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AHI: United States » The fall of China Mae: Part 2, Data disappears … 0

AHI: United States » The fall of China Mae: Part 2, Data disappears …

By: David A. Smith 1 Continued from yesterday s Part 1 .] The Chinese government wants you to buy high, hold indefinitely or else Anne Stevenson-Yang in Barron s on September 5, 2015. 3 So facile are human minds that when confronted with a nuclear fact one that entirely disrupts the previous world-view we can go from denying the possibility to rationalizing that it s nothing to worry about in the blink of an editorial column. New worldview uploaded Sources used in this post YouTube video of CSIS February 2015 symposium 4 Ms.

Stevenson-Yang at 3:00-28:15, 51:45-57:45, 1:08:30-1:10:45, 1:16:40-1:19:00 The New York Times (3 November 2015; dark green font) 5 Wall Street Journal (January 28, 2016 ; orange font ) 6 The New York Times (25 February 2016) 7 So it is proving with the exposure of China s comprehensive, pervasive manipulation of official statistics. Despite accepting the idea that every single one of them is likely wrong, and all are slanted in the rosiest way possible, many observers conclude that the arithmetic sum of a totality of fibs nevertheless must be largely truthful because after all, it couldn t all be a fa ade, could it? I m fearsome, my economy breathes fire In truth, nobody outside of China knows some are just less clueless that others.

2. No one knows how strong or weak China s economy is The party now sees reports of economic turbulence as a potential threat . The same goes for data. 8 Waiting in line to buy food rations in Venezuela, April, 2015 In both Venezuela and Argentina , accurately reporting statistics got you jailed .

China hasn t gone quite that far, but people who speak up are periodically and mysteriously detained. 9 10 11 12 Chinese leaders are taking increasingly bold steps to stop rising pessimism about turbulent markets and the slowing of the country s growth. As financial and economic troubles threaten to undermine confidence in the Communist Party, Beijing is tightening the flow of economic information and even criminalizing commentary that officials believe could hurt stocks or the currency. 13 If you want to keep publishing and making money, don t criticize me More than many other nations, China has for centuries used the show trial and public confession of guilt as a means of cowing dissent and independent thinking. Mao looking down on the far left, a very young Deng Xiao-ping at far right It s still the pattern today: censoring the internet, whitewashing official statistics all of that invites the inference that China s leadership is afraid of its citizens and needs their information, and their residency , compartmentalized. 14 The effort to control the economic narrative plays into a wide-reaching strategy by President Xi Jinping to solidify support at a time when doubts are swirling about his ability to manage the tumult.

The government moved to bolster confidence on Saturday by ousting its top securities regulator, who had been widely accused of contributing to the stock market turmoil. 15 Scapegoating, of course, is universal. Mr. Xi is also putting pressure on the Chinese media to focus on positive news that reflects well on the party. 16 What s that opium you ve been smoking?

Remember Rule 3: Between observation and doctrine, report doctrine . That s still the mantra, and it works as long as Rule 1 holds: Nothing outside of China matters . The tightly scripted story makes it ever more difficult to get information needed to gauge the extent of the country s slowdown, analysts say.

Data disappears when it becomes negative, said Anne Stevenson-Yang, co-founder of J Capital Research, which analyzes the Chinese economy. Though better than people disappearing, it s no vote of confidence. Risking being cracked down upon himself We are going to continue to see crackdowns on people telling a different story than what Beijing wants to hear, said Leland R.

Miller. And Rule 1 is weakening, because now China wants inward investment, and after half a century of bait-and-switching foreign capital, the foreign capital is in no hurry to buy (say) the magic lantern of Alibaba. At the same time, Beijing appears to be conflicted on this issue, because it recognizes that without independent gauges, commercial relations and foreign direct investment will suffer, due to growing skepticism over official data.

You can t suddenly buy integrity; if you try, not only do you not get the genuine article, you overpay badly for it. And China, like every other government, can be schizophrenic, with new reformist policies at the dinosaur head, and all the old instincts scattered throughout the body and those instincts are always to shut off discussion. All of you tons follow where the head leads, okay?

