David Fuller and Eoin Treacy's Comment of the Day
Category - China

    The Massive Scale of China's Property Sector

    This article from Reuters is filled with wonderful graphics that help to highlight the divergence between private and government-funded property developers. Here is a section:

    The ballooning debt crisis could delay the prospect of a recovery of both the property market and the broader Chinese economy, in which real estate is a core pillar.

    Country Garden, once considered to be financially sound and stable, failed to pay the interest on two of its bonds due in August and narrowly avoided default by making the interest payment hours before a 30-day grace period ended on September 5.

    It also failed to pay an interest of $15 million on a bond that was due in September but was granted a 30-day grace period.

    Country Garden’s liabilities of 1.54 trillion yuan were the highest among the top-25 real-estate companies in China, and it was among seven to have reported a loss.

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    Evergrande Liquidation Risk Rises After Creditor Meet Scrapped

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    China Evergrande Group is running out of time to get what would be one of the nation’s biggest-ever restructurings back on track, after setbacks in recent days that raise the risk of liquidation.

    The string of surprise developments include scrapping key creditor meetings at the last minute, saying it must revisit its restructuring plan, detention of money management unit staff and an inability to meet regulator qualifications to issue new bonds.

    That last item is a major setback to its planned restructuring of at least $30 billion of offshore debt that would have creditors swap defaulted notes for new securities. Evergrande’s shares plunged as much as 25% Monday.

    At the epicenter of China’s property crisis, Evergrande is under pressure to finalize a blueprint for its offshore debt restructuring as it grapples with an even bigger pile of total liabilities that amount to 2.39 trillion yuan ($327 billion)—among the biggest of any property firm in the world. The clock is ticking. The company faces an Oct. 30 hearing at a Hong Kong court on a winding-up petition, which could potentially force it into liquidation.  

    The distressed real estate giant said late Sunday it couldn’t satisfy requirements of the China Securities Regulatory Commission and the National Development and Reform Commission to issue new notes. It cited an investigation of subsidiary Hengda Real Estate Group Co., without elaborating. The unit said in August that CSRC had built a case against it relating to suspected information disclosure violations.

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    Xi's Purge of Handpicked Ministers Shatters Stability Image

    This article for Bloomberg may be of interest to subscribers. Here is a section:

    Instead, his government looks like it’s in disarray. Xi’s mysterious purge of his foreign minister in July, followed by the reported ouster of his defense chief less than two months later, is making China appear unstable to the outside world. The Chinese leader also overhauled the generals overseeing China’s Rocket Force, which manages the nation’s nuclear arsenal, without giving an explanation.

    And those are just the firings that have been made public. 

    While most analysts don’t see any threat to Xi, who has amassed more power than any leader since Mao Zedong, questions are being raised about his management style. Morale within the Foreign Ministry in particular is very low, with anxiety running high among a group of bureaucrats that see themselves as professional diplomats who don’t want to get caught up in political power plays, according to Chinese officials who asked not to be identified discussing sensitive information. 

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    US-China War Would Be Economic Disaster for Both

    Thanks to a subscriber for this article by Niall Ferguson. Here is a section:

    It is impossible to say how far the Chinese would prepare for a full-scale war with the US in the scenario of a blockade. It’s estimated by Western experts that that it would need a minimum of four months to be ready for prime time. The dilemma for Chinese strategists is that, if there is to be a war with the US, they would be better off striking the first blow, probably by attacking American naval assets in the Indo-Pacific, exploiting the classic vulnerability of ships in port.

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    Rio Tinto CEO Says Chinese Steel Demand Is Close to Peaking

    This article may be of interest to subscribers. Here is a section:

    “We are foreseeing that the peak steel demand in China is about to be reached,” he said during an interview at Bloomberg headquarters in New York. “Not because the Chinese economy is not growing, but just because of the maturity it has reached.”

    The notion that China’s steel market is poised to contract this decade — after many years of breakneck growth — is widely held across the industry. Rio’s rival BHP Group reckons annual output has reached a plateau just above a billion tons each year that will stretch into 2024. Analysts at Capital Economics Ltd.
    said demand and supply probably peaked in 2020.

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    China Economy Shows More Signs of Stability on Policy Boost

    This article from Bloomberg may be of interest. Here is a section:

    China’s economy picked up steam in August as a summer travel boom and a heftier stimulus push boosted consumer spending and factory output, adding to nascent signs of stabilization.

    Industrial production and retail sales growth jumped last month from a year earlier, blowing past expectations, while the urban jobless rate eased slightly. That improvement came as the government has in recent weeks beefed up pro-growth measures, including plans to spur more spending on home goods and ease curbs on some housing purchases. 

    “Perhaps the peak pessimism is behind us,” said Ding Shuang, chief economist for greater China and North Asia at Standard Chartered Plc. “August’s data indicates that the economy is unlikely to suffer from a persisting, deeper downturn going forward even though there might still be some volatility ahead — especially if we take into account the policy factor.”

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    Unity has changed its pricing model, and game developers are pissed off

    This article from the Verge may be of interest. Here is a section:

    “Unity Plus is being retired for new subscribers effective today, September 12, 2023, to simplify the number of plans we offer,” Unity wrote. “Existing subscribers do not need to take immediate action and will receive an email mid-October with an offer to upgrade to Unity Pro, for one year, at the current Unity Plus price.”

    A Unity Plus subscription was about $400 per year. After that one year, however, it stands to reason that those former Plus users will have to pay the new Pro rate, which is currently over $2,000 per year.

    Developers are also concerned these new fees could impact digital preservation efforts as now game makers are seemingly incentivized to delist older games so they aren’t charged for them. There’s also the question of how Unity plans on tracking installs and whether or not such tools run afoul of government privacy laws. Here’s a tweet from the official Unity account explaining how it intends to monitor a game’s installs.

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    Huawei Debuts Even More Powerful Phone as Controversy Swirls

    This article may be of interest. Here is a section:

    The Pro+ similarly emerged without the typical marketing and fanfare surrounding a major product launch. A brief teaser video posted to Huawei’s Weibo account showcased a device very similar to its lesser cousin, with the same outsized back-camera array.

    The new devices have spurred an outpouring of nationalist sentiment on Chinese social media and were picked up by domestic news outlets that touted Huawei’s advances as a victory against sanctions.

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    China's Commodities Imports Surge as Coal Hits All-Time High

    This article may be of interest. Here is a section:

    “With inventories relatively low, the prospects of further stimulus measures triggered restocking across commodities, which should keep demand strong in the short term,” ANZ Group Holdings Ltd. said in a note after Chinese customs released its latest trade figures on Thursday.

    Still, the country’s recovery from the pandemic has fallen well short of expectations and confidence among households and businesses is fragile. Deflationary pressures in the economy and a weaker currency have added to the headwinds faced by importers, although fears that the yuan will slide further may have motivated some to front-load purchases.

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