10/11/21-10/17/21 Weekly Reports: The Truth Of Economy In China

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1.CCP Central Bank Launched 500 Billion Yuan of Medium-Term Lending or Targeting the Real Estate Market

CCP’s central bank carried out 500 billion yuan of medium-term lending facilities (MLF) operations, precisely hedging the amount due; the operating rate was 2.95%, maintaining the previous value unchanged. This is the second consecutive month that the central bank has renewed the MLF at parity. Market analysts believe that the central bank may introduce more structural policy tools in the fourth quarter. Five hundred billion yuan of MLF maturity in October, the third-highest level since the beginning of the year. In the view of industry insiders, the central bank equal amount of renewal released a signal of policy support for moderate easing of medium and long-term liquidity in banks.

Since the July downgrade, the mid-market interest rates have dropped sharply. Among them, the 1-year commercial bank (AAA-rated) interbank certificates of deposit, which is the benchmark interest rate in the mid-market. The monthly average yield to maturity fell from 2.88% in June to 2.66% in August. It rebounded slightly to 2.70% in September, continuing to be significantly lower than the medium-term policy rate, and the “inversion” margin did not change much.

In addition, from the operating interest rate, the MLF interest rate has been “in place” for 19 consecutive months. Moreover, the central bank’s reverse repo operation rate has recently remained at 2.20%, and the short-term policy rate continues to be in a stable state.

2.Microsoft in Rashomon over Whether to Shut down Linking China

Microsoft Corp. is shutting down its social network LinkedIn in China, saying it’s becoming increasingly challenging to comply with Chinese government regulations. After a series of investigations and bans on private technology companies in China this year, Linking’s move underscores that foreign companies are also affected by the political situation in Beijing as they expand into the Chinese market and could face more significant difficulties in an environment of tensions between the U.S. and China.

“We are operating in a more challenging and demanding environment in China,” wrote Mohak Shroff, a senior vice president at Collingwood, in a blog post. The professional social platform will launch a jobs-only site later this year called InJobs, which does not include sharing social updates and users can’t share or post articles — features that have been a big part of Linking’s success in Western markets like the U.S. However, in an open letter yesterday, Lu Jian, president of Collage China, said that it was untrue that Microsoft would shut down Collage China.

3.The Price of Vegetables in Communist China Generally Rose

On 15th, grain and oil meat, eggs, and retail fish prices with the previous period (October 13, the same below) compared to 15 varieties five up to six down four flat. Thirty-six large and medium-sized cities, pork prices 12 up 11 down 13 flat. Among them, Taiyuan prices rose 3.25%, Haikou prices fell 3.38%, prices in other cities rose and fell within 3%. Egg prices rose by 6, fell by 13, and were flat at 17. Among them, Kunming prices fell 3.58%, prices in other cities rose and fell within 3%. Fifteen vegetable varieties prices 13 up to two flat, the average retail price of 3.75 yuan / 500 grams, up 1.35% over the previous period. Among them, Dalian, Guangzhou, Shenzhen, Kunming, the average price of vegetables rose 4.26%, 3.50%, 3.46%, 3.43%, the average price of vegetables in other cities rose or fell by 3%.

4.CCP Power Coal Prices Hit a Record High

Chinese power coal prices soared to a record high on Wednesday after floods in the central coal-producing province of Shanxi further exacerbated the tight coal supply situation. At the same time, the government’s attempts to liberalize power prices have further raised the demand for coal from power generators. As the world’s top carbon-consuming country, China is facing a severe energy crisis. Energy supply is outstripping demand while fuel prices are soaring. As a result, the government has introduced a series of measures to increase coal production and control industrial companies’ power consumption. At the same time, power plants and other carbon-using companies have increased their coal imports.

The governments of Shanxi and Inner Mongolia have asked more than two hundred coal mines to increase output, but days of heavy rain have caused flooding at about 60 coal mines in Shanxi. An official in Shanxi said Tuesday that four coal mines with a total annual output of 4.8 million tons had been forced to shut down production.

