China Economy Megathread

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Fojar38: Sep 2, 2011; Sorry I meant to say I hope that the police use maximum force and kill or maim a bunch of innocent people, thus paving a way for a proletarian uprising and socialist utopia

also here's a stupid take
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ocrumsprug posted:

Has there ever been a bigger, flashier SELL EVERYTHING NOW sign in the history of markets?

The best part is I'm pretty sure that the headlines flashing "EMERGENCY MEETING OVER STOCK CRISIS" is intended to calm investors, suggesting that maybe Beijing doesn't understand how to control a market as well as they've been projecting.

# ? Jul 4, 2015 14:55

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# ? May 13, 2024 06:35

Arglebargle III: Feb 21, 2006

Woah woah woah! How is a bunch of trading companies getting together and agreeing not to sell unless the price is X not illegal price fixing?

# ? Jul 4, 2015 14:59

z0glin Warchief: May 16, 2007

Arglebargle III posted:

Woah woah woah! How is a bunch of trading companies getting together and agreeing not to sell unless the price is X not illegal price fixing?

You assume China has sane laws in place regulating this stuff. maybe they do I dunno, but it wouldn't surprise me if this wasn't actually illegal

# ? Jul 4, 2015 15:03

FrozenVent: May 1, 2009; The Boeing 737-200QC is the undisputed workhorse of the skies.

z0glin Warchief posted:

You assume China has sane laws in place regulating this stuff. maybe they do I dunno, but it wouldn't surprise me if this wasn't actually illegal

"Illegal" in China is a much more fluid concept than westerners are used to.

# ? Jul 4, 2015 15:23

Mc Do Well: Aug 2, 2008; by FactsAreUseless

Arglebargle III posted:

Woah woah woah! How is a bunch of trading companies getting together and agreeing not to sell unless the price is X not illegal price fixing?

The state is part of the meetings.

Socialism with Chinese Characteristics.

# ? Jul 4, 2015 15:30

TheBalor: Jun 18, 2001

So, they're basically passing a law that the stock market isn't allowed to crash?

I can't say exactly why that would fail, but I feel it has something to do with discouraging foreign investors from getting involved.

# ? Jul 4, 2015 16:11

MickeyFinn: May 8, 2007; Biggie Smalls and Junior Mafia some mark ass bitches

TheBalor posted:

So, they're basically passing a law that the stock market isn't allowed to crash?

I can't say exactly why that would fail, but I feel it has something to do with discouraging foreign investors from getting involved.

I read somewhere that the basis of the existence of the single party Chinese state is the (explicit?) promise that every one's life will get better, so there is no reason to rock the boat. If that is true then, from the perspective of the party, it is totally unacceptable for the country to appear to lose a massive fraction of its wealth because then people may not believe the story about improving fortunes for all. Doubly so if the majority of the year long bubble was due to individual investors entering the market on margin.

# ? Jul 4, 2015 16:19

Shifty Pony: Dec 28, 2004; Up ta somethin'

TheBalor posted:

So, they're basically passing a law that the stock market isn't allowed to crash?

I can't say exactly why that would fail, but I feel it has something to do with discouraging foreign investors from getting involved.

Depends on how they implement it. If the brokerages are going to buy up anything offered below certain prices to keep the prices high (which is what big US banks do when an IPO they are underwriting threatens to go below opening price) what will happen is people with stock will siphon massive amounts of money off of the brokerages and the government ~~bailout~~ backstop fund by selling them to the brokerages at whatever the CCP-demanded price target is. What I imagine will happen would be that those with connections will buy the stocks cash off market at lower prices then sell them on the market to make a handy profit, then repeat.

Alternately if brokerages simply all agree to not put in sell order below certain prices volume will evaporate which makes for really fun times when margin calls go through and people (or brokerages who have taken the collateral) are unable to liquidate their stocks due to a lack of a buyer.

# ? Jul 4, 2015 16:56

My Imaginary GF: Jul 17, 2005; by R. Guyovich

TheBalor posted:

So, they're basically passing a law that the stock market isn't allowed to crash?

I can't say exactly why that would fail, but I feel it has something to do with discouraging foreign investors from getting involved.

Question is, is the Chinese government better capitalized than the Chinese stock market over-valued, and will the PBOC be perceived as engaging in sustainable policy which will not impact debt servicing obligations? China has a demand-side problem which the party is attempting to fix by throwing money at it.