Last September, Markit Economics , a British company, and Caixin Media , based in Beijing, stopped publishing preliminary results from a monthly survey of purchasing managers at Chinese factories. The preliminary results, which came a few days before the two firms and the government separately released complete numbers, often affected markets. As a result, officials at China s statistics bureau objected to the early release, according to people with knowledge of the official order. 17 18 It s a very influential economic indicator, and it s highly cited overseas, said Mr.

Yuan, the researcher at Tsinghua. Given the international worry over the Chinese economy, I had a sense last August that the Caixin indicator wouldn t really last long, because its publishing in mainland China had touched high-tension lines. China also shut down the blog of Ren Zhiqiang , who s long been the Donald Trump of China: a property development tycoon, loud, brash, and deliberately controversial and recently, politically aggressive as well . 19 20 21 This user no longer exists When all media have surnames and do not represent the people s interests, the people will be cast aside into a forgotten corner!

Mr. Ren complained on his microblog hosted by Weibo, a Chinese social-media site. In another post Mr Ren asked: Since when has the people s government been turned into the party s government?

He said that taxpayers money should not be wasted on things that do not provide them with services. Speaking truth to cyberspace Mr. Ren had 38 million followers , and while his current voice is silenced, the 38 million are not suddenly going to believe what the party tells them.

If anything, they re going to believe he was right . 22 23 We ve been deceived for years. The Cultural Revolution only let me know the class struggle under a proletarian dictatorship. And that there is no next generation of communism, Ren wrote: The invincible Mao Zedong Thought has let thousands of people starve to death, and we don t even know who many people died through persecution during the Cultural Revolution.

Maybe even more people died because of wrong political policies than because of the war. China has always had emigre observers who perched nearby Hong Kong, Formosa but before the internet they could be ignored as they had no means of reaching the Chinese domestic population. Anne Stevenson-Yang , of J Capital Research , said she and her colleagues had seen growing discrepancies in official data in the last two years in a variety of sectors, including retail, shipping and steel production. 24 25 Now that genie is out of the bottle, due to global communication, global capital, and most notably a Chinese global elite that frantically wants to export its capital as fast as humanly possible.

AHI posts on China s urbanization and capital August 23, 2010: Gleefully running up the debts , 2 parts, SOEs and development 26 October 28, 2011: A little learning is a dangerous thing , 2 parts, hukou and schools 27 July 29, 2012: I m shocked, shocked , kickbacks in property development 28 August 23, 2012: China s cities and housing: Nothing outside China matters 29 August 25, 2012: China s cities and housing: Imperial economy is successful society 30 August 26, 2012: Suburb stuffing , 2 parts, new ghost high-rise townks 31 September 17, 2012: China s cities and housing: Between observation and doctrine, report doctrine 32 July 22, 2013: China s runaway money train , 4 parts 33 December 16, 2013: Formula for an instant slum , 5 parts 34 September 19, 2014: Where the money goes, people will follow , 3 parts 35 February 1, 2016: Yuan to buy American housing? , 4 parts 36 AHI posts on global financial markets June 26, 2006: Fannie Mae, the implied story , 7 parts, HUD OFA report 37 June 30, 2006: Part 5, Smoothing earnings with financial tricks , Gaming earnings 38 January 22, 2008: Who s next? , 2 parts, Fannie Mae s thin capital ratios 39 May 6, 2008: Catastrophe is a precondition to fundamental reform , 2 parts, US meltdown 40 December 4, 2012: Innumeracy precedes insolvency , 4 parts, San Bernardino bankrupt 41 October 7, 2013: The demise of deposit insurance , Russia investing in Cyprus 42 September 3, 2015: House and country , 9 parts, Russian oligarchs buying London 43 3. Capital is fleeing China at unprecedented and unstainable rates China s foreign-exchange reserves fell by $700 billion last year. The flood of cash across its borders is complicating the country s economic transformation and is raising the risks of problems in other emerging markets, where cash already is flowing outward.

