China Refuses To Confirm Trade Deal As Local Media Stays Dead Silent

Markets are closed in Beijing, the workday is over, and there no official reports in local media of an actual trade deal, that is because, as we explained on Thursday night, the language of the deal will never be made public and there would be no signing event between President Trump and President Xi. One may ask if there is even a "deal"?

As the WSJ writes this morning, China indicated that a near-term trade agreement with the U.S. has yet to be completed despite President Trump’s signoff, highlighting the unpredictability of a negotiation process that has rattled global markets and businesses.

Trump on Thursday approved a so-called phase-one trade pact that will scale back existing tariffs on Chinese imports and eliminate new levies scheduled to take effect on Sunday, in exchange for a written pledge from Beijing to buy tens of billions of dollars worth of U.S. farm products, among other concessions.

While Mr. Trump was “upbeat and enthusiastic about this breakthrough,” in the words of Michael Pillsbury, an adviser to the president during the trade talks, the mood in Beijing has been decidedly more sober.

As noted above, none of China’s state-owned media outlets or economic agencies involved in the trade negotiations made any public statement on Friday about the deal which according to Trump was finalized.

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Hashrate Domination: China Controls Two-Thirds Of The World's Crypto Network's Processing Power

A new report from Reuters, citing CoinShares, indicates that China's Bitcoin miners now control a whopping 66% of the world's crypto network's processing power. This could be bad news for US miners as it signals China is quickly advancing.

Also known as "hashrate," it's the speed at which a computer is performing an operation in Bitcoin code to unlock coins, China has been steadily gaining hashrate share this year.

In June, China's Bitcoin miners controlled 60% of the global hashrate, and now the figure is up to 66% in December.

Chris Bendkisen, head of research at CoinShares, believes the rapid increase in the Chinese share of hashrate could be due to the deployment of advanced mining technology.

"This is beneficial to the Chinese mining industry," said Bendiksen. "If you are the first to increase your proportion of the hashrate, and you can do that before your competitors, that's generally good."

Mining crypto has become more difficult over the last several years as profitability sags. The overall Bitcoin hashrate has risen 80% since June, which in recent times, has created stronger profitability for miners who have access to cheap energy.

With China controlling more and more of the world's Bitcoin hashrate, some worry that the US could be falling behind the crypto curve, as Beijing is making a state effort to be a leader in blockchain.

Xiao Wunan, an executive vice-chairman of the China-backed Asia Pacific Exchange and Co-operation Foundation (APECF), recently told CNBC that Beijing's crypto initiatives are strategically important to the communist party.

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The Next Pearl Harbour? China's Gold-Backed Crypto Currency Will Blindside US Dollar

Indeed, this weekend marks the 78th anniversary of the attack on Pearl Harbor in Hawaii, which opened the door for the United States to enter World War II. Turn on your TV and you will see military mavens rambling on, pontificating about ‘the defense of the realm’, all the while completely aloof and unaware of the American empire’s real Achilles heel.

Recent, financial pundit and TV host Max Keiser outlined such a scenario, and warned that the US will be blind-sided the day that China introduces its gold-backed crypto currency – an absolute game changer which would create a “catastrophic trapdoor opening underneath the US economy,” said Keiser.

Not surprisingly, very few mainstream financial pundits in the West are willing to admit that China possesses gold reserves in excess of 20,000 tons, and by introducing a gold-backed cryptocurrency, it has the ability to “kill the US dollar deader than a door nail …. a new Pearl Harbor-type event and it’s coming in the next six to nine months.”

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China Set To Make History With Record Number Of Bond Defaults In 2019

While China is bracing for what may be a historic D-Day event on December 9, when the "unprecedented" default of state-owned, commodity-trading conglomerate Tewoo with $38 billion in assets may take place, it has already been a banner year for Chinese bankruptcies.

According to Bloomberg data, China is set to hit another dismal milestone in 2019 when a record amount of onshore bonds are set to default, confirming that something is indeed cracking in China's financial system and "testing the government’s ability to keep financial markets stable as the economy slows and companies struggle to cope with unprecedented levels of debt."