What does throwing money at a problem of demand do? Either you throw enough money at it so that folks begin to purchase more and P/E ratios level out to somewhere sane, or you throw too much at it and create inflation which further reduces demand and lowers earnings so that P/E's are even more unbalanced and money needs to flow outta the market to make some bank elsewhere.

My question is, how much money would it take to get Chinese P/E's back to something sane like in America?

Shifty Pony posted:

What I imagine will happen would be that those with connections will buy the stocks cash off market at lower prices then sell them on the market to make a handy profit, then repeat.

Does that money go back into balancing Chinese P/E's, or is it sent offshore to safety? There's nothing wrong with subsidizing profit from trading, so long as that profit goes back into your economic fundamentals.

My Imaginary GF fucked around with this message at 17:00 on Jul 4, 2015

# ? Jul 4, 2015 16:56

Vladimir Putin: Mar 17, 2007; by R. Guyovich

I'm going to be the dissenting voice here. I think the government wants a correction but doesn't want the momentum to carry to over correction and destroy the economy. So they are stepping in to put a bottom on it. It's not all too different than when the U.S. Government let Lehman and bear sterns die but then stepped in to save AIG and other banks (was it Morgan Stanley/WaMu/or some other institution I can't remember)

# ? Jul 4, 2015 17:54

My Imaginary GF: Jul 17, 2005; by R. Guyovich

Vladimir Putin posted:

I'm going to be the dissenting voice here. I think the government wants a correction but doesn't want the momentum to carry to over correction and destroy the economy. So they are stepping in to put a bottom on it. It's not all too different than when the U.S. Government let Lehman and bear sterns die but then stepped in to save AIG and other banks (was it Morgan Stanley/WaMu/or some other institution I can't remember)

I think you're reading something different from this policy intervention. To me, it screams of the 1929 attempt by J.P. Morgan to restore stability to the market, as had been done in past stock market panics throughout American history.

# ? Jul 4, 2015 17:57

the talent deficit: Dec 20, 2003; self-deprecation is a very british trait, and problems can arise when the british attempt to do so with a foreign culture

My Imaginary GF posted:

Does that money go back into balancing Chinese P/E's, or is it sent offshore to safety? There's nothing wrong with subsidizing profit from trading, so long as that profit goes back into your economic fundamentals.

Let me introduce you to the Vancouver property market

# ? Jul 4, 2015 17:59

My Imaginary GF: Jul 17, 2005; by R. Guyovich

the talent deficit posted:

Let me introduce you to the Vancouver property market

Canadian property market, London loft market, luxury developments in Chicago, NYC, and LA, in addition to America's higher education system.

Question isn't whether there are outflows, question is the rate at which outflows are occuring. Wonder how Chinese foreign currency reserves are looking from the beginning of the year.

# ? Jul 4, 2015 18:02

mila kunis: Jun 10, 2011

Arglebargle III posted:

Woah woah woah! How is a bunch of trading companies getting together and agreeing not to sell unless the price is X not illegal price fixing?

If it's done with the support of the government during a crisis, is that a bad thing to attempt? (not casting a judgement, just curious)

Also I'm a dumb retard and I don't understand stock markets at all; like IPOs seem to be a good thing to me because they get capital and investment into a company, that are paid back with dividends, but it seems that from that point on it's a bunch of gamblers sucking money away from doing anything productive and pouring it into hoping electronic representations of pieces of paper go up/down?

# ? Jul 4, 2015 18:11

dr_rat: Jun 4, 2001

My Imaginary GF posted:

Question is, is the Chinese government better capitalized than the Chinese stock market over-valued, and will the PBOC be perceived as engaging in sustainable policy which will not impact debt servicing obligations? China has a demand-side problem which the party is attempting to fix by throwing money at it.

What does throwing money at a problem of demand do? Either you throw enough money at it so that folks begin to purchase more and P/E ratios level out to somewhere sane, or you throw too much at it and create inflation which further reduces demand and lowers earnings so that P/E's are even more unbalanced and money needs to flow outta the market to make some bank elsewhere.

My question is, how much money would it take to get Chinese P/E's back to something sane like in America?

Does that money go back into balancing Chinese P/E's, or is it sent offshore to safety? There's nothing wrong with subsidizing profit from trading, so long as that profit goes back into your economic fundamentals.

According to tradingeconomics.com who apparently get their figures for the Ministry of, debt to GDP in China is 22.4%, (as 0f 2014, may of/probably has risen since then) which gives a lot of leeway to borrow, which might be enough to get them out of immediate problems. Turning the worst of the private debt public, like the US bailout. Hell if its demand side, just devaluing the currency more would be an immediate fix, although I have no idea what would be the social/political reaction to that would be, but purely economically that seems to be the usually solution to that sort of problem.