You can only sell cash abroad if it s in a currency foreigners want to buy The flood of cash leaving the country has produced another impressive statistic: We are witnessing the greatest episode of capital flight in history. As far as I know, there is no analog in history for what is now taking place in China: the country s socioeconomic elite are exporting their cash at rates that have gone from zero to warp speed in barely over a year. The phenomenon leaves virtually all observers spluttering for an explanation: And I don t splutter often What happened in 2015 coming out of China was unprecedented in magnitude, said Charles Collyns , chief economist for the Institute of International Finance , a global trade group for the financial industry. 44 45 What caused the polarity reversal? Continued tomorrow in Part 3 .] References ^ David A.

Smith (www.affordablehousinginstitute.org) ^ Part 1 (affordablehousinginstitute.org) ^ Barron s (www.barrons.com) ^ YouTube video of CSIS February 2015 symposium (www.youtube.com) ^ The New York Times (3 November 2015; dark green font) (www.nytimes.com) ^ Wall Street Journal (January 28, 2016 (www.wsj.com) ^ The New York Times (25 February 2016) (www.nytimes.com) ^ potential threat (www.nytimes.com) ^ both (www.bloomberg.com) ^ Venezuela (www.statisticsviews.com) ^ Argentina (www.reuters.com) ^ accurately reporting statistics got you jailed (www.economist.com) ^ turbulent markets (www.nytimes.com) ^ and their residency (affordablehousinginstitute.org) ^ More articles about Xi Jinping. (topics.nytimes.com) ^ positive news (www.nytimes.com) ^ Markit Economics (www.markiteconomics.com) ^ Caixin Media (english.caixin.com) ^ shut down the blog of Ren Zhiqiang (www.whatsonweibo.com) ^ loud, brash, and deliberately controversial (affordablehousinginstitute.org) ^ politically aggressive as well (www.economist.com) ^ had 38 million followers (www.whatsonweibo.com) ^ they re going to believe he was right (www.whatsonweibo.com) ^ Anne Stevenson-Yang (www.jcapitalresearch.com) ^ J Capital Research (www.jcapitalresearch.com) ^ August 23, 2010: Gleefully running up the debts (affordablehousinginstitute.org) ^ October 28, 2011: A little learning is a dangerous thing (affordablehousinginstitute.org) ^ July 29, 2012: I m shocked, shocked (affordablehousinginstitute.org) ^ August 23, 2012: China s cities and housing: Nothing outside China matters (affordablehousinginstitute.org) ^ August 25, 2012: China s cities and housing: Imperial economy is successful society (affordablehousinginstitute.org) ^ August 26, 2012: Suburb stuffing (affordablehousinginstitute.org) ^ September 17, 2012: China s cities and housing: Between observation and doctrine, report doctrine (affordablehousinginstitute.org) ^ July 22, 2013: China s runaway money train (affordablehousinginstitute.org) ^ December 16, 2013: Formula for an instant slum (affordablehousinginstitute.org) ^ September 19, 2014: Where the money goes, people will follow (affordablehousinginstitute.org) ^ February 1, 2016: Yuan to buy American housing? (affordablehousinginstitute.org) ^ June 26, 2006: Fannie Mae, the implied story (affordablehousinginstitute.org) ^ June 30, 2006: Part 5, Smoothing earnings with financial tricks (affordablehousinginstitute.org) ^ January 22, 2008: Who s next? (affordablehousinginstitute.org) ^ May 6, 2008: Catastrophe is a precondition to fundamental reform (affordablehousinginstitute.org) ^ December 4, 2012: Innumeracy precedes insolvency (affordablehousinginstitute.org) ^ October 7, 2013: The demise of deposit insurance (affordablehousinginstitute.org) ^ September 3, 2015: House and country (affordablehousinginstitute.org) ^ Charles Collyns (www.iif.com) ^ Institute of International Finance (www.iif.com) ^ Part 3 (affordablehousinginstitute.org)

Captain Ahab's Watery Tales: CRT Council meets in Liverpool 0

Captain Ahab's Watery Tales: CRT Council meets in Liverpool

CRT Council meets in Liverpool You may remember that I was elected to the CRT Council as a Business Boating representative at the back end of 2015. Museum of Liverpool – venue for the Council meeting. Well, today was my first meeting, this one taking place on the Waterfront in Liverpool.