The price of coal promissory notes hit a record high, and coal prices have more than tripled so far this year. The latest data from China’s General Administration of Customs, released Wednesday, also showed that coal imports rose to their highest level this year in September to make up for the current supply gap. In total, China imported 32.88 million tons of coal in September this year, up 76 percent from the same month last year. Reuters reported that this was the fifth largest single month of coal imports since the relevant statistics were conducted.

5.September Domestic Fruit Prices Rose Compared to Last Year

In September, domestic fruit prices rose compared with the performance of the same period the previous year. Among them, the domestic fruit year-on-year price index closed at 100.23 points, up 0.23%. Compared with the same period last year, the plum category, kiwi category outstanding performance, its prices are higher than the same period the previous year, up 16.40% and 15.39% respectively; peach category rose slightly by 2.51%, together with driving domestic fruit prices rose beyond last year’s level.

Compared with last month, the hot fruit pomegranate supply is still sufficient; the market consumption capacity is limited, the September pomegranate category fell significantly, the ring price index closed at 72.91 points, down 27.09%. On the other hand, with the peak supply of watermelon, peach has passed, the reduction in the stock of its price continued to rise, the chain price index closed at 128.12 and 111.02 points, up 28.12% and 11.02%, respectively; the rest of the fruit, the distribution of the increase in 10.00%-20.00% between the fruit for the Hami melon, mangoes and apples, where the new season apples on the market, high-quality fruit Most of the fresh season apples on the market, high-quality fruit, prices up from last month, up 10.23%; cantaloupe class, mango class ring price index rose 17.51% and 11.99%, respectively.

6.Winter Oil and Grease Supply and Demand-Side Tightening, Prices or Continue to Rise

Affected by reducing vegetable oil supply and domestic soybean procurement slowdown, domestic soybean oil supply, and demand will be tighter. On the other hand, under the influence of the global energy crisis, palm oil prices may be boosted by the sharp rise in crude oil prices, and overall domestic vegetable oil prices may rise further in the fourth quarter. In contrast to the global soybean supply and demand continues to ease, domestic vegetable oil in the fourth quarter is likely to go tight. As a result, the domestic vegetable oil trend in the fourth quarter is expected to be stronger than soybean oil and palm oil. Therefore, in the fourth quarter, the domestic vegetable oil supply may gradually reduce, the spread between vegetable oil and soybean oil, and palm oil will again expand.

Soybean oil may move further upward in the fourth quarter. Contrary to the global soybean supply and demand continues to ease, domestic vegetable oil in the fourth quarter is likely to tighten. As a result, domestic soybean oil prices are reasonable to face further upside in the fourth quarter, mainly influenced by the following factors: first, the domestic downstream market is facing an increase in demand for restocking after the holidays; second, the electricity restriction policy may continue to affect oil mill crushing; third, the hog industry is still loss-making, and hog stocks are expected to contract, so protein demand may continue to weaken; fourth, palm oil prices remain strong, while Canadian rapeseed The reduction in production makes the domestic supply of rapeseed oil decrease, and the substitution effect will increase the dependence on soybean oil consumption. As a result, domestic soybean oil stocks continue to decrease in the fourth quarter; prices will grow. Still, the magnitude is correspondingly lower than palm oil and vegetable oil.

Seasonal production cuts may drive palm oil up. Affected by the Malaysian MPOB report, palm oil prices in the first half of September once downward, but the robust export data for the whole month of September eventually making palm oil prices out of new highs. Shipping company data show that Malaysia’s overall export volume in September rose about 40% from the previous month, which means that Malaysia’s palm oil stocks in September may not increase, but rather decrease. And into October will usher in the seasonal palm oil production reduction cycle; in the global energy supply constraints, natural gas and crude oil prices are growing, making biodiesel consumption expected to be enhanced, thus driving up palm oil prices. Technically, palm oil prices have broken out of the previous oscillation range to the upside and will continue to stay up if exports remain robust in the face of a downward spiral in production in October.

