China pide paso... II

Ojo con China: el Plan E con esteroides

26.10.2013

The most scary thing is that even the central government doesn't really know how large the size of the local government debt is. - Hu Yifan

Comentábamos la semana pasada en mi entrada Llueve dinero en España ¿o no? que la acumulación de deuda genera mayor fragilidad en el sistema económico. Los índices globales mantienen su fase expansiva, pero se empieza a percibir un cierto nivel de desaceleración. Fitch reducía sus estimaciones de crecimiento global tanto para 2013 –a 2,3%- como para 2014 –de 3,1% a 2,9%-, y las empresas más cíclicas que han publicado resultados siguen cautelosas con sus previsiones para 2014. Debemos tener en cuenta que algunas economías se mueven peligrosamente hacia el estancamiento. Brasil, presa de la política populista de Rousseff, con una inflación disparada, va camino de no crecer en 2015 y los problemas de India, con un creciente déficit por cuenta corriente y altísima inflación en el precio de los alimentos, ya los hemos mencionado en esta columna.

Pues bien, entre la euforia inversora, la trampa de liquidez creada por los estímulos monetarios eternos y los desajustes en países emergentes, nos habíamos olvidado de China. Merece la pena analizar algunos datos.

China sigue creciendo de manera planificada y ópticamente espectacular (9,1% anualizado en el tercer trimestre comparado con el mismo periodo de 2012). La máquina de la que depende el crecimiento global va 'bien' siempre que el Gobierno la mantenga bien engrasada. Es el triunfo de la economía masivamente endeudada y planificada. ¿Triunfo? Ahora veremos que no. El propio primer ministro, Li Keqiang, según Reuters, se refería al PIB chino como "artificial y solo relevante como referencia" (“man-made and for reference only”).

Un modelo a copiar… que ya copiamos en España, con resultados desastrosos, en la década de "la deuda no importa". No solo lo copiamos, sino que lo sobrepasamos… En deuda, en infraestructuras inútiles, en ciudades fantasma y en sobrecapacidad… que hoy pagamos.

El Shibor (el índice interbancario chino) se disparaba de nuevo esta semana, igual que lo hizo en junio. Los tipos de interés de una economía excesivamente apalancada volvían a subir, a pesar de las intervenciones pasadas del Banco Popular de China, poniendo en riesgo a un sistema económico donde no se conoce adecuadamente el riesgo de préstamos de difícil cobro ni la deuda real de las provincias.

- Efectivamente, la deuda de las provincias chinas, obligadas a acatar las órdenes de crecimiento impuestas por el gobierno central, no se conoce realmente. ¿Les suena a nuestro pasado reciente? Los análisis varían entre 2,5 billones de dólares y 5 billones, entre un 30% y un 60% del PIB –en Estados Unidos, por ejemplo, no llega al 18%-. Esta falta de tras*parencia e información también pone de manifiesto el poco control que tiene el Gobierno central sobre la deuda de las regiones. Tal vez por eso se ha aprobado la creación de bancos malos regionales, para intentar reducir el riesgo sistémico.

- La burbuja de crédito privado ya supera, según Credit Suisse, el 178% del PIB, un 26% por encima del máximo aceptable. La deuda total alcanza el 200% del PIB. ¿Se acuerdan de España en 2007? Teníamos cifras muy superiores. Y el nivel de gasto –inversión- es un 12% superior al de Japón en el cénit de su locura de estímulos. Las inversiones sobre PIB superan el 48%, casi un 10% superior a los países que se industrializaron más rápidamente en el siglo XX. Por supuesto, mucha gente justifica este nivel de inversión por la necesidad de modernizar el país. Sin embargo, en infraestructuras, China está tan sobrecapacitada como España, y con la misma densidad en autopistas, por ejemplo, que Reino Unido o EEUU.