# ? Jul 4, 2015 18:19

VideoTapir: Oct 18, 2005; He'll tire eventually.

My Imaginary GF posted:

Why wouldn't they just pawn it and use the cash to go on vacation?

This mindset doesn't make sense to me.

Because there's more where that came from.

# ? Jul 5, 2015 01:17

namaste friends: Sep 18, 2004; by Smythe

quote:

Via the WSJ story on the Chinese market stabilization fund http://twitter.com/izakaminska/status/617472085024210945/photo/1

https://twitter.com/izakaminska/status/617472085024210945

# ? Jul 5, 2015 01:18

namaste friends: Sep 18, 2004; by Smythe

http://www.scmp.com/news/china/economy/article/1833103/chinas-central-bank-fund-margin-finance-agency-latest-stock

quote:

In the latest effort to cope with the worst domestic stock market crisis in years, China's market regulator said on Sunday that it would allow the country�s central bank to provide liquidity support to the government-backed margin finance agency, China Securities Finance Corp.

The China Securities Regulatory Commission said in a statement on its website that with the support of the People�s Bank of China, China Securities Finance could expand its business and continue to help the government to stabilise the stock market.

The statement did not elaborate on the possible size of central bank�s funding for CSFC or how long the measure would last.

The involvement of the central bank came just days after the securities regulator announced it would boost the capital base of China Securities Finance to 100 billion yuan (US$16 billion) from 24 billion yuan.

On Saturday, the Chinese government unveiled a package of new policies, including suspending new share issues and letting key domestic brokerages inject at least 120 billion yuan into the stock market via purchases of funds focusing on blue-chip stocks to boost market performance.

The benchmark Shanghai index has lost about 30 percent in three weeks. Chinese retail investors, who drive more than 80 percent of daily trading in domestic markets, have become frustrated about rapid losses in the market, fuelling government concern over the possibility of social unrest.

A stock market crash could also damage the outlook for economic growth, especially at a time when the leadership is keen to transform the economy into one more driven by market forces.

Reasons for the cause of recent stock market crisis remain unclear, but analysts have widely blamed margin calls. State media have also warned some foreign banks with �suspicious purposes" to cause Chinese stock market instability.

# ? Jul 5, 2015 17:34

MickeyFinn: May 8, 2007; Biggie Smalls and Junior Mafia some mark ass bitches

Cultural Imperial posted:

http://www.scmp.com/news/china/economy/article/1833103/chinas-central-bank-fund-margin-finance-agency-latest-stock

I don't get it. Where is the money going to come from? Reports peg the total losses since mid-June between $3-4 trillion. Where will the bank get the (presumably) large fraction of this that will at the very least be required to stem losses? If this is indeed bubble-herd behavior, they might even have to make everyone whole, or nearly so. This seems destined to fail or produce horrible "side effects," but what do I know?

# ? Jul 5, 2015 20:20

namaste friends: Sep 18, 2004; by Smythe

Shcomp and chinext aren't good right now.

# ? Jul 6, 2015 04:03

Ceciltron: Jan 11, 2007; Text BEEP to 43527 for the dancing robot!; Pillbug

Cultural Imperial posted:

Shcomp and chinext aren't good right now.

Chinext has really taken a beating.

# ? Jul 6, 2015 04:39

namaste friends: Sep 18, 2004; by Smythe

https://twitter.com/george_chen/status/617903802201411584

# ? Jul 6, 2015 05:57

namaste friends: Sep 18, 2004; by Smythe

https://twitter.com/george_chen/status/617905613679386624

# ? Jul 6, 2015 05:59

namaste friends: Sep 18, 2004; by Smythe

http://www.ft.com/intl/cms/s/0/7481...ed%2F%2Fproduct

quote:

China markets gain after Beijing liquidity move

Chinese stocks surged on Monday morning after Beijing pledged to provide liquidity, the latest in a series of steps aimed at stoking stock-buying sentiment, but failed to sustain big initial gains as investors sold into the rally.

The Shanghai Composite climbed 7.8 per cent in opening trading but by the midday break had retraced to a gain of just 2.2 per cent, suggesting that investors were using the pop as an opportunity to sell.

The tech-heavy Shenzhen Composite was down 2.6 per cent at the end of morning trading, after having risen as much as 6.6 per cent.