7.Communist China’s CPI and PPI Scissor Difference in September Was the Largest in History

Price data released by the CCP ​on Thursday showed that the CPI was slightly lower than expected. Still, the PPI surged year on year, with a scissors difference of about ten percentage points between the two, with the PPI hitting a record high of 10.7%. According to analysts, price trends so far this year suggest that China is facing structural, phased industrial inflation rather than full-blown inflation, driven by a combination of an uneven recovery, weaker demand push, and more vital supply constraints. However, against the backdrop of global liquidity easing and inflation, the trend of PPI is subject to more significant uncertainty, and industrial commodity prices will likely remain at high levels for some time. With the relatively mild CPI and another record high PPI increase, with rising raw material prices and energy supply tensions and the recent power cuts, China’s economic class stagflation characteristics are becoming more and more apparent, with the liberalization of electricity prices. PPI continues to be high may produce a lagging conduction effect, macro-control on how to prescribe the right medicine also faces a test.

Detailed data for September.
–Consumer Price Index (CPI) rose 0.7% year-on-year (0.9% in Reuters survey median)
–Industrial producer price index (PPI) rose 10.7% year-on-year (Reuters poll median 10.5%)
–CPI unchanged YoY, PPI up 1.2% YoY
–CPI food prices down 5.2% y/y, non-food prices up 2.0% y/y
–Core CPI excluding food and energy prices rose 1.2% YoY in September, compared to 1.2% in the previous month.

8.The Property Market Is the Worst “Golden September” in 7 Years

This year’s property market “golden September” ushered in the worst performance in nearly seven years: both new and second-hand housing market, the volume of transactions have fallen for several months in a row, and is expanding trend; the land market is also cold, 300 cities across the country land transaction area declined by more than 30%; more than 90% of the top 100 real estate enterprises sales and sales volume fell year-on-year, half of the enterprises with a double drop in the ring. Since the beginning of August, Hunan Yueyang shot the first shot of “limit down the order,” nearly two months, Zhuzhou, Jiangyin, Heze, Yueyang, Kunming, Shenyang, Tangshan, Zhangjiakou, and more than ten cities have taken measures to limit the decline in housing prices and maintain the order of the real estate market.

On September 9, Zhuzhou City Housing Authority interviewed some housing enterprises project leaders, requiring them to stop selling irregularities that exist to take a significant price reduction and significantly lower than the average market price, to strengthen the quality of construction, to ensure the quality of the property, and to downgrade all information about the properties suspected of low price sales. On September 20, the Lingui New District of Guilin City held an emergency meeting and requested the real estate enterprises embrace self-discipline, firmly resist the vicious disruption of the market, and reduce malicious selling behavior. On September 26, Zhangjiakou issued a new policy requiring new projects with pre-sale licenses not to sell below 85% of the recorded price.

And Shenyang, a representative city in the northeast, started a credit easing cycle. Shenyang Housing Provident Fund Management Center issued the “Rules for the Implementation of Housing Provident Fund Support Policy for High-Level Talents in Shenyang,” which stipulates that for high-level talents and other qualified talents identified to use housing provident fund loans for the first time to purchase their first self-occupied housing in Shenyang, the loan limit can be relaxed to a maximum of 1.5-4 times of the current maximum loan limit.

9.Three Shaanxi Financial Executives Were Disciplined on the Same Day

On October 11, the official website of the Central Commission for Discipline Inspection released the results of three financial executives of the Shaanxi Provincial Commission for Discipline Inspection and Supervision Party disciplinary and political sanctions. Zhao Yongjun, former party secretary and chairman of Changan Bank Co., Ltd., was expelled from the Party and dismissed from public office for severe violations of discipline and law. Yang Jianxin, former chairman of Shaanxi Rural Credit Union Federation, was expelled from the Party and canceled his retirement benefits for severe disciplinary violations. Wang Xuming, former deputy director of Shaanxi Rural Credit Union Federation, was expelled from the Party and dismissed for severe disciplinary violations from public office.