- Todo este crédito no sería un problema si las empresas chinas se estuvieran “forrando” y los márgenes empresariales fueran espectaculares. Sin embargo, el 48% del Hang Seng (índice de las mayores empresas chinas) genera rentabilidades por debajo de su coste de capital y casi el 30% no cubre sus costes financieros con caja libre –es decir, se endeuda para pagar intereses-. ¿Les suena a nuestras "no importa porque la deuda es sin recurso" de 2007?. Los márgenes netos de las empresas chinas son los más bajos (2,5%) de todos los países emergentes (media 6%).

- Burbuja inmobiliaria muy similar a la española. La inversión inmobiliaria supone un 18,7% del PIB comparado con España en el cénit de nuestra burbuja (22%). Las ciudades fantasma que pueblan la geografía china también son conocidas, tanto como las nuestras. Y cuando el crecimiento ha empezado a ralentizarse, la construcción de vivienda nueva se ha disparado por arte de "ordeno y mando", superando en un 20% a las ventas.

- La agresividad en el proceso de endeudamiento. Hoy se necesita hasta cuatro veces más deuda que en 2010 en China para generar una unidad de PIB.

¿Y cuál es el problema? Los argumentos que sostienen los defensores –o justificadores- del modelo chino son: “Es usted un agorero, lleva siendo igual desde el año 2000”. “Mientras haya crédito y el Gobierno lo decida, China crecerá lo que tenga que crecer, y no hay problema”. “Mientras el riesgo se concentre en sus bancos, no hay contagio al resto del mundo”. “No hay burbuja, solo moderación del crecimiento”. “Mientras crezca por encima del 5%, el resto del mundo va bien”.

Sorpresa, es lo mismo que se oía en 2008 en España. Sólo que China tiene enormes ramificaciones al mercado de crédito global –el segundo mayor comprador de bonos norteamericanos- y al anémico proceso de recuperación industrial –Japón depende en gran parte de China para mejorar sus exportaciones-.

Pero, además, es que no es cierto que sea irrelevante. Estos datos, según Goldman Sachs, UBS o Credit Suisse en su magnífico informe China: Curb Your Enthusiasm, apuntan a una realidad incomoda. El Gobierno chino tiene ante sí dos alternativas: crecer por crecer y entrar en una crisis financiera de efectos impredecibles al subir los tipos de interés y empeorar la situación de sus bancos, o limpiar el riesgo sistémico de su banca, que, incuestionablemente, lleva a limitar la expansión de crédito, y con ello, parar su modelo de crecimiento endeudado.

A las afueras de nuestra oficina en Pekín se puede leer un cartel que dice Nosotros siempre decimos si de una de las entidades financieras 'no convencionales'. La cifra de préstamos de difícil cobro en China ya supera los 88.000 millones de dólares. Una cifra que parece 'contenida' –ya que es “oficialmente” solo un 1% de los préstamos totales, comparado con un 12% en España- por la enorme cantidad de nuevos préstamos concedidos, y por la metodología, más que debatible, a la hora de considerar un préstamo de difícil cobro, y la enorme cantidad de préstamos 'escondidos'. Pero todo el mundo, incluso el Gobierno central, reconoce que la magnitud del problema es preocupante.

Un empresario amigo mío, cuando le pregunté si se estaba planteando expandirse a China me dijo: “China es como la lotería, puede salir bien, pero la mayoría paga más de lo que recibe”. ¿Cuánto puede durar la burbuja china? Algunos años, o unos meses. Pero ya no es una cuestión de 'alarmismo' o de preocupaciones injustificadas. Bajos márgenes, mucha deuda y multiplicadores económicos que se desploman de manera alarmante siempre terminan en un susto. La magnitud del mismo depende de la decisión del Gobierno chino. Moderar la locura o una crisis financiera. Préstenle atención.

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BIS sees risk of 1998-style Asian crisis as Chinese dollar debt soars

The world's banking watchdog warns that foreign loans to companies and banks in China has tripled over the last five years and may be large enough to set off financial tremors in the West

By Ambrose Evans-Pritchard

9:30PM GMT 27 Oct 2013

Foreign loans to companies and banks in China have tripled over the last five years to almost $900bn and may now be large enough to set off financial tremors in the West, and above all Britain, the world’s banking watchdog has warned.