I drove up bright and early and arrived in time for a short tour of the Trust’s waters at the docks which lie at the far end of the Liverpool Link. I have to admit that the Waterfront is a spectacular redevelopment, filling the gap between the Three Graces and the bank of The Mersey. CRT Council members on tour The area is jam packed with attractions and I was particularly taken with the new statue of the Fab Four, striding confidently to the Beatles shop.

As for the Council meeting? I have to admit that I was made very welcome and the assembled members were walked through the various facets of the CRT including its strategy, recruitment and selection update the response to the Calderdale flooding, the finances and the fundraising activities. All a high level insight into the workings of the Trust for the benefit of the numerous new Council members.

Stanley Dock with a rather unlovely – Yellow Submarine! Due to the nature of the information download the communication was, on this occasion, rather one way. However, as we approached the end the various groups represented started to ask questions from their perspective, making suggestions about future agenda items and prompting discussions – basically doing what they are there to do.

I think its fair to say that most of the elected representatives were struggling to define the role they play in the Trust’s governance structure, but perhaps having the whole spectrum of interest groups sharing and challenging in the same room is the point of it.

One minute the boaters relation to The Friends is being discussed and then we are looking at the same problem from the perspective of canoeists, cyclists, ramblers, fishermen and ecologists.

And so the gathering closed at 4.15 with the next scheduled for September in Birmingham, tacked on the back of the AGM.

AHI: United States » The fall of China Mae: Part 1, Choose any … 0

AHI: United States » The fall of China Mae: Part 1, Choose any …

By: David A. Smith 1 When they start lying about economic data, short them. Smith s Rule of Emerging-Market Investment (Written March, 2016, backdated to June, 2007) In January, 2008, I wrote a two-part blog post, Who s next? , suggesting that Fannie Mae was overextended and due for a market correction.

Though I believed my own prophecy, I never acted on it, because it was (at the time) not merely contrarian but virtually unthinkable. 2 Sources used in this post YouTube video of CSIS February 2015 symposium 3 Ms. Stevenson-Yang at 3:00-28:15, 51:45-57:45, 1:08:30-1:10:45, 1:16:40-1:19:00 The New York Times (3 November 2015; dark green font) 4 Wall Street Journal (January 28, 2016 ; orange font ) 5 The New York Times (25 February 2016) 6 In September, 2012, after four or five years of intermittently posting on China, I concluded a six-part on China s urbanization and housing with the penultimate installment Between observation and doctrine, report doctrine . 7 Three premises that re braking down (published September, 2012) In December, 2012, when San Bernardino filed for bankruptcy, I posted that Innumeracy precedes insolvency , because in my experience dating back to my earliest investor services days in 1976, when they cannot produce financial reports, the money they re not counting is disappearing faster than they can imagine. 8 The Chinese stock market is a roach motel for capital. Anne Stevenson-Yang, The New York Times , September 9, 2015 9 When the ultimate faithful reader, Matthew Healy, pointed me at a recent New York Times article, the headline alone set off alarm bells: As China s Economic Picture Turns Uglier, Beijing Applies Airbrush Nothing to see here And I thought, that s just what Fannie Mae did , and we know where that wound up. 10 Economists have long cast some doubt on Chinese official figures, which show a huge economy that somehow manages to avoid the peaks and valleys that other countries regularly report.