After a brief lull in the third quarter, a burst of at least 15 new defaults since the start of November have sent the year’s total to 120.4 billion yuan ($17.1 billion), and set to eclipse the 121.9 billion yuan annual record in 2018.

The good news is that this number still represents a tiny fraction of China’s $4.4 trillion onshore corporate bond market; the bad news is that the rapidly rising number is approaching a tipping point that could unleash a default cascade, and in the process fueling concerns of potential contagion as investors struggle to gauge which companies have Beijing’s support. As Bloomberg notes, policy makers have been walking a tightrope as they try to roll back the implicit guarantees that have long distorted Chinese debt markets, without dragging down an economy already weakened by the trade war and tepid global growth.

"The authorities have found it hard to rescue all the companies," said Wang Ying, a Shanghai-based analyst at Fitch Ratings, perhaps envisioning at least two banks that have experienced depositor runs in the month of November in the aftermath of an unprecedented succession of bank failures earlier in the year.

It's not just banks however: this year’s debt woes have spread to a broad array of industries, from property developers and steelmakers to new-energy firms and software makers. The types of borrowers facing repayment difficulties has also expanded from private companies and local state-run firms to business arms of universities, an obscure and loosely regulated corner of China’s corporate world.

China's two latest defaults involved just such a company; on Monday Peking University Founder Group shocked investors after failing to repay a 2 billion yuan bond. The same day, Tunghsu Optoelectronic Technology, a maker of photoelectric display components, also failed to deliver early repayment on both interest and principal for a 1.7 billion yuan note.

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Russian Gas Mega-Pipeline To China Goes Online As Putin & Xi Hail Closer Ties

Late Monday Chinese President Xi Jinping and Russia's Vladimir Putin jointly launched the major unprecedented cooperative project that had been years in the making called the 'Power of Siberia' gas pipeline.

The China-Russia east-route pipeline is now providing China with Russian natural gas, which according to Chinese state media is expected to reach 5 billion cubic meters in 2020 and increase to 38 billion cubic meters annually from 2024.

Crucially, S&P Global Platts estimates that total sales through the pipeline is projected to meet nearly 10% of China's entire gas supply by 2022, ensuring vital energy security as Beijing continues to feel the pressure and uncertainty of the trade war with Washington. 

The ceremony to officially bring the pipeline online was held as a video call between Xi and Putin was underway. Xi told Putin: "The East-route natural gas pipeline is a landmark project of China-Russia energy cooperation and a paradigm of deep convergence of both countries' interests and win-win cooperation."

The deal had been cemented in May 2014 when Russian gas giant Gazprom signed a 30-year contract with China National Petroleum Corp, after which the pipeline agreements were signed with both leaders present in Shanghai in later 2014.

Gazprom CEO Alexei Miller announced to both leaders that the pipeline had been opened via video link. "Gas is flowing to the gas transmission system of the People's Republic of China," he said.

A 30-year deal was signed by Putin and Xi in 2014, and while a final figure has not been announced, it is believed to be worth more than $400 billion. — CNN

Gazprom will oversee operation of the mammoth pipeline which runs more than 8,100 kilometers (5,000 miles) across the two countries.


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China's 'Official' Virtual Currency Could Be Arriving "Quite Soon" To "Challenge The U.S."

As if the trade war - and soon to be currency war - between China and the U.S. needed another wrench thrown in its gears...

China sent cryptocurrencies tumbling on Friday after re-cracking-down on exchanges that are operating illegally against authorities' ban.

On Nov. 22, authorities in Shenzhen have identified a total of 39 exchanges falling foul of China’s cryptocurrency trading ban, according to local news outlet Sanyan Finance. 

It remains unknown what consequences the exchanges will face, with Sanyan highlighting a desire to crack down on liquidity.

It appears that China's blockade on non-government-sanctioned crypto trading, could be on its way to launching its own digital currency within the next 6 to 12 months, according to fund manager Edith Yeung, who recently appeared on CNBC. 

The Chinese government has been researching the idea over the last few years and has reportedly identified entities to use for a potential rollout, Yeung says. 

“It’s really been something (that’s) been in the works for the last few years,” she said on Wednesday during an interview. Yeung is a partner at blockchain-focused venture capital fund Proof of Capital. 