“Dollar and foreign currency loans have been growing very rapidly,” said the Bank for International Settlements in a new report.

“They have more than tripled in four years, rising from $270 billion to a conservatively estimated $880 billion in March 2013. Foreign currency credit may give rise to substantial financial stability risks associated with dollar funding,” it said. China’s reserve body SAFE said 81pc of foreign debt under its supervision is in dollars, 6pc in euros, and 6pc in yen.

The BIS said loose money policies by Western central banks since the Lehman crisis had cut the cost of foreign funding in East Asia, tempting firms to borrow heavily in dollars. The risk is that this process could go into reverse as the US Federal Reserve shuts the spigot, triggering off a dollar liquidity shortage across the region with even bigger knock-on effects than during the East Asian crisis in 1997-1998.

British-based banks hold almost a quarter of all cross-border bank exposure to China, and the figure has risen since 2008.

By contrast, German, Dutch, French and other European banks have slashed their share from 32pc to 14pc, chiefly because they are retrenching to beef up capital ratios at home. Some of the British banks are likely to be branches of Mideast lenders or agents of foreign wealth funds, recycling money through London.

The BIS said the Asian dollar funding crisis after the Lehman crash should be a warning shot, though the sums in the region are already much larger. Korea was deeply alarmed by its reliance on European bank debt in 2008-2009 and has capped dependence, but China and Hong Kong have not ***owed suit.

Talk of Fed `tapering’ in May this year offered a foretaste of trouble to come. It caused a ‘sudden stop’ in capital flows and a surge in dollar borrowing costs across much of Asia. The squall blew over when the Fed began to pull back again, but the BIS said the issue has not gone away.

“It is worth recalling that the deflationary shock from the currency depreciations during the Asian financial crisis in 1997–98 interrupted the tightening phase of the Federal Reserve, with implications for asset markets,” said the report, entitled ‘tras*mitting Global Liquidity to East Asia’.

East Asia is a much bigger economic animal today than it was fifteen years ago. The BIS said “financial instability” in the region could complicate the West’s exit from quantitative easing. “There is a risk of blow-back effects to major economies.”

The report said the loan-to-deposit ratio for foreign currencies in China has doubled from a well-behaved level of around 100pc in 2005 to nearer 200pc today. It is “not clear” where the extra foreign currency has been coming from, but seems to involve foreign exchange swaps and forms of credit off the BIS radar screen. At the same time bond issuance by Chinese firms has increase tenfold to almost $80bn in just eight years.

The Chinese state holds the world’s largest foreign reserves at $3.7 trillion and the country has capital controls, so there is little danger that China itself could suffer the sort of currency crisis that hit Korea, Indonesia, or Thailand in the 1990s. That does not miccionan foreign banks will necessarily get their money back if they lent too much to over-indebted Chinese companies.

The Chinese state has already signalled that it will not rescue private firms with too much debt, letting the solar company Suntech Power default on $541m of notes. Premier Li Keqiang is pledging market discipline as part of his liberalization and reform drive.

For China itself the risk is that a dollar funding crisis becomes the trigger for an internal financial crisis. Chinese credit has soared from 125pc to 200pc of GDP in just five years, prompting a string of warnings from Fitch Ratings over the stability of the financial system. A dollar squeeze could come at a very unwelcome moment.

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China premier warns against loose money policies

BEIJING | Tue Nov 5, 2013 5:37am EST

(Reuters) - China needs to sustain economic growth of 7.2 percent to ensure a stable job market, Premier Li Keqiang said as he warned the government against further expanding already loose money policies.

In one of the few occasions when a top official has specified the minimum level of growth needed for employment, Li said calculations show China's economy must grow 7.2 percent annually to create 10 million jobs a year.

That would cap the urban unemployment rate at around 4 percent, he said.

"We want to stabilize economic growth because we need to guarantee employment essentially," Li was quoted by the Workers' Daily as saying on Monday. His remarks were made at a union meeting two weeks ago but were only published in full this week, just days before a pivotal Communist Party plenum to set policy opens.