If it s too smooth, it s been Botoxed like Fannie Mae s earnings were . 11 Smooth and flawless Now, China can t collapse the way Fannie Mae did, because it s not levered the way Fannie Mae was, but China can collapse socio-politically if the money machine that has sustained the rapid (how rapid? does anybody really know?) expansion of China s economy and rise of the sudden Chinese billionaires suddenly stopped. 12 sudden_stop Sorry about the lack of highway AHI posts on China s urbanization and capital August 23, 2010: Gleefully running up the debts , 2 parts, SOEs and development 13 October 28, 2011: A little learning is a dangerous thing , 2 parts, hukou and schools 14 July 29, 2012: I m shocked, shocked , kickbacks in property development 15 August 23, 2012: China s cities and housing: Nothing outside China matters 16 August 25, 2012: China s cities and housing: Imperial economy is successful society 17 August 26, 2012: Suburb stuffing , 2 parts, new ghost high-rise townks 18 September 17, 2012: China s cities and housing: Between observation and doctrine, report doctrine 19 July 22, 2013: China s runaway money train , 4 parts 20 December 16, 2013: Formula for an instant slum , 5 parts 21 September 19, 2014: Where the money goes, people will follow , 3 parts 22 February 1, 2016: Yuan to buy American housing? , 4 parts 23 AHI posts on global financial markets June 26, 2006: Fannie Mae, the implied story , 7 parts, HUD OFA report 24 June 30, 2006: Part 5, Smoothing earnings with financial tricks , Gaming earnings 25 January 22, 2008: Who s next? , 2 parts, Fannie Mae s thin capital ratios 26 May 6, 2008: Catastrophe is a precondition to fundamental reform , 2 parts, US meltdown 27 December 4, 2012: Innumeracy precedes insolvency , 4 parts, San Bernardino bankrupt 28 October 7, 2013: The demise of deposit insurance , Russia investing in Cyprus 29 September 3, 2015: House and country , 9 parts, Russian oligarchs buying London 30 Rather than start this post where the Times did, its story, allow me to pluck out the conclusive anecdote: This is a good place to start Anne Stevenson-Yang , of J Capital Research , said a colleague had once called a Chinese cement factory to ask for production data, and a factory employee had thought the researcher was calling from a government-affiliated research association. The employee told the researcher that the factory had already changed its numbers twice and would rather not do it again, so the researcher could choose any number that fit. 31 32 As the post will make clear, Ms.

Stevenson-Yang is my newest heroine, for her February, 2015 talk ( YouTube video of CSIS February 2015 symposium ) on China at the Center for Strategic and International; Studies (CSIS) is riveting. 33 Throughout this post, I ll use many screen shots from her PowerPoint deck, because they punch. And like blog posts, they re free Ms. Steven-Yang s thesis, as backed up by her impressive command on facts gathered directly from China, comes in five parts that agree with my amateur sleuthing: What do you think of my puzzle?

1. Chinese statistics should be treated as unreliable propaganda While it had not been proven that every Chinese government statistic is a lie, virtually every such statistics that anyone can verify has been shown to be such: Chance of sun today? BEIJING China, the world s leading emitter of greenhouse gases from coal, has been burning up to 17% more coal a year than the government previously disclosed, according to newly released data.

The finding could complicate the already difficult efforts to limit global warming. It s not the finding that complicates the efforts, but the indisputable proof that China has no intention of limiting its emissions, and is simply bilking the west out of however much guilt money the European nations are willing to part with. Ed. And that s after carbon-credit incentives The increase alone is greater than the whole German economy emits annually from fossil fuels. We also know that China s industrial production figures are questionable, and that its housing production bears no relation to any semblance of market demand.

What s an error factor 58x the US overhang among friends? Is it any surprise that the financial statistics are likewise fiddled? In recent years, China made efforts to improve that data by releasing more information more frequently, among other measures.

It also gave its financial media greater freedom, even as censors kept a tight leash on political discourse. Actually, before the fiddle becomes the embarrassing omission: This month, Chinese banking officials omitted currency data from closely watched economic reports. When in doubt, squelch bad news.