The three were old “partners” who worked together for many years at the Shaanxi Rural Credit Union (from now on referred to as “Shaanxi Agricultural Credit Union”). Yang Jianxin served as secretary of the party committee and chairman of Shaanxi Agricultural Credit Union from June 2005 to September 2016, while Wang Xuming served as director of Shaanxi Agricultural Credit Union from March 2006 and served as a member of the party committee and deputy director of Shaanxi Agricultural Credit Union in December 2008. The two were announced to be under review and investigation on the same day, on March 2 this year. The company’s primary business is developing a new product, a new product, a new product, a new product.

The three people who worked together in a team back then officially announced the results of party disciplinary and political sanctions on the same day. Shaanxi Provincial Commission for Discipline Inspection and Supervision’s notification shows that. Yang Jianxin “abandoned his political responsibility to manage the party and financial risk supervision responsibilities, incorrectly established, corrupt, cronyism, profit-oriented, using the organization’s personnel power to accept bribes, leading the cadre of the federation system, damaging the political ecology of the federation system, damaging the credit of the federation system.” Wang Xuming “corrupted the election and employment culture, polluted the political ecology of the provincial federation system, used the right to approve loans as a bargaining chip for personal gain, used each other with unscrupulous businessmen, solicited and accepted bribes, was both an official and a businessman, and did not distinguish between “pro” and “clear.” Zhao Yongjun “willing to be hunted, the financial loan approval rights, state-owned enterprises cadres personnel rights as a bargaining chip in exchange for personal interests, engaged in power and money transactions, accepting bribes; life is corrupt, greedy for enjoyment.”

10. For the Sake of “Shared Prosperity”, Property Tax Is Called For

On Friday (Oct. 15), Xi Jinping published an article entitled “Solidly Promoting Common Wealth.” The report was part of Xi’s speech at the 10th meeting of the Central Finance and Economics Commission on Aug. 17. At that meeting, Xi particularly emphasized the concept of “common prosperity,” noting that “shared prosperity is an essential requirement of socialism and a necessary feature of Chinese-style modernization. The article “Solidly Promoting Common Wealth” emphasizes the idea of constructing primary, redistribution, and tertiary distribution and believes that basic institutional arrangements are essential and that taxation, social security, and transfer payments should be increased to form an olive-shaped distribution structure with a large middle and small ends among social groups. In response to China’s lack of an apparent property tax and inheritance tax system, Xi’s article explicitly calls for “reasonable regulation of excessive income, improvement of the individual income tax system, and standardization of capital income management.”

At a press conference at China’s two sessions in 2020, Chinese Premier Li Keqiang said that 600 million people in China earn less than $1,000 per month. Several studies have shown that the share of residents in China’s national income distribution has continued to decline in recent years. In 2018 the claim in both the initial distribution and redistribution was lower than in 2013. Thus, after China’s official announcement of poverty eradication in 2020, addressing the inequality between the rich and the poor is the following, more serious challenge. And one means of solving that problem is mentioned in Xi’s article on reforms in the real estate sector, where he said, “Real estate tax legislation and reform should be actively and steadily pushed forward, and pilot work should be done.” Reuters and other media outlets noted the article. They pointed out that for more than ten years, China has wanted to push ahead with implementing a real estate tax but has encountered resistance, including from local governments. There are concerns that the property tax has led to a decline in property prices or a panic rush to sell in the market. In addition, in the debate over whether to introduce a property tax, there have been “concerns that the tax would affect economic growth.

By【G Translators – Financial Team】
Translator: Totoro

Disclaimer: This article only represents the author’s view. Gnews is not responsible for any legal risks.

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