When she was asked how long it might be before the launch becomes reality, she responded "Quite soon. So I definitely think within the next 6 to 12 months."

And China has recently embraced blockchain, with state media reporting that President Xi Jinping said the country should look to "take a lead" in the technology. 

Wendy Liu, head of China strategy for UBS, also said that there was greater willingness to work with blockchain and 5G in China because they will help facilitate and manage the world's biggest country by population. 

Liu commented: “Due to its own needs, (China) is going to push in that direction and you see this willingness to back these technologies more so than anywhere else.”

Meanwhile, tensions between China and the U.S. continue to hit new fever pitches, as the trade war standoff between the two countries continues. Yeung says that even thought the dollar remains the world's reserve currency, the wider use of the Yuan could "challenge the U.S."

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Futures Spike After China's Top Trade Negotiator Says "Cautiously Optimistic" About Phase 1

Futures slumped for just over three hours amid fears that the US-China trade deal was hopelessly lost and in anticipation of Chinese retaliation for Congress voting unanimously to support Hong Kong protesters, before a burst of optimism was injected. Only there was a surprise twist: instead of the optimism coming from Kudlow, or Ross, or even a Trump tweet, this time it was China that did what it could to push up US equity futures.

As Bloomberg reported, China’s chief negotiator and vice premier Lie He, said Wednesday night that he was “cautiously optimistic” about reaching a phase one trade deal with the U.S., even as tensions over Hong Kong soar while trade talks continue to stretch out without even a meeting date still agreed upon.

How do we know this? Because as Bloomberg reports, "Liu He made the comments in a speech in Beijing" although not in public, but rather to an Impeachment-style whistleblower, i.e., "according to people who attended the dinner and asked not to be identified."

It was unclear why, if Liu He was truly "cautiously optimistic", officials wouldn't say so in public, and instead we would have to rely on a deep throat Bloomberg source, who refused give his name. This unnamed source said that He also explained China’s plans "for reforming state enterprises, opening up the financial sector, and enforcing intellectual property rights -- issues which are at the core of U.S. demands for change in China’s economic system."

And while algos focused exclusively on the flashing red Bloomberg headline, reading a bit further into the article reveals that Blomberg's unnamed "source" Lie He told one of the attendees that he was “confused” about the U.S. demands... but was confident the first phase of an agreement could be completed nevertheless.

Credible or not, the Bloomberg report was enough to send S&P futs spiking back over 3,100 now that if not order, then at least trade optimism has been (somewhat) restored...

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Globalist-Endorsed War-On-Cash May Be China's Next Terrifying Weapon

Recent protests in Hong Kong, along with the resulting fall out from international corporations questioned for their relationships with mainland China, has placed a renewed focus on the authoritarianism of the Chinese Communist Party. This has led to several articles identifying ways in which Western countries have learned from the CCP, including Europe's growing embrace of web censorship and growing interest in the social credit system rolled out in 2018. Given that it wasn't that long ago that it was common to see Western leaders and neoliberal commentators openly envy aspects of the Chinese political system, these concerns are certainly worth exploring. What should be of equal interest, however, is the ways China may be learning from the West.

As Joseph Salerno, among others, has noted for years now, a successful War on Cash would represent a new escalation in government's long history of weaponizing currency against the population. Moving far beyond the clipping of coins as a means of stealth tax collection, the purpose of a War on Cash is not simply to strengthen a government's grasp on the wealth of its citizens - but the move becomes a highly effective means of tracking any who find themselves in the crosshairs of the state.

These features make a cashless society attractive for any government - which explains why it has become an increasingly popular goal for politicians, bureaucrats, and central bankers in the West. This is precisely why we've seen the cause promoted from such influential economists as Kenneth Rogoff, former chief economist of the IMF, Marvin Goodfriend, an economics professor at Carnegie Mellon who was once nominated to the Fed by Donald Trump, as well as various economic ministers. The governments of Australia and Sweden have made a cashless society an explicit policy goal within their countries, while some central banks — such as the ECB — have begun phasing out higher denomination bills as an opening move in their own cashless campaigns.