Citi analysts said that while the stabilisation measures rolled out by policy makers were likely to support sentiment in some circles, �deleveraging still has a long way to go�.

�Despite the sentiment help, we believe continued deleverage, and possible reform concerns given recent administrative intervention, will cap index upside. Our calculation suggests only one-fourth margin buys have been forced out so far,� they wrote.

David Cui, Bank of America Merrill Lynch strategist, said gains may be merely a short-term bounce. �Fundamentally, with the Shanghai Composite excluding banks trading at 31 times trailing 12-month earnings, the market appears very expensive to us,� he said, adding that if the rebound continues in coming days, �we suggest investors sell into the rally, especially brokers�.

Last week Shanghai stocks fell 12.1 per cent, capping off three weeks of sharp declines that have seen a cumulative $3tn of losses. The Shanghai and Shenzhen stock indices have each fallen about 30 per cent since June 12 as a year-long bull run on China�s volatile bourses reverses.

On Sunday night, the China Securities Regulatory Commission said in a brief statement that the central bank would �uphold market stability� by providing liquidity to China Securities Finance, a state entity that makes margin financing available to brokers.

That followed an agreement by banks to suspend initial public offerings from 28 companies, while 21 of the country�s largest brokerages said they would contribute Rmb120bn ($19bn) to a market stabilisation fund.

Authorities have been struggling to restore investor confidence, as a rate cut late last month � the fourth by the People�s Bank of China since November � and a reduction in the reserve requirement for commercial banks have failed to halt the stock market rout.

Last week the CSRC relaxed rules on margin lending and cut trading fees, while also pledging to investigate alleged market manipulation.

# ? Jul 6, 2015 06:13

MrNemo: Aug 26, 2010; "I just love beeting off"

So is this promoting actual investor confidence or are we seeing 'buy in before the collaps musical chairs II: Electric Boogaloo'? Cause I'm leaning towards the latter unless the government just mandates that stock market prices are only allowed to go and we see the Chinese shadow stock market emerge where everyone may or may not be losing huge amounts of money and it's all completely unregulated and off the books.

# ? Jul 6, 2015 06:27

Bone Crimes: Mar 7, 2007

For as much gas as they poured on the market today, it doesn't seem to have worked.

SSE Composite Index (000001.SS) -Shanghai
3,684.16 Down 2.76(0.07%) 15:20

# ? Jul 6, 2015 06:40

My Imaginary GF: Jul 17, 2005; by R. Guyovich

MrNemo posted:

So is this promoting actual investor confidence or are we seeing 'buy in before the collaps musical chairs II: Electric Boogaloo'? Cause I'm leaning towards the latter unless the government just mandates that stock market prices are only allowed to go and we see the Chinese shadow stock market emerge where everyone may or may not be losing huge amounts of money and it's all completely unregulated and off the books.

80% of volume in China is from retail investors, and those folks gotta sell to meet margin calls

Even with no institutional investors selling, China has too much bad debt to non-institutional actors to make much of a dent. While Beijing's mandated purchases of stock over the weekend boosted the market 7.8% in pre-opening trading, retail investors have gotten the market to shed all of that so far today. Essentially, 8% of the market's capital has been wiped away from the Chinese party, which is more concerned with appearing strong and decisive than it is with implementing structural reform.

# ? Jul 6, 2015 06:44

Arglebargle III: Feb 21, 2006

I think I should mention that if you just read Bill Bishop's Sinocism Newsletter and invested based on that you would have exited the market with a very handy return. Back in March he predicted that the market would peak at 4,500 or 5,000. If you'd invested right then and pulled out when it hit that range you would be sitting pretty.

# ? Jul 6, 2015 07:35

caberham: Mar 18, 2009; by Smythe; Grimey Drawer

I'm rich. But I want to be richer. Im too late to short stocks now but can't wait for the market to hit rock bottom

# ? Jul 6, 2015 07:49

Ceciltron: Jan 11, 2007; Text BEEP to 43527 for the dancing robot!; Pillbug

My one regret in life is that I don't know how to short sell or have the investment power to do so.

# ? Jul 6, 2015 15:52

Mozi: Apr 4, 2004; Forms change so fast
Time is moving past
Memory is smoke
Gonna get wider when I die; Nap Ghost

If the gov't keeps the market above a certain level, is this just a window of opportunity for individual investors to get their money out? I'm wondering if they're more trying to avoid wiping out people's savings or they just can't abide the market crashing in principle (as that would greatly offend the feelings etc etc.)