It s for your own good In January data released last week , the Chinese central bank omitted or hid one key number and altered the parameters of another that gave insight into what the central and commercial banks were doing to prop up the country s currency. 34 35 36 37 38 Or at least, postpone it to a later news cycle, when there might be something good to report. Before that, officials pressed two companies to stop releasing early results from a survey of Chinese factories that often moved markets. In China, speaking truth to power can get you indicted, fined, and in some cases jailed.

Just weeks earlier, Chinese regulators fined a journalist $23,000 for reposting a message that said a big securities firm had told elite clients to sell stock. Truth is what the party wants it to be. China s central bank and national statistics bureau are constantly changing, redefining, introducing and excluding statistics, and I don t think it is by accident, said Christopher Balding , an associate professor at Peking University HSBC Business School . 39 40 And we know nobody s hiding good news, which invites the question: just how bad is it?

For many nations, 4 % GDP growth would be great news for China, it s slower than slow Continued tomorrow in Part 2. References ^ David A.

Smith (www.affordablehousinginstitute.org) ^ Who s next? (affordablehousinginstitute.org) ^ YouTube video of CSIS February 2015 symposium (www.youtube.com) ^ The New York Times (3 November 2015; dark green font) (www.nytimes.com) ^ Wall Street Journal (January 28, 2016 (www.wsj.com) ^ The New York Times (25 February 2016) (www.nytimes.com) ^ Between observation and doctrine, report doctrine (affordablehousinginstitute.org) ^ Innumeracy precedes insolvency (affordablehousinginstitute.org) ^ The New York Times (www.nytimes.com) ^ that s just what Fannie Mae did (affordablehousinginstitute.org) ^ like Fannie Mae s earnings were (affordablehousinginstitute.org) ^ rise of the sudden Chinese billionaires (www.dailymail.co.uk) ^ August 23, 2010: Gleefully running up the debts (affordablehousinginstitute.org) ^ October 28, 2011: A little learning is a dangerous thing (affordablehousinginstitute.org) ^ July 29, 2012: I m shocked, shocked (affordablehousinginstitute.org) ^ August 23, 2012: China s cities and housing: Nothing outside China matters (affordablehousinginstitute.org) ^ August 25, 2012: China s cities and housing: Imperial economy is successful society (affordablehousinginstitute.org) ^ August 26, 2012: Suburb stuffing (affordablehousinginstitute.org) ^ September 17, 2012: China s cities and housing: Between observation and doctrine, report doctrine (affordablehousinginstitute.org) ^ July 22, 2013: China s runaway money train (affordablehousinginstitute.org) ^ December 16, 2013: Formula for an instant slum (affordablehousinginstitute.org) ^ September 19, 2014: Where the money goes, people will follow (affordablehousinginstitute.org) ^ February 1, 2016: Yuan to buy American housing? (affordablehousinginstitute.org) ^ June 26, 2006: Fannie Mae, the implied story (affordablehousinginstitute.org) ^ June 30, 2006: Part 5, Smoothing earnings with financial tricks (affordablehousinginstitute.org) ^ January 22, 2008: Who s next? (affordablehousinginstitute.org) ^ May 6, 2008: Catastrophe is a precondition to fundamental reform (affordablehousinginstitute.org) ^ December 4, 2012: Innumeracy precedes insolvency (affordablehousinginstitute.org) ^ October 7, 2013: The demise of deposit insurance (affordablehousinginstitute.org) ^ September 3, 2015: House and country (affordablehousinginstitute.org) ^ Anne Stevenson-Yang (www.jcapitalresearch.com) ^ J Capital Research (www.jcapitalresearch.com) ^ YouTube video of CSIS February 2015 symposium (www.youtube.com) ^ January data released last week (www.pbc.gov.cn) ^ hid (www.pbc.gov.cn) ^ one key number (www.pbc.gov.cn) ^ altered the parameters (www.pbc.gov.cn) ^ gave insight (www.pbc.gov.cn) ^ Christopher Balding (www.baldingsworld.com) ^ Peking University HSBC Business School (english.phbs.pku.edu.cn)