Of course, the international perspective of the Swedish government is quite different than that of China's — and understandably so. For all of Sweden's issues, there are no comparisons to the CCP's brutal child policies or its treatment of religious minorities. What should be understood, however, is that a successful move to a cashless society would give the Swedish government similar tools over its population as those the Communist Party seeks over its dominion. While the former may ground their policy aims in “combating drug trafficking” and “convenience,” the end result in both cases is a new terrifying weapon in the hands of the state.

Luckily, it's easier for the government to desire a cashless society than it is to create it, and we've seen countries like Sweden rethink their approach. There is reason to think that China may be less apprehensive. Not only is the government more powerful, but it is also more desperate.

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"Ridiculous": $1 Trillion In Orders For $7 Billion Chinese Bond

In recent years, hardened bond market cynics snickered when insolvent European nations such as Italy or Greece saw 4, 5, or more times demand for their bond offerings than was for sale, whispering to themselves that such oversubscriptions for potentially worthless debt assure a very unhappy ending. Yet not even the biggest cynics were prepared for what just happened in China.

When Shanghai Pudong Development Bank sold $7 billion in convertible bonds last month, investors placed more than $1 trillion worth of orders, making this a 140 times oversubscribed offering, enough to shock even the most seasoned China investor, the FT reports.

That $1 trillion in bids was almost as large as the entire stock-market capitalisation of Apple or Microsoft — the two biggest companies in the world. "It was a ridiculous amount," said Gerry Alfonso, head of research at Shenwan Hongyuan Securities in Shanghai. It is also a testament to how desperate the world has become in chasing yields and return, as well as just how much excess liquidity there is in the market at the moment

While new issue oversubscriptions have become the norm in recent years, this absurd case had several Chinese market unique characteristics, reflecting a surge in issuance of such equity-linked instruments in China — a rise helped by what the FT called "an unusual embrace of the product by policymakers better known for cracking down on financial innovations to ensure stability."

So far this year, Chinese companies have issued a record $40bn in convertible bonds, up more than 80 per cent from the full-year total in 2018, according to Dealogic.

It now appears that converts have become the latest Chinese bubble due to their hybrid characteristics: while they carry a (lower) coupon payment they also offer investors the right to switch them for equity if a company’s shares rise to a certain price. For companies, convertibles offer a way to raise money more cheaply than by issuing regular debt and do not immediately dilute shareholders’ equity.

Ronald Wan, chief executive at Partners Capital in Hong Kong, said Chinese convertibles had become more attractive to investors thanks to this year’s stock rally, while the government was promoting the instruments as a way to rein in financing done off-balance sheet, or through a fragile shadow banking sector. Naturally, Wan cautioned that convertibles’ performance "depends on the quality of the issuer", with investors typically prefering large banks and big blue-chip companies over small and mid-sized issuers, especially in a time when China's smaller banks are either hit by bank runs or outright getting bailed out.

Shenwan's Alfonso meanwhile warned that while large issuers such as Shanghai Pudong have seen ample liquidity in their convertibles after listing, investors in smaller issuers faced the prospect of taking heavy losses in the event of a sell-off.

"The liquidity is bad but there is liquidity,” he said. “The thing is, the price you’re going to get there is pretty horrendous."

That, however, is not preventing every investor scrambling to be allocated a piece of the original bond in hopes of an early pop which can then be sold.

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As US Moves To Ban Huawei 5G, CEO Says Good Riddance Ahead Of Great Decoupling

The great economic decoupling has started, this is something that we've warned about since the trade war began. Years of elevated financial market volatility will follow as the world is sliced in half, with one side being controlled by the US, and the other side controlled by China.

The latest evidence of decoupling comes from Huawei Technologies CEO Ren Zhengfei, who spoke with The Wall Street Journal and said: "We can survive very well without the US. The China-U.S. trade talks are not something I'm concerned with."

In May, the Commerce Department blacklisted Huawei, the world's largest 5G equipment and smartphone producer, from doing business US firms.

Zhengfei said, "we have virtually no business dealings in the US" since the blacklisting.

Huawei was a major buyer of US semiconductors before it was blacklisted. Sales figures showed the company bought $11 billion of technology from US suppliers in 2018. The blacklisting has forced Huawei to find alternative sourcing.