Yet even as authorities keep an eye on growth, Li sounded a warning on easy credit supply, which he said had topped 100 trillion yuan ($16.4 trillion) in the world's second-biggest economy.

"Our outstanding M2 money supply has at the end of March exceeded 100 trillion yuan, and that is already twice the size of our gross domestic product (GDP)," Li was quoting as saying.

"In other words, there is already a lot of money in the 'pool'; to print more money may lead to inflation."

His comments echoed the government's hawkish stance on inflation, analysts said, and were separately affirmed on Tuesday by the central bank, which promised to keep policy prudent with appropriate fine-tuning as well as to "resolutely repress" property speculation.

Still, Li's remarks underscore the fine line China must walk to create economic growth and jobs for social stability, while guarding against excesses that may hurt itself in the long run.

China's authorities have criticized the country's $8.5-trillion economy - powered by heavy reliance on exports and investment - as unstable and on an unsustainable growth path.

To retool the economy, its new leaders have signaled they are willing to tolerate slower expansion in exchange for cleaner growth led by consumption.

The crucial meeting of top leaders from November 9 to Nov 12 will shed light on just how committed Beijing is to enforcing reforms, many of which analysts say would test politicians' will to push through unpopular changes.

PROPERTY INFLUENCE?

Buffeted by sluggish export sales and in part on the government's deliberate attempt to slow activity, China's economy is sagging towards its slackest pace of expansion in 23 years this year, at 7.5 percent.

In its third-quarter monetary policy report, the People's Bank of China (PBOC) said China's economy faces a challenging future and that inflation, although stable right now, may rise in the fourth quarter.

"The foundation for stable consumer prices is not solid," the central bank said. "Annual consumer inflation may rise in the fourth quarter."

It said a marked rise in house prices, especially in China's biggest cities, may have also lifted rents, other related costs, and ultimately overall price levels.

The central bank said that the problems of the property market - along with those involving local government debt - are "more prominent" than other ones. It said it will "resolutely repress speculative demand for homes."

Signs of overheating in the property market have led some analysts to speculate the government may unveil measures during or after the Communist Party meeting that opens Saturday.

China's annual consumer inflation rate rose to a seven-month high of 3.1 percent in September as poor weather drove up food prices, limiting the scope for the central bank to maneuver to support the economy even as exports showed a surprise decline.

STABLE FISCAL, MONETARY POLICIES

Li reiterated that a 7.5 percent growth target for 2013 remains intact, but noted that weak exports were a risk.

Exports can directly create about 30 million jobs and add another 70 million jobs in other related industries, Li said.

For every percentage point that China generates in economic growth, it creates 1.3 million to 1.5 million jobs, Li said.

"We are not seeking high-speed growth, and definitely not seeking only GDP growth. But a reasonable speed in growth is needed, and so we have ensured a reasonable range in economic expansion," he said.

China's urban jobless rate eased to 4 percent at the end of September from 4.1 percent three months earlier. It is the country's only official unemployment indicator, but analysts say it grossly underestimates the true level of unemployment as it excludes about 260 million migrant workers from its surveys.

Li did not say that 7.2 percent in annual economic growth was the minimum the government would tolerate, but analysts have always believed that China's leaders considered growth between 7 percent and 7.5 percent to be reasonable.

On inflation risks, however, Li was clear.

"If we loosen credit, if we expand the fiscal deficit, that would be like an old saying where one carries firewood to extinguish a fire," Li was quoted as saying.

"And this is why we choose to persevere with stable fiscal and monetary policies."

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China’s Youngest Lung-Cancer Patient Is Just 8 Years Old, and Pollution Is to Blame

Smog-related cancer deaths in China are soaring. Now children are being affected
By Emily Rauhala / Beijing Nov. 05, 2013

To the list of China’s environmental horrors, add one: an 8-year-old with lung cancer. Doctors at a hospital in coastal Jiangsu province blamed the girl’s condition on pollution, according to a state media. The child, who has not been identified, reportedly lived near a busy road and was exposed to harmful particles and dust. She is being called China’s youngest-ever lung-cancer patient.

