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China the monster.
mullokintyre
post Posted: Mar 14 2019, 02:18 PM
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From Bloombergs


QUOTE
For years, China’s biggest borrowers relied on accounting alchemy to prop up their balance sheets. Those days are over.

Corporate perpetual bonds have almost always been recognized by Chinese auditors as equity, not debt. That enabled state-owned enterprises to borrow billions of dollars without it showing up that way.

As part of its effort to shine a light on hidden debt, the Ministry of Finance earlier this year announced changes to its treatment of such securities. Now more than $360 billion worth of bonds could be reclassified as liabilities.

Of the 1,227 perpetual notes outstanding, almost all are issued by central or regional SOEs. It comes as little surprise that more than 70 percent of these issues get a pristine AAA rating.

Closing the Loophole
New issues of perpetuals fell off a cliff after the Ministry of Finance announced changes to their accounting treatment in late Januar

Perpetuals tend to have a call option, allowing the issuer to repay its debt in three to five years. If the borrower chooses not to do so, it has to reset its coupon rate, often paying 3 percentage points to 5 percentage points more. As a result, most chose to avoid the steeper interest costs: Of the 81 issues that have hit their call dates since issuance took off in 2014, roughly 90 percent decided to retire their debt.

In its announcement on Jan. 28, the Ministry of Finance decided these securities should be rightfully classified as fixed income. Perpetuals that have the same credit ranking as senior debt, or a step-up coupon rate much higher than the industry standard, also will need to be reclassified, the government said.

Over the past three years, loss-making SOEs from power generators to infrastructure builders embraced perpetuals. The latest accounting change could affect 80 percent of issuers’ leverage profiles, according to Guosheng Securities Co. China Communications Construction Co., for instance, which incurred a $7.7 billion free-cash-flow loss in the year ended September, would have seen its net debt-to-equity ratio jump to 121 percent from 92 percent.

Landslide
Some issuers pack their balance sheets with perpetuals. For about 18 percent of them, such bonds comprise at least 5 percent of total assets


Bond traders are now repositioning. They’ve been busily buying distressed dollar issues from China Minmetals Corp. and China Huaneng Group Co. with the expectation the companies will call their bonds, now that they’ve lost this convenient equity treatment.


The Ministry of Finance’s cleanup is also paving the way for China’s banking system to replenish capital. Just look at Bank of China Ltd.’s offering in late January, the first perpetual bonds from a Chinese lender. The People’s Bank of China established a new facility called the central bank bill swap that aims to boost bank liquidity through this channel. Insurance companies can also buy these bonds, China’s banking regulator said.

Now that perpetual bonds have become a new tool of the central bank, the market will no longer have room for the likes of troubled power generators and railway builders — even if they perform a public service at Beijing’s bidding. Meanwhile, the private enterprises farther down the totem pole simply lose an option they never really had.


Will be interesting to see how this one plays out.

Mick







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early birds
post Posted: Feb 21 2019, 08:58 PM
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In Reply To: mullokintyre's post @ Feb 21 2019, 05:40 PM

yeah Mick. i just surprised that Chinese hit aussie back sooo late after we joint USA to band Huawei 5G and all other stuff we throw at Chinese face.

as you;ve point out-----it's political shities

i always said ----we don't have to bow USA and we don't have to listen to China as well!!

how about ------Australia first!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

ps... Mick China has a lot of coal mine { may be the grade bit lower than us}, so it'a not their main attention for our coal miner. more of try to boost their own domestic economy after they been hit hard by Trump's Govt. IMHO

hope this shitiy stopped here, if goes any futher then our economy will feel it i'm afraid . thumbdown.gif



 
nipper
post Posted: Feb 21 2019, 05:42 PM
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In Reply To: mullokintyre's post @ Feb 21 2019, 05:40 PM

QUOTE
Customs at China’s Dalian port has banned imports of Australian coal and capped all imports for 2019, says port official.