Zhengfei said the company is rapidly expanding its 5G network products across the world without US chips. He said 5,000 5G base stations are being constructed every month.

Despite the blacklisting, Huawei is still purchasing some chips from US firms that produce offshore, where US restrictions don't apply.

Will Zhang, Huawei's president of corporate strategy, told The Journal that purchasing levels of US chips are at 70% to 80% of its previous level.

The Trump administration has spent at least 15 months creating Sinophobia across the world, by warning countries not to use Huawei 5G equipment because of spying concerns.

Zhengfei has denied the allegations that it spies on its customers or any government, though the Trump administration has labeled Huawei a national security threat.

Beijing views Huawei as a centerpiece of its economic success and is considered an essential piece of any future trade deal between the US.

The next several quarters will be critical for Huawei. That is if it can continue sourcing most of its chips from alternative producers and continue dominating the global smartphone space and the build-out of 5G networks across the world, then that will indicate the great decoupling from West to East is well underway.

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China To Establish $10 Trillion Economic Zone In Space

Having already created 12 free trade zones (with 6 more coming soon) in and around major Chinese metro areas...

. Beijing's next project to boost commerce is more ambitious than anything seen on earth before. Literally.

According to the Global Times, China plans to establish an Earth-moon space economic zone by 2050, which is expected to generate $10 trillion worth of services per year. The zone will cover areas of space near Earth, the moon and in between.

Bao Weimin, director of the Science and Technology Commission of the China Aerospace Science and Technology Corporation, revealed the ambitious plan at a seminar last week on the space economy, Chinese media reported Friday. CAST is a state-owned company focused on researching, making and launching carrier rockets, satellites, spacecraft and space stations. 

Perhaps because by 2050 all of China will be one giant free trade zone (even though the US Trade war will still not be over), the proposed zone will cover areas of space near Earth, the moon and in between, Weimin said, adding that companies involved in basic industries, application exploration and development will feature at the zone, which will focus on three key fields: interspace transport, space resource detection and space-based infrastructure.

In a report on developing earth and moon space, Bao shared his thoughts on the economic potential in this field and pledged that the country would study its reliability, cost and flight-style transportation system between the Earth and moon, The Science and Technology Daily reported Friday.

He pledged to complete basic research and make a breakthrough on key technologies before 2030 and establish the transportation system by 2040.  By 2050, China could successfully establish an earth-moon space economic zone, he said.

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Chinese Bank On Verge Of Collapse After Sudden Bank Run

First it was Baoshang Bank , then it was Bank of Jinzhou, then, two months ago, China's Heng Feng Bank with 1.4 trillion yuan in assets, quietly failed and was just as quietly nationalized. Today, a fourth prominent Chinese bank was on the verge of collapse under the weight of its bad loans, only this time the failure was far less quiet, as depositors of the rural lender swarmed the bank's retail outlets, demanding their money in an angry demonstration of what Beijing is terrified of the most: a bank run.

Local business leaders, political cadres and banking executives rallied Thursday at the main branch of Henan Yichuan Rural Commercial Bank, just outside the central Chinese city of Luoyang, where they stood one by one before a microphone to pledge their backing for the bank, as smiling employees brandished wads of cash before television cameras to demonstrate just how much cash, literally, the bank had.

It was China's latest, and most desperate attempt yet to project stability and reassure the public that all is well after rumors spread that the bank’s chairman was in trouble and the bank was on the brink of insolvency. However, as the WSJ reports, it wasn’t enough for 31-year-old Li Xue, who showed up for the third day Thursday to withdraw thousands of yuan of her mother’s life savings after hearing from fellow villagers that Yichuan Bank - which is the largest lender in Yichuan county by the number of branches and capital, and it is also a member of PBOC’s deposit insurance system, according to the local government - was going under.

Just like any self-respecting Ponzi scheme, the bank's branch managers tried to persuade her to keep her money with them until March, when her mother’s three-year deposits would mature, yielding more than 10,000 yuan in interest. And then, just like any Ponzi scheme, to sweeten the offer, the bank managers also offered her even higher-yielding products, plus supermarket gift cards, just to keep her money there..

"Our bank is state-backed, and your money is insured by deposit insurance," one female manager told her, but Ms. Li refused, her confidence in the state's lies crushed.