The news comes amid growing concern about the health effects of air pollution. Last month the World Health Organization for the first time classified air pollution as a cause of cancer. The agency said air pollution caused 220,000 cancer deaths in 2010 and that more than half of lung-cancer deaths from particulate matter were in East Asia. Lung-cancer deaths in China have multiplied more than four times in the past three decades, according to government statistics.

The problem is particularly bad in northern China, where coal-powered heating systems add extra filth to the mix. These emissions have shortened the lifespans of Chinese people living north of the Huai River by an average of five years, according to a study published this year by the Proceedings of the National Academy of Sciences, an American journal. In Beijing, the smog-addled capital, cancer is now the leading cause of death, with lung-cancer rates jumping 60% in a period of 10 years.

Chinese urbanites are all too familiar with chest-rattling smog. In the northern Chinese city of Harbin last month, the pollution was so thick that kids were granted a “smog day” off school, roads were closed and planes grounded. State media said the PM 2.5 reading (which measures the level of dangerous particulate matter in the air) “exceeded” 500. A Reuters report put the figure at 1,000, or 40 times higher than what the World Health Organization deems safe. Last year, Beijing endured weeks of off-the-chart pollution that English speakers now refer to as the “airpocalypse.”

Perhaps the only upside of the city-shuttering smog is that it has forced the Chinese government to own up to the problem. This fall, the government announced a new blueprint for cleaning up the air by 2017. The plan calls for 5 billion yuan, or $817 million, to fight pollution. There will also be tonalidad-coded emergency measures for bad pollution days in Beijing. On red days, for instance, half the city’s cars will be idled and schools closed. Under a code orange, factories will slow and activities like fireworks and outdoor barbecues will be restricted.

These plans are better than nothing, but many wonder why the government hasn’t done more to keep people safe. After news of the 8-year-old’s diagnosis broke, hundreds of people commented on the story, wishing the child luck and expressing their own antiestéticars about living in a region where the air quite literally kills.

Channeling the sentiment of many here, one reader invoked a Chinese idiom: “Hao hao xuexi, tian tian xiang shang,” or, roughly, “Study hard and make progress every day.” Parents and teachers have been saying it for years, urging children to work harder, do better. But to this old phrase, they added a second bit of advice that reflects the dark mood as the country heads into another toxic winter: “Study hard and make progress every day,” they wrote. “And then leave China.”

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Analysis: Can China really urbanize?
By Asia Sentinel Nov 05, 2013 10:23AM UTC

Premier Li Keqiang’s big idea may not work, writes Asia Sentinel’s Philip Bowring

Plenty of ideas for driving China toward being a modern economy are on view in the run-up to the Party Plenum – interest rate liberalization, rural land rights, abolition of the hukou system, competition for state enterprises, etc., showing that top advisory bodies know what should be done even if vested interests stand in the way.

Meanwhile, however, the modest uptick in China’s growth seems yet again mostly due to the traditional stimulus mode – urban infrastructure, railways and highways and public buildings, all guzzlers of steel, cement, copper and other raw materials. Commodity prices, notable iron ore, have risen sharply again, as has that most China-sensitive of currencies, the Australian dollar.

This new surge of infrastructure building is not even just viewed as a short term stimulus measure. A faster pace of urbanization is regarded as underpinning growth in the medium term. Statistics show that another 280 million people might move to the towns and cities over the next 17 years, bringing the urban population from around 52 percent of the total to 70 percent. At present China is only slightly more urbanized than the Philippines, while Malaysia is already at 70 percent.

That sounds like a big number but 16 million a year is actually slightly less than that of recent years. The goal also implies that the percentage decline in the percent of the rural population will have to rise from the annual rate of which has held steady at around 1 percent for two decades.