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
mullokintyre
post Posted: Feb 21 2019, 05:40 PM
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In Reply To: early birds's post @ Feb 19 2019, 04:38 PM

Well, its now official.
China has effectively banned Australian Coal imports.
China plays by its own rules.
We negotiate in a position of wekkness always.
Perhaps the plan is to come in and buy up all the dead coal extraction companies.

QUOTE
Australian coal producers have suffered another savage hit, with Chinese authorities placing an indefinite ban on imports ahead of a strict new regime of quotas.

Key points:
The ban follows a marked slowdown in processing Australian coking coal imports this year
Exporters are now experiencing similar delays for both coking and thermal coal through other big Chinese ports
Coal is now Australia's most valuable export and China is its biggest market
The Reuters news agency reported customs officers based at the key northern port of Dalian stopped Australian coal imports and would move to cap imports for through their harbours at 12 million tonnes a year.

The move appears political, with only Australian coal being targeted.

Reuters said imports from Russia and Indonesia would not be affected.

News of the ban sent the Australian dollar tumbling in late afternoon trade.

At 6:00pm (AEST) the dollar had tumbled below 71 US cents, having moved above 72 US cents after stronger-than-expected jobs data earlier in the day.

The Dalian custom officers oversee imports through five harbours — Dalian, Bayuquan, Panjin, Dandong and Beiliang — into the heavily industrialised steel-making heart of China's north.

At the moment, the ban is centred on coking coal used in steel making, but the fear is it will spread to other ports and thermal coal exports.



Mick



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early birds
post Posted: Feb 19 2019, 04:38 PM
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https://www.cnbc.com/2019/02/19/us-china-tr...f-commerce.html

The business community and American workers want a deal that is sustainable, that changes the trajectory of our bilateral relationship," Brilliant said.
================

American first!!! i guess China will bow to USA , because it has bigger muscles [ military power]/ lmaosmiley.gif
isn't it how things works always ??????



 
mullokintyre
post Posted: Feb 19 2019, 11:13 AM
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In Reply To: early birds's post @ Feb 19 2019, 09:09 AM

No worries EB, if you go back further to when we were all convicts, all the trade was with Mother England!
We don't seem to learn from past mistakes.
Mick




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early birds
post Posted: Feb 19 2019, 09:09 AM
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In Reply To: mullokintyre's post @ Feb 18 2019, 03:21 PM

know you are a biz man Mick.
so, if any biz rely on one single customer that would be disadvantage .

aussies use to rely on USA, then Japs, now ,chinese .
for aussies , just sell as much nature resource as higher price as we can, no matter who the hell we sell to, right??

i might be biased as i'm a chinese oregon.
but what i point out is real facts that without fabrication.

hope aussie can have more chioce, but the reality tell the different story----sadly!! devilsmiley.gif




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nipper
post Posted: Feb 18 2019, 03:39 PM
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In Reply To: mullokintyre's post @ Feb 18 2019, 03:21 PM

But totally unrelated to anything else happening
QUOTE
- The Liberal, Labor and National parties were targeted in the February 8 attack
- Authorities are yet to detect any evidence of electoral interference from the hack
- PM Scott Morrison says a "sophisticated state actor" is responsible
- sleep well, chill'uns

"Any plan conceived in moderation must fail when the circumstances are set in extremes". - Metternich



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
mullokintyre
post Posted: Feb 18 2019, 03:21 PM
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Once again, the dangers of relying on China for trade has been demonstrated.

QUOTE
Dozens of vessels carrying Australian coal continue to be in limbo off the coast of China as restrictions on imports are introduced at key ports across the country.

Beijing imposed import restrictions in January, primarily in the north-east of the country, to boost domestic coal prices with no indication of when they might be lifted.

Tania Constable, CEO of the Minerals Council of Australia, said companies were "deeply concerned" about the restrictions and the uncertainty of when they would be lifted.

"We believe an unofficial quota system [has been] employed since the restructure of customs and quarantine administrative arrangements in October 2018," she said.

In 2016, the Chinese government restricted coal miners' working days from 330 to 276 days per year.

This was seen as an attempt to cut back on domestic production of low-grade brown coal and improve the environment and air quality.