“We really can’t afford to lose the money,” she said.

The bank run at Yichuan Bank, located in China's landlocked province of Henan, makes it at least the fourth bank that authorities have rushed to rescue this year. It won't be the last.

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China's Bond Market Faces Turmoil Amid Maturity Deluge

While the US bond market has had its share of harrowing slumps and vomit-inducing short squeezes in the past year as consensus shifted from one of "the neutral rate is far away" to "here comes NIRP", China's bonds have been a bastion of stability, trading in a tight range between 3% and 3.50% for the past year.

hat may be about to change.

The reason: a wall of bond maturities is about to flood across China’s sovereign-bond market, which in the past three months has already been reeling from a global sell-off and rising inflation.

According to Bloomberg, more than 2 trillion yuan ($283 billion) of local-government notes will mature in 2020, a record and 58% more than this year’s level. This means fresh debt to refinance upcoming maturities will start hitting the market soon, with a the southern province of Guangdong expected to sell notes as early as November.

This is happening as China's 10-year yield rose 3 basis points to 3.31%. the highest since late May, while the cost on 12-month interest rate swaps jumped 5 basis points to 2.92%. The yield on China Development Bank’s 3-year bonds due January 2022 rose 10 basis points to 3.25%.

Despite trading in a narrow range, China’s government bonds have been sliding for nearly two months, starting around the time a "growth shock" hit US rates and sparked the infamous quantastrophe, with the 10-year yield hitting the highest since May as selling momentum accelerated. Naturally, a flood of new supply will only exacerbate the weakness, especially as real, inflation-adjusted yields are barely above zero, a rarity for emerging markets.
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China's Growth Much Worse Than Reported, What About The US?

China doubles value of infrastructure project approvals to stave off economic slowdown amid trade war.

The South China Morning Post reports China Doubles Value of Infrastructure Project Approvals to Stave Off Slowdown.

The National Development and Reform Commission (NDRC) has approved 21 projects, worth at least 764.3 billion yuan (US$107.8 billion), according to South China Morning Post calculations based on the state planner’s approval statements released between January and October this year.

The amount is more than double the size of last year’s 374.3 billion yuan (US$52.8 billion) in approvals recorded over the same period, which included 11 projects such as railways, roads and airports.

Local governments have been under increasing pressure from Beijing to support the economy, but they have less budget room due to lower tax revenues after the central government over the past year ordered individual and business tax cuts.

To fill the gap, Beijing has allowing local governments to sell more special purpose bonds, whose proceeds can only be used to fund infrastructure projects. At the beginning of this year, the Ministry of Finance raised the quota for special bonds to 2.15 trillion (US$302 billion) from 1.35 trillion (US$190 billion) last year. And when local governments came close to exhausting their annual quota set this autumn, the central government brought forward a portion of their 2020 quota so they could continue to raise funding for new projects.

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China Just Injected The Most Liquidity Since January... And It's Not Enough

Just days after China's GDP unexpectedly dropped to a sub-consensus 6.0%, the lowest in three decades (with Beijing now set to reveal a 5-handle GDP in the coming months), China watchers were convinced that this week would start with Beijing again lowering its "Libor rate", i.e., the previously discussed Loan Prime Rate, especially with the Fed expected to cut rates once again next week. However, that did not happen as China kept its one-year prime rate for new corporate loans unchanged in October, at 4.2%, and above the 4.15% consensus estimate. The five-year benchmark was also kept unchanged at 4.85%.

As we reported previously, the Loan Prime Rate, also called China's "Libor", is a revamped market indicator of the price that lenders charge clients for new loans, and is linked to the rate at which the central bank will lend financial institutions cash for a year. The rate, which is updated once a month, is made up of submissions from a panel of 18 banks, although ultimately it is Beijing that sets the final rate.

Analysts were quick to step in and "explain" away the unexpected move: Commerzbank's Zhou Hao said that a static one-year rate shows China “may be trying to balance the shrinking margins of banks with support to the real economy,” adding that "the PBOC remains restrained on policy easing.”