# ? Jul 6, 2015 16:59

Raenir Salazar: Nov 5, 2010; College Slice

Didn't the last time there was a market contraction the gov't targeted it so only the people who made the crazy investments (Owning several buildings and renting them/sitting on them) who lost out?

# ? Jul 6, 2015 17:13

Freezer: Apr 20, 2001; The Earth is the cradle of the mind, but one cannot stay in the cradle forever.

Raenir Salazar posted:

Didn't the last time there was a market contraction the gov't targeted it so only the people who made the crazy investments (Owning several buildings and renting them/sitting on them) who lost out?

Aren't these people either members of the Party or really close to it. It seems to me that this move is in order to save the ruling class' money.

# ? Jul 6, 2015 17:41

Necc0: Jun 30, 2005; by exmarx; Broken Cake

Ceciltron posted:

My one regret in life is that I don't know how to short sell or have the investment power to do so.

If you have to ask then shorting isn't for you.

# ? Jul 6, 2015 20:58

Ceciltron: Jan 11, 2007; Text BEEP to 43527 for the dancing robot!; Pillbug

Necc0 posted:

If you have to ask then shorting isn't for you.

Look, I'm too busy running the IMF over here. I don't have time to gamble.

# ? Jul 6, 2015 21:43

namaste friends: Sep 18, 2004; by Smythe

http://on.ft.com/1JKHcxS

quote:

China's benchmark stock index is declining for its fourth session of the past five days despite efforts from Beijing to prop up the market.

The Shanghai Composite opened 2.3 per cent lower on Tuesday and the tech-heavy Shenzhen Composite lost more than 4 per cent.

Nine of the 11 sectors in Shanghai were in decline. The two exceptions were energy and financials, where blue chips are rallying on speculation of direct buying from government-directed funds � or as a result of it.

The top gainers are all state-owned. PetroChina shares rose 8.3 per cent, a fourth straight gain, while Sinopec added more than 6 per cent, a second strong gain. Agricultural Bank of China and Bank of China each rose about 5 per cent.

The rally in state-backed companies mitigated early losses, with the Shanghai fall paring to less than 1 per cent. But 90 minutes into trading the decline had resumed and index was down 3.5 per cent.

In Shenzhen, Tuesday losses were extended to nearly 6 per cent. The index is now up less than 37 per cent this year, compared with a 122 per cent gain less than a month ago. The two indices saw roughly $3tn in combined losses between a peak on June 12 and the start of this week.

The more recent falls are all the more significant because in recent days policy makers have stepped up efforts to stabilise the retail-dominated market.

The central bank has allowed its own balance sheet to support stocks, 21 securities brokerages have pledged to use their own funds to buy-and-hold shares, and IPOs were suspended to avoid new offerings sapping appetite for the secondary market.

But the more Beijing does, the more they risk looking like there's panic in the upper echelons of Beijing policy making circles.

"All this activity has supported a view that policymakers are in a state of panic," wrote Mark Williams at Capital Economics. "But it is too late � and probably counter-productive � to intervene [now]. The damage was done when the bubble was allowed to inflate."

According to Bloomberg, margin traders reduced holdings of shares for a record 11th day on Monday. Citi analysts warned this trend is likely to continue, as only one-fourth of margin buys had been forced out so far.

Borrowed money helped fuel the rally, giving markets stratospheric gains; deleveraging � the unwind of those positions � could fuel the return the earth.

# ? Jul 7, 2015 04:48

Fall Sick and Die: Nov 22, 2003

*masturbates furiously*

# ? Jul 7, 2015 06:05

Fojar38: Sep 2, 2011; Sorry I meant to say I hope that the police use maximum force and kill or maim a bunch of innocent people, thus paving a way for a proletarian uprising and socialist utopia

also here's a stupid take
---------------------------->

# ? Jul 7, 2015 06:18

Mercury_Storm: Jun 12, 2003; *chomp chomp chomp*

A few years ago it was declared that China had overtaken Japan as the world's 2nd largest economy. Kinda wondering if that actually happened now.

# ? Jul 7, 2015 06:24

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# ? May 13, 2024 06:35

Fojar38: Sep 2, 2011; Sorry I meant to say I hope that the police use maximum force and kill or maim a bunch of innocent people, thus paving a way for a proletarian uprising and socialist utopia

also here's a stupid take
---------------------------->

Potemkinism is a hell of a thing.

# ? Jul 7, 2015 06:30

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