Subsequently, imports of higher-grade coal increased, as did the price of coal worldwide.

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But by year's end, the working day restrictions had eased and Beijing began to re-exert control over its domestic mining sector.

Vivek Dhar, a commodities analyst at Commonwealth Bank, said it was during this time Beijing began turning the tap on and off to imports of Australian coal.

"[Chinese] policy on coal has very dramatically shifted over the last three to four years, but particularly over the last year [as] import restrictions have been fiddled with," he said.

"Mid-November is where we saw the most aggressive push towards a policy of capping coal import levels and that was probably the most prominent move, similar to this, we've seen."

How long will it last?
Beijing indicated last year its goal to keep 2018 imports at 2017 levels.

This was not achieved, but led to a steep drop in coal imports in December before surging in January to the highest level in five years, according to figures released by China's General Administration of Customs.

The latest round of restrictions was imposed about a week before the Lunar New Year celebrations, a national holiday for China, which added to the uncertainty.

"There's still a lot of confusion," Mr Dhar said.

"Given the holiday period, it's very difficult to know exactly what's causing this issue and finding the right people to contact."

In the meantime, the thermal coal price at Newcastle port, which accounts for 25 per cent of Australia's thermal coal, is down to its lowest point since May 2018.

What is the impact?
China is heavily reliant upon Australian coking coal, which accounts for approximately 75 per cent of the coal used in Chinese steel production.

China relationship isn't broken

Australia's relationship with China is not in crisis, but no-one would blame you for thinking that, writes Stephen Dziedzic.

But concerns over slowing growth saw steel production in the country slow towards the end of 2018 as profitability collapsed.

Ms Constable said talks were ongoing with the Chinese embassy in Canberra and stressed the negative impact restrictions would have on the industry if allowed to continue.

"The longer these sorts of delays go on, of course it does have an effect overall on production and that has a flow-on effect to other parts of business," she said.

"A lot of discussion is occurring with customers in China and with the traders themselves, and plans are being made to try and get to the bottom of it."

Some reports said restrictions would ease in a few weeks, others said a few months.

Ultimately, only time will tell.


Chinese authorities turn the taps on and off as it suits them.
Personally, I would be wary of having the bulk of my income reliant on China.

Mick




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blacksheep
post Posted: Jan 20 2019, 07:36 PM
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Interesting read - also the video showing the ghost towns
China's looming great wall of debt may have 'major global implications'
By Tasha Wibawa
Posted earlier today at 5:49am
QUOTE
While many countries struggled following the 2008 global financial crisis, China appeared as though it had largely escaped unscathed.

But observers are becoming increasingly concerned Beijing will struggle to repay an ever-increasing mountain of debt, with potential detrimental consequences for the global market.

China's debt has been a key factor to its economic success in riding out the GFC, due to a large government stimulus injected into its economy.

However, the financial boost has mostly led to China having one of the highest corporate debts in the world, only second to the Special Administrative Region of Hong Kong.

The past year has been a tumultuous one for the Chinese market: it was hit by an economic downturn, and for the first time in two years, exports unexpectedly plunged to its lowest point, all of this against the backdrop of an ongoing trade dispute and punishing tariffs by the US.

Beijing made moves to solve its issues by slashing central bank reserves earlier this month — the fifth time within a year — freeing up $US116 billion ($161.3 billion) to stimulate more economic growth.

But forecasted figures by a number of global financial institutions are not looking too positive for the global superpower, and adding to the debt fears is an opaqueness and inability for analysts to completely obtain information and understand the full extent or impact of the potential looming problem


QUOTE
According to the Bank for International Settlement (BIS), China's overall debt currently sits at 255.7 per cent of its gross domestic product (GDP), with its corporate debt standing at 160.3 per cent, well ahead of Japan and the US.

However, the concerns do not surround the amount of China's accumulated debt, but rather the rate of its corporate debt and its growth since the GFC, which also includes State-Owned Enterprises (SOE) and local governments, prompting fears of a financial crisis with a domino effect.


read more - https://www.abc.net.au/news/2019-01-20/chin...ection=business



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The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington

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