The market, however, was less sanguine, as the PBOC's lack of easing was promptly taken as an ill-omen: China's government bonds dropped while money-market rates climbed, amid bets that the policy makers are not in a rush to loosen monetary policy (why? perhaps China's gargantuan debt load and rapidly devaluing currency have something to do with it). On Monday, the yield on 10-year sovereign notes rose three basis points to 3.22%, the highest since July 1, while the costs on 12-month interest-rate swaps advanced to the highest level since late May.

While the Chinese economy has been under pressure amid a prolonged trade dispute with the US, many have expected that the central bank would match the Fed's easing and lower corporate borrowing costs and further cut bank reserve ratios. However, so far the PBOC hasn’t embarked on an aggressive stimulus program as some market watchers had hoped.

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Shanghai Housing Sales Plunge 86% In Golden Week

Golden Week, a seven-day Chinese holiday, is traditionally a peak period for home sales.

This year, sales plummeted.

The South China Post reports ‘Golden Week’ Property Sales Plunge in Major Chinese Cities.

Property sales in China’s major cities saw one of their worst “golden week” holidays in years, as buyers held back amid a slowing economy and tight restrictions on mortgage loans.

Sales of new homes in Beijing dropped to their lowest level since 2014 during the week following the National Day holiday, according to data from the property information portal Zhuge.com.

By area, sales of new homes in Shanghai plummeted 86 per cent to 5,000 square metres, while the capital saw a 92 per cent plunge to 2,000 sq metre, according to data from Centaline Property.

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China Just Got Handed The Oil Deal Of A Lifetime

China and Russia are sewing up whatever oil and gas fields and accompanying infrastructure that they can in Iran and Iraq, as Iraq tries to markedly up the pace of development on the fields it shares with Iran. Iraq only wants the U.S. for the Common Seawater Supply Project (CSSP) because ExxonMobil is the only firm that can do it properly and within a reasonable timeframe. ExxonMobil’s participation, though, is far from guaranteed.

Of all the key shared fields - Azadegan (Iran side)/Majnoon (Iraq side), Azar/Badra, Yadavaran/Sinbad, and Dehloran/Abu Ghurab, Naft Shahr/Khorramshahr – the first of these has been a priority for Iran since it was severely flooded in March. It is this field that was the focus of the announcement last week that two major new drilling contracts have been signed: one with China’s Hilong Oil Service & Engineering Company to drill 80 wells at a cost of US$54 million and the other with the Iraq Drilling Company to drill 43 wells at a cost of US$255 million.

According to senior oil and gas industry sources spoken to by OilPrice.com last week, it is China that will do all of the work and finance all of the drilling, with the headline ‘Iraq Drilling Company’ being on the contract simply to assuage the followers of Moqtada al-Sadr, the de facto leader of Iraq, and his Sairoon (‘Marching Towards Reform’) power bloc whose public message at the last election was that Iraq should not be beholden to any other country. OilPrice.com understands that al-Sadr privately has approved the project, otherwise, of course, it would not be going ahead.

Located around 60 kilometres to the north-east of the main southern export terminal of Basra, the supergiant Majnoon oilfield is one of the world’s largest, holding an estimated 38 billion barrels of oil in place. Rather literally, the field’s name means ‘insane’ in Arabic, derived from its possessing an ‘insanely’ large amount of oil. Discovered in 1975 by Brazil’s Braspetro (now part of Petrobras), it has been subject to a microcosm of the troubles that have affected the Iraq oil industry as a whole, with two U.S.-led wars, the war against Iran, and ongoing domes­tic security issues leading to the cancellation of various deals with international oil companies (IOCs) over the past 40 years. A major ongoing problem for development remains the substantial quantity of unexploded ordinance in and around the site that dates back to the 1980-1988 Iran Iraq War.

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EU's Growing Trade Deficit With China Bodes Poorly For The Future

While we read a great deal about the huge trade deficit America runs with China it is important to understand we are not the only one. Other countries also have this problem.

Europe as a whole runs a solid trade deficit with China. In some ways, this is balanced by the EU having a surplus with America. Still, in many ways, a growing trade deficit with China bodes poorly for the EU as they look down the road.

