Chinese Homebuyers Losing Their Firepower

iFeng: 中国家庭购房能力逐年减弱 房价不会快速上
“After 40 years of reform and opening up, after 20 years of housing reforms, today's development-led real estate wave is basically slowing down.” On the afternoon of March 5, Yang Xianling, president of the Chain Home Research Institute, bought a house in Beijing in 2018. At the home improvement trend conference and the signing ceremony of the Shell Financial Control Strategic Partnership, the signing ceremony of the rapid increase in domestic house prices and the large-scale development stage has passed. The ability of Chinese families to purchase homes has been weakening year by year, and China’s economic growth and household wealth growth have become worse. The harder it is to support rising house prices.

Since 1998, China's real estate market has been for 20 years. However, its property of “living” has been diluted by the “investment” property in recent years. Real estate has become the favorite investment category of Chinese investors. “The house is used to live, not used for speculation.” After the repositioning, the market has undergone drastic changes in 2017 and the drastic changes in 2018 have continued.
Investing in Chinese real estate for income is also increasing as rents rise faster than home prices. Goodbye 1% yield!
The “China Housing Market Development Monthly Analysis Report” released by the project team of the Institute of Financial Strategy of the Chinese Academy of Social Sciences and the Center for Urban and Competitiveness Research of the Chinese Academy of Social Sciences on March 2 showed that due to short-term and long-term policies, the short-term and short-term policies tighten the financing environment. It is expected that housing prices in first-tier cities such as Beijing and Shanghai will continue their current decline in the short-term, and it is difficult for them to rebound strongly.

However, rent has shown an upward trend. According to the Economic Observer Online reporter, through information on the chain's official website, in April last year, the rent of a 50 square meter apartment in a certain district outside Beijing's East Fourth Ring was about 5,000 yuan per month, and it has now risen to about 6,000 yuan, and it has risen about 20%.

“From the data point of view, housing prices are hard to rise again, and rents have been rising steadily. I believe the overall market space is relatively large, because now the central indicator of the development of the (leasing) market is that the return rate of funds is too low. In fact, Rents are rising every year, with a relatively stable curve, probably about 5% to 8% per year.” Yang Xianren said that there is a large lease gap in the current market, and the rent, inventory, old, broken, small Renovation, supply of bed products and other aspects of a relatively large rental gap. Beijing's rental population is 7.31 million, but the number of leased houses in Beijing is 3 million, a gap of 4.31 million, Shanghai's 5.86 million, and Shenzhen's 2.23 million. This is a very large supply gap. In 2017, the overall turnover of the housing leasing market was 1.3 trillion, and the market will increase to three trillion in the next five years.

Nationalists Rising: Tax Cuts for Immigration Reductions in Australia?

The Liberals want corporate tax cuts, but Australia's One Nation party says no more tax cuts for business and they hold the balance in the Senate.
Macrobusiness: The One Nation/Coalition deal that could rock Aussie politics
The upside for ON and the Coalition in this deal very obvious:

it would hand Pauline Hanson a spectacular win, consolidating her support;

but it would also position the Coalition right along side her, recapturing some big slice of ON preferences, without them having to get their hands dirty;

moreover, it would deliver a gigantic wedge to the Labor reform agenda as it handed the Coalition a housing affordability platform, a stronger wages platform, a growth platform, a fairness platform and the upper hand in environmental values, as well as strategic policy. Plus it would preserve negative gearing for the faithful.

Everything that Labor is campaigning on would come under extreme stress and every reform loser become a natural Coalition voter.

Yen Gains Momentum, Trouble Brewing for an Asian Currency?

I track long-term relative momentum for lots of ETFs. In the international group, CurrencyShares Japanese Yen (FXY) popped up strongly this past week. The last time it climbed out of the bottom and to this level was July 2015. A month later China devalued the yuan.
What's going on right now? The Hong Kong dollar is approaching the limits of its peg.


