massive yellow and orange fireballs into the sky, hurled burning debris across a vast industrial area, crumpled cars and shipping containers, burnt out buildings and shattered windows of nearby apartments.
The number of missing rose to 95, most of them fire fighters, state media said, suggesting the toll would rise significantly. More than 720 people remained in hospital.
...
http://www.todayonline.com/world/china-b...ing-xinhua
Corruption is dangerous, and fatal...
Shortcuts, lax rules proved an explosive mix in Tianjin
TIANJIN — One partner was the son of a local police chief, the other an executive at a state-run chemicals firm. After meeting at a dinner party, they started a company to handle the export of the most dangerous chemicals made in China, promising “outstanding service” and “good results”.
Within two years, Rui Hai International Logistics had built a reputation as the go-to place for businesses looking to ship hazardous materials to customers abroad.
Rui Hai offered lower prices, a no-hassle approach to paperwork and quick government approvals. Business was brisk. It seemed like another success story for the Binhai New Area, a thriving economic development zone established here by the ruling Communist Party around one of China’s busiest seaports.
Now, more than two weeks after explosions at its warehouses levelled a section of that district, killing 150 people, injuring more than 700 and leaving millions here fearful of toxic fallout, Rui Hai has become a symbol of something else for many Chinese: The high cost of rapid industrialisation in a closed political system rife with corruption.
In interviews with more than a dozen of Rui Hai’s former clients and associates — and unusually critical reports in China’s state-controlled news media — a picture has emerged of a company that exploited weak governance in one of the party’s showcase economic districts and used political connections to shield its operations from scrutiny.
Rui Hai began handling hazardous chemicals before it obtained a permit to do so, and it secured licences and approvals from at least five local agencies that conducted questionable reviews of its operations. Local authorities outsourced one safety review required for a storage permit to a private contractor that Rui Hai selected and paid.
As much as 3,000 tonnes of hazardous chemicals were stored at Rui Hai on the night of the explosions, including 700 tonnes of sodium cyanide, deadly in a dose of less than a tablespoon, and 1,300 tonnes of fertiliser nitrates, more than 500 times the amount used in the 1995 Oklahoma City bombing.
Rui Hai’s shipping yard covered more than 4.5ha, but clients said it routinely packed huge volumes of different volatile chemicals together in haphazard fashion, instead of storing them separately, at safe distances and in smaller quantities as recommended in the industry.
...
http://www.todayonline.com/chinaindia/ch...epage=true
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China August factory activity shrinks at fastest pace in 3 years
China's factories continued to suffer from sluggish demand at home and abroad, which has saddled some firms with enormous amounts of idle capacity and forced them to cut prices, eating into profits.
[Image: workers-fix-second-hand.jpg] Workers fix second-hand robots in a factory in Shanghai. (Photo: REUTERS/Aly Song)
BEIJING: Activity in China's manufacturing sector contracted at its fastest pace in three years in August, an official survey showed on Tuesday (Sep 1), reinforcing fears of a sharper slowdown in the world's second-largest economy despite a flurry of government support measures.
The official Purchasing Managers' Index (PMI) fell to 49.7 in August from the previous month's reading of 50.0, in line with expectations of analysts polled by Reuters.
A reading over 50 points signals an expansion in activity while one below that mark indicates an contraction on a monthly basis.
China's factories continued to suffer from sluggish demand at home and abroad, which has saddled some firms with enormous amounts of idle capacity and forced them to cut prices, eating into profits.
The sub-index for new orders - a proxy for domestic and foreign demand - fell to 49.7 in August from July's 49.9. New export orders fell to 47.7 from 47.9 in July, contracting for an 11th consecutive month, according to data from the National Bureau of Statistics.
With demand remaining tepid, factory owners were forced to layoff more workers, and the employment sub-index fell to 47.9 from 48.0 in July.