Reuters reports the European Union’s trade surplus in goods with the United States and its deficit with China both increased in the first seven months of 2019. Eurostat, the EU statistics office, reported the European Union’s surplus with the United States grew to 100.8 billion dollars in Jan-July 2019 from 88.6 billion in the same period of 2018. During that time the EU’s trade deficit with China expanded to 120.9 billion dollars from 109.2. This comes at a time that trade figures are adding extra strain to global tensions.

This brings up the importance of what countries buy and sell to each other. If a county's exports are not centered around products where they have a core advantage over time they can see them erode. I contend part of the problem the EU has going forward is that much of the EU is simply uncompetitive. This means unless it takes strong action to halt the importation of cheap Chinese consumer goods it will be flooded with them in coming years. Since Europe does not sell China much in the way of "raw goods" it has little to balance this trade.

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China Cuts Required Reserve Ratio Releasing $126BN In Liquidity; Yuan Surges

As had been widely previewed in China's official financial press in recent days, on Friday the PBOC announced it would cut the required reserve ratio (RRR) for all banks by 0.5% effective Sept. 16 (and by 1% for some city commercial banks, to take effect in two steps on Oct. 15 and Nov. 15), releasing 900 billion yuan ($126 billion) of liquidity, helping to offset the tightening impact of upcoming tax payments.

While today's rate cut was more than the previous cuts in January and May, which released 800 billion yuan and 280 billion yuan, respectively, the PBOC stated that “China won’t adopt flood-like monetary stimulus” and that they will continue “prudent” monetary policy to “keep liquidity at (a) reasonably ample level" and will "strengthen the counter-cyclical adjustment" which is basically gibberish for it will do whatever it sees appropriate.

With the Chinese economy slowing drastically in recent months, with various economic indicators at multi-decade lows, the RRR cut was aimed at supporting demand by funneling credit to small firms and echoes the earlier cuts this year. Indeed, as Bloomberg notes, China’s economy softened substantially in August after poor results in July, and will likely deteriorate further in the remainder of the year. Trade tension between China and the U.S. expanded onto the financial front recently after China allowed the currency to decline below 7 a dollar, prompting the U.S. to name it a currency manipulator.

Anticipating cries of foul play from Trump's twitter account which is just minutes away from unleashing hell at the Fed for not doing what China is doing, the cut "doesn’t reflect an aggressive easing," said Commerzbank economist Zhou Hao. "In fact, China has recently massively tightened property financing. Hence this is still a re-balancing - to lower the funding costs for the manufacturing sector but tighten liquidity in the property sector due to asset bubble concerns."

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US Slaps New Tariffs On China; One Minute Later China Retaliates

The biggest reason for last week's torrid stock market rally was rekindled "optimism" that the escalating trade war between the US and China may be on the verge of another ceasefire following phone conversations, fake as they may have been, between the US and Chinese side. This translated into speculation that a new round of tariffs increases slated for this weekend may not take place or be delayed.

However, that did not happen, and with no trade deal in sight, at 12:00am on Sunday, the Trump administration slapped tariffs on $112 billion in Chinese imports, the latest escalation in a trade war that’s ground the global economy to a halt, sent Germany into a recession, and given the market an alibi to keep rising because, wait for it, "a trade deal is imminent."

Only, it isn't, and 1 minute later, at 12:01am EDT, China retaliated with higher tariffs being rolled out in stages on a total of about $75 billion of U.S. goods. The target list strikes at the heart of Trump’s political support - factories and farms across the Midwest and South at a time when the U.S. economy is showing signs of slowing down.

The 15% U.S. duty hit consumer goods ranging from footwear and apparel to home textiles and certain technology products like the Apple Watch. A separate batch of about $160 billion in Chinese goods - including laptops and cellphones - will be hit with 15% tariffs on Dec. 15.  China, meanwhile, began applying tariffs of 5 to 10% on U.S. goods ranging from frozen sweet corn and pork liver to bicycle tires on Sunday.

The slated 15% U.S. tariffs on approximately $112 billion in Chinese goods may affect consumer prices for products ranging from shoes to sporting goods, the AP noted, and may mark a turning point in how the ongoing trade war directly affects consumers. Nearly 90% of clothing and textiles the U.S. buys from China will also be subjected to tariffs.

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