There are a number of reasons in practice to expect the process of urbanization to fall. The first is the simple one that the increase in total population is grinding to a halt. This is already reflected in the fact that while the urban population was growing at 3 percent a year early in this century and at the end of the last one, but had fallen to 2.5 percent by 2010 and is now probably 2 percent at best.

The second is that it is mainly young people who migrate to the cities. Older ones mostly only become urbanized as towns expand into rural areas. The number in the potentially mobile age bracket is in steep decline. The number of people in the 15-29 age cohort rose from 322 million in 2000 to a peak of 347 million in 2010 but is now falling steadily and by 2020 will be only 266 million.

Even worse is that the number in these age groups in rural areas is falling even faster. Of those now 30 years old who were born in rural areas, 75 percent are already in the cities, a reflection of the role of the youth bulge, now passed, in enabling cities to grow so fast.

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China to end use of prisoners' organs for tras*plants in mid-2014

By Li Hui and Ben Blanchard

HANGZHOU, China | Sat Nov 2, 2013 4:58am EDT

(Reuters) - China, the only country that still systematically takes organs from executed prisoners for use in tras*plant operations, plans to end the controversial practice by the middle of next year, a senior official said on Saturday.

By mid-2014, all hospitals licensed for organ tras*plants will be required to stop using organs from executed prisoners and only use those voluntarily donated and allocated through a fledging national system, said Huang Jiefu, a former deputy health minister who heads the organ tras*plant reform.

The supply of human organs falls far short of demand in China due in part to a traditional belief that bodies should be buried or cremated intact. An estimated 300,000 patients are wait-listed every year for organ tras*plants, and only about one in 30 ultimately receives a tras*plant.

That shortage has driven a trade in illegal organ trafficking, and in 2007 the government banned tras*plants from living donors, except spouses, blood relatives and step- or adopted family members.

Huang, an Australian-trained tras*plant surgeon, admitted the problem of an organ black market was not something China would be able to easily resolve.

"The illegal trade of human organs will be inevitable in Chinese society in the years to come. The huge demand for organs is one of the causes. As long as there's a gap between supply and demand, illegal organ trafficking won't disappear, but the government will continue to crack down on it," he told Reuters.

INTERNATIONAL CRITICISM

Beijing said in August it would begin to phase out the practice of using executed prisoners' organs this month. Huang did not give an exact date for a ban on their use.

"Using executed prisoners' organs for tras*plants does not meet with the ethical standards universally accepted, and has always received criticism from the international community," Huang told a meeting of health and hospital officials in the eastern city of Hangzhou. "China's organ tras*plant reform is the government's political commitment to the people, and the world."

"There has never been a law that regulates the use of prisoners' organs. Enforcement of the policy has many loopholes, and there have been a lot of scandals that tarnish the image of the Chinese government," Huang said.

Courts, which oversee executions, have been told they are no longer allowed to offer organs to hospitals, Huang later told Reuters, noting a trend in China anyway for fewer executions. "China has meted out fewer and fewer death sentences, so reliance on death-row inmates' donations will become a dead end. So we must rely on voluntary donations," he said.

China does not publish the numbers of people it executes, though the World Coalition Against The Death Penalty estimates it was about 4,000 last year.

VOLUNTEER PROGRAMMES

To cut back on its dependency on prisoners' organs, China has launched pilot volunteer organ donor programs in 25 provinces and municipalities since February, with the aim of creating a nationwide voluntary scheme by the end of this year.

The number of tras*plants using donated organs has jumped to more than 900 cases in the first seven months of this year from 245 in 2011, but is still less than half the number of organs from death-row inmates, according to data provided by Huang.

Rights groups say many organs are taken from prisoners without their consent or their family's knowledge, something the government denies.

A decrease in organ supply will also put more pressure on China's nascent donation system.

A tras*plant surgeon at Saturday's meeting from the nearby city of Nanjing, who asked to be identified by his last name, Li, said it was likely the new rules would limit the number of tras*plants they were able to carry out.

"There might be a temporary shortage of organs. If so, we will just have to do fewer tras*plants. There's nothing we can do about that. Other countries haven't solved that problem either," he said.

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