"The broad based decline in almost all components of the PMI hints the central bank was right in introducing further easing measures on Aug 25," said Chester Liaw, an economist at Forecast Pte Ltd in Singapore.
"It is clear that the interest rates and RRR cuts were not only aimed at containing further falls in the SSEC, but to boost activity in the real economy."
A preliminary, private survey released in August showed China's factory sector shrank at its fastest rate in almost 6-1/2 years in August, fanning global concerns that the economy may be slowing more sharply than earlier feared.
The government has rolled out a flurry of steps since late last year to try to keep the country's economy growing at roughly 7 percent for the year, as targeted.
The central bank last week cut interest rates and trimmed the amount of reserves banks must hold for the second time in two months, ramping up efforts to support the economy. It has now cut interest rates five times since November.
A Reuters poll suggested that China's central bank is highly likely to ease monetary policy again by the end of this year to support a rapidly cooling economy and calm financial markets.
Premier Li Keqiang said recently international market instability "has increased the uncertainties around the global economic recovery, and the impact on China's financial market and imports and exports has also deepened, with the economy facing new pressure."
A similar official survey on the services sector showed activity was cooling there, too. Strength in services has been helping offset the broader economic downdraft from deteriorating factory conditions.
The official non-manufacturing Purchasing Managers' Index (PMI) fell to 53.4 from July's reading of 53.9, according to the National Bureau of Statistics.
The services sector has accounted for the bigger part of China's economic output for at least two years, with its share rising to 48.2 percent last year, compared with the 42.6 percent contribution from manufacturing and construction.
- Reuters
Winston Churchill:-
“The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.”
"The farther backward you can look, the farther forward you are likely to see."
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Yes, it is indeed, another step backward...
China c.bank to clamp down on forwards trading to curb yuan depreciation
SHANGHAI/HONG KONG (Sept 1): China's central bank plans to tighten rules on trading of currency forwards from October, sources with direct knowledge of the matter told Reuters, in a move to curb speculation and volatility after a shock devaluation of the currency last month.
The People's Bank of China (PBOC) has repeatedly intervened to stabilise the yuan since the Aug 11 devaluation - billed as free-market reform - sent shockwaves through global markets and depressed emerging currencies.
"The forwards move is yet another step to cushion unexpected strong expectations of yuan depreciation after the devaluation," said a senior trader at a major European bank in Shanghai.
"Together with increased frequency of intervention in the spot market, this is another step backward for China's currency reforms."
The sources said the PBOC will require banks trading currency forwards to set aside reserves from Oct 15. Banks will be required to keep the equivalent of 20% of their clients' forex forwards positions in dollar reserves to be held for a year at no interest, they added.
The base for calculating reserves will be the nominal value of new contracts clients sign with banks to purchase dollars, or banks' dollar sales to clients, traders said.
Excluding clients' dollar sales to banks gives a clear signal the move is aimed at curbing the yuan's depreciation expectations in derivative markets, they said.
The PBOC did not immediately respond to requests for comment.
...
http://www.theedgemarkets.com/sg/node/226016
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02-09-2015, 01:16 PM
(This post was last modified: 02-09-2015, 01:39 PM by Behappyalways.)
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So yuan will nosedive beginning of next year? 
PBOC seen quitting yuan support by end-2015 as reserves shrink
02 Sep 2015 12:26
[BEIJING] China's central bank will have to step back from supporting the yuan??by early December and allow the currency to decline, given the current strain on foreign- exchange reserves, according to Rabobank Group.
The nation has to keep at least US$2.7 trillion in hand to avoid any potential shortfalls, considering it needs US$1 trillion to pay for six months of goods imports and US$1.7 trillion to service external debt, Michael Every, head of financial markets research at Rabobank in Hong Kong, wrote in a note Tuesday. The stockpile will shrink by US$40 billion a month for the rest of 2015, partly due to efforts to prop up the yuan, according to a Bloomberg survey conducted in August.
...
Source: Business Times Breaking News
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