Chinese Treasuries Fall as Reflationary Wave Ends, Dollar Steadies

China's holding of U.S. treasuries peak ahead of the U.S. dollar bull market that starts in 2014. Then Chinese holdings decline through 2016 as outflows persist. China cracks down on the Anbangs, closes up the capital account, and the reflationary wave kicked off by the PBoC in early 2016 lifts the economy and eventually the capital account. China ended the reflation late last year, now U.S. treasury holdings are falling again. And the media still misinterprets the information.

Bloomberg: China's Holdings of U.S. Treasuries Drop to Six-Month Low
China’s holdings of Treasuries fell to the lowest level since July as investors soured on U.S. fixed-income securities and the dollar at the start of the year.

America's Top Export is Fiat; Software Eats the Trade Deficit Too

If you believe the argument that says automation and robotics will dominate production, if you believe that universal basic income is something to consider because there's a risk of widespread mass unemployment, then you also expect production will eventually be concentrated in fewer and fewer hands (and even no hands if the machines take over). This is usually discussed in domestic terms, but it will also happen internationally. We should expect some nations will see their exports soar and other nations become chronic trade deficit nations or simply become relatively poorer as their economies fall behind. Domestically, the fear is that high-skill white collar labor is next, with lawyers, accountants, financial analysts, writers and such in line to see their jobs automated. Internationally, developing nations that lack highly-advanced sectors will also fall behind as their economies cannot keep pace.

The U.S. has a massive trade deficit because it prints the reserve currency. It's really the #1 export of the United States. Pieces of paper with no value except that other people accept them because the United States is the pre-eminent military, political and economic power in the world. Path dependency could secure that status through many years of decline, but eventually the U.S. will lose this status. The U.S. could collapse the trade deficit at any moment by extracting itself from this role. A long-term global agreement to increase the use of foreign currencies, allowing the dollar to slowly fade away as a share of global finance. Of course, this would weaken the U.S. dollar and make exports more competitive and imports more expensive. It will have a similar impact to passing tariffs. Using tariffs is a way of keeping reserve status (for a time, and only if it doesn't blow up global trade) and mitigating the costs to the long-term health of the economy.

The U.S. can also help itself by dominating in advanced manufacturing, artificial intelligence and software. It needs large domestic industries for applied research though. The software to run an automated steel mill needs a steel mill to automate.

As an advanced manufacturing economy, the U.S. would become like Germany, Japan and China (if there's no major wars or serious national decline, these four nations might produce an unbelievable sum of global GDP in 2100). Instead of buying stuff as a consequence of reserve currency demand, it will offer credit to its buyers (as it did in the 1920s).

The current system is unsustainable. Tariffs aren't a long-term solution, but they are a step in the direction of the future. (They're also close to inevitable in a democracy where unemployed workers can vote. Either that or UBI.) The U.S. must produce more, either because the dollar will lose reserve currency status or because it simply does produce more through advanced manufacturing. Otherwise it goes into terminal decline. I view tariffs as a step towards the death of the dollar as reserve currency. Washington and Wall Street refuse to give that up willingly, so the only way to push things forward is to put the U.S. in a better position when the dollar crisis hits. Or break the global trading system and negotiate the end of reserve currency status as part of a major renegotiation of the global financial and trading systems.

Real Estate M&A Picks Up in China as Small Players Exit

iFeng: 多家中小房企卖地产项目转行,楼市并购整合提速
Recently, several other housing companies have announced their bid farewell to the real estate industry. On March 12, Zhujiang Holdings changed its name to Beijing Grain Holdings. The company has successively disposed of its property business. On March 9, Zhongtian Finance (formerly Zhongtian City Investment) sold its property business for 24.6 billion yuan, completely from real estate. Turn to the financial industry. The industry believes that the small and medium-sized housing enterprises bid farewell to the real estate industry is affected by the external environment and internal demand and other factors, with the continuous increase in the concentration of the real estate industry, mergers and acquisitions between housing companies frequently appear, in the future, more and more small and medium-sized housing prices will be forced Faced with the acquired situation.

...In Yan Yuejin's view, besides withdrawing, real estate mergers and acquisitions will continue to heat up, and small and medium-sized homeowners may also face the dilemma of being acquired or even shutting down. In this process, the concentration of the entire real estate industry will further increase, and the real estate industry presents a situation of large-scale accumulation and frequent mergers and acquisitions.

According to statistics, starting from last November, from the listing of major property rights exchanges, the number of real estate objects has increased significantly. Analysts inside the industry said that after a new round of regulation, there will inevitably be a wave of equity trading. Late last year, developers began to “clean up” their assets, and some sold off assets that did not meet their own development, and others simply withdrew from the industry. As a result, frequent and intensive real estate equity transactions began to take place in major property rights exchanges.

For small and medium-sized housing enterprises, the main reason for selling shares is to reduce profits and financial pressure, after all, selling some assets is easier than selling a house, and funds are quickly recovered.


Trade Rebalacing: After China, Germany

ZH: Albert Edwards: "Trump Will Soon Turn His Protectionist Fire On Germany. That Will Be Messy"
Making matters worse, everyone knows that it is Germany's FX subsidy courtesy of the EUR - which replaced the far stronger Deutsche Mark - that makes Berlin one of the biggest currency riggers in the world. In fact, "a Chinese official commented a few years back that Germany, not China, was actually the world's biggest currency manipulator - in tying its currency to far weaker economies, the real DM is massively undervalued."

Ironically, Germany is aware of what is coming, and as Edwards writes, he agrees with former German Finance Minister Schäuble, who correctly pointed out that it was the ECB's QE policies that exacerbated the trade situation, in stimulating capital flight from the eurozone that (by identity) has increased the overall trade surplus by depressing the euro.

As a result, Edwards expects Trump to "soon turn his protectionist fire on both Germany and the EU. That will be messy."

...So what happens next? Using Japan as a template for the "economic and financial Ice Age unfolding in the west" Edwards made one major contrarian prediction: "to those in the noughties who said a bust in the US and Europe would be nothing like the 90s bust in Japan, I agreed. I thought it would be much worse because the west did not enjoy Japan's high levels of equality and social cohesion."

Looking at recent events, it appears that when confronted with Japanese-style pain, he's been right: western electorates' anger is boiling over... the only thing keeping social sanity in check are near record high stock prices. That, too, will go soon one central banks finally end their daily manipulation some time over the next year.

In that context, Edwards concludes, he has "always viewed competitive devaluation and trade war as a likely endgame of the predicament we find ourselves in. It's just coming sooner than I expected!"
One lost decade is one too many.

Currency devaluation was always the end point assuming governments and central banks do not allow widespread debt default. The only question was when: would the governments/central banks act proactively or wait until a crisis? Many thought 2008 was that crisis, but central banks could not restart lending. All they did was monetize the existing monetary base. The potential for inflation is there, but it requires private sector credit growth. Ten years have passed, but the balance sheets are still impaired. Nothing has been solved then, and voters are reacting in frustration.

Chinese Developers Plan Fundraising Blitz in March

iFeng: 3月份多家上市房企公布融资计划
“Under the general trend of regulation and control of the property market, housing companies are increasingly concerned about the safety of the capital chain. Under the conditions of domestic financing, overseas financing is increasingly valued.” Zhang Dawei, chief analyst of Centaline Real Estate, analyzed that, for the whole year of 2017, the overseas financing of housing enterprises totaled 38.86 billion U.S. dollars, an increase of 176% year-on-year to 14.06 billion U.S. dollars in 2016.

“In 2017, the domestic financing data of housing enterprises continued to be sluggish. From a trend point of view, the total amount of domestic financing of housing enterprises in the whole year is decreasing, mainly because domestic financing is more difficult.” Zhang Dawei said that in this context, this trend will continue in 2018, and even more companies will start looking for financing opportunities overseas.
Overseas financing plummeted 75 percent in the first two months of 2018 according to the NBS report.