The Sinocism China Newsletter – October 13, 2016

Bill Bishop , October 14, 2016 9:15am


1. PBOC Orders 17 Banks to Curb Housing Loans-Caixin Sources told Caixin that regulatory authorities will take measures to keep commercial bank lending from going to the housing market, and the government will conduct more supervision and inspections of financial institutions over their issuance of home loans. New loans in August reached 948 billion yuan ($141 billion), more than double the figure a month before, data from the People’s Bank of China showed. Over 71 percent of the loans went to households. During the weeklong National Day holiday at the beginning of this month, more than a dozen cities rolled out stringent measures to cool the housing market, including increasing the minimum down payment required for both first- and second-home purchasers. In Beijing, for example, families that already own a unit must provide a 50 percent down payment for a second home, up from 30 percent. The next step may be to increase the interest rates on mortgage loans, a bank source told Caixin // original Chinese 独家|央行召集17家银行就房地产调控开会 

Related: China Cracking Down on Rumor-Mongering in Property Market – Bloomberg right, this will solve the issue…in the playbook every time it seems //  The ministry said local authorities should follow the example of local police in Hangzhou and Shenzhen, which have taken “restrictive measures” against a local developer and an Internet user who spread rumors or untrue information related to property prices. Such steps will ensure a “stable and healthy” home market, the ministry said.

Related: China’s property bulls keep running hard-FT Many analysts consider the most leveraged mainland developers vulnerable to a financial blow-up at any time. Some of them, such as China Evergrande Group, have debt loads of upwards of $60bn (according to its first-half interim unaudited results). Moreover, Hong Kong has seen an influx of mainland development activity, suggesting these players are not particularly bullish on their prospects at home. But as so often is the case with China, the doomsayers may well be wrong. Property as an asset class has become important in China — maybe too important

Related: China bank regulator: ‘Little to worry about’ from mortgage loans | Reuters China’s banking sector has “little to worry about” from its fast growing mortgage lending business, an official with the China Banking Regulatory Commission said on Thursday. “The real estate market has limited direct impact on banks,” Wang Shengbang told reporters at a briefing.

Related: 首付一夜涨几百万 北京部分二手房买主违约弃购_凤凰资讯 new real estate restrictions already starting to wreak havoc in Beijing

Related: 中央党校周天勇:打房豪,分房子 几十年前无数英雄烈士抛头颅洒热血,为了中国的解放运动而献出生命,终于消灭了地主阶级,让所有农民翻了身做了主。可几十年后,经济虽然发展起来了,但老百姓地阶层分化又出现了,再度倒退到了以前那个地主和农民的时代——只不过这一次是以房豪和房客的形式。虽然形式不同,但本质是一样的。那就是有少数群体可以依靠房(地)不劳而获,赚取大量财富,而底层群体则要艰辛的劳动着,并将自己的辛苦钱双手送给这群房主(地主)。 几十年前可以打土豪分田地,现在也许该打房豪,分房子了!// Central Party School’s Zhou Tianyong calls for redistributing homes owned by the rich (or at least this wechat post claims he does, kind of hope it is fake…), would be funny but for the history…

2. John Kasich: Refusing to ratify TPP risks America’s role as the world leader – The Washington Post The last thing we need is for these thriving markets to come to believe they can’t count on U.S. support, pushing them instead into economic and geopolitical relationships with China or Russia. In the event of our inaction and loss of resolve, the United States will surrender global leadership to our most aggressive rivals, dictators who have the most to gain: Vladimir Putin, Russia’s latter-day Stalin; and Xi Jinping, the most repressive Communist Chinese leader since Mao Zedong. That’s why the TPP agreement enjoys full-throated, bipartisan support from America’s most respected national-security leaders, including former defense secretaries Robert Gates, Leon Panetta and Donald Rumsfeld and former secretaries of state Colin Powell, Madeleine Albright and James Baker.

Related: S’pore and Australia urge the US to stay engaged in Asia, ratify TPP | TODAYonline During the press conference, Mr Lee also urged the US Congress to ratify the TPP soon, saying it is of vital importance to the region. Both Singapore and Australia are signatories of the 12 nation trade pact, which would account for around 40 per cent of global economic output if it comes into effect. Mr Turnbull added: “The ratification of the TPP by the US Congress, would be of enormous importance to the region and certainly we see it. Both Prime Minister Lee and I see it and the region sees it as a profoundly strategically important commitment and that is the argument that we have been making.”

Related: If Beijing can claim South China Sea, US can call Pacific ‘American Sea’, says Clinton in leaked speech | South China Morning Post In the paid speech to Goldman Sachs, Clinton said she confronted Chinese officials about the South China Sea during her tenure as secretary. “I said, by that argument, you know, the United States should claim all of the Pacific. We liberated it; we defended it. We have as much claim to all of the Pacific. And we could call it the American Sea, and it could go from the West Coast of California all the way to the Philippines.” She said in the speech that she had told her Beijing counterparts the Chinese claims to the South China Sea were based on “pottery shards” from “some fishing vessel that ran aground in an atoll somewhere”, whereas the US claim to the Pacific would be based on “convoys of military strength” in the second world war and the claim Americans “discovered Japan”. // sad that political expediency trumps strategic importance when it comes to TPP

3. 魏少军:中国发展存储器芯片应以市场为主导公司频道财新网 清华大学微电子研究所所长魏少军认为,要淡化“政府主导”的思路,谁的市场能力强,就由谁来主导  //  Interview with Wei Shaojun, director of the Institute of Microelectronics at Tsinghua University, who just led the recent Politburo study session, “deglobalization” of China’s IT stack only gaining momentum

Related: 军报:护好网络命门 最好的方法是“用上中国芯”-中新网 call in PLA Daily for domestic chips as best way to ensure cyber security  //  自1994年4月20日通过一条64K的国际专线接入国际互联网后,我国网络发展飞奔在信息的高速路上,目前已拥有世界上数量最多的网民和规模最大的网络市场,成为名副其实的网络大国。然而,相对于信息技术的快速发展和广泛应用,我们的网络安全整体防护能力不强,基础信息技术水平较为薄弱,特别是核心芯片、操作系统、数据库等基础软硬件大部分采用国外产品,存在着重大安全隐患。正因如此,习主席在网络安全和信息化工作座谈会上指出:“互联网核心技术是我们最大的‘命门’,核心技术受制于人是我们最大的隐患”。

4. The Road To The 19th Party Congress-Alice Miller | Hoover Institution The Politburo’s scheduling of a Central Committee plenum for October signals the start of formal preparations to convene the Chinese Communist Party’s 19th Congress in the fall of next year.  This article lays out the successive procedures and processes that will lead to the congress and that will charge leadership politics over the coming year. // oversight yesterday, should have included this in the essential eight item about the 6th plenum and speculation about Xi’s successor. Dr. Miller, my advisor at SAIS, is very much the embodiment of the “institutionalizer” school of elite China politics analysis. There is the quite the debate raging about whether Xi is rolling back institutionalization 

Related: 央地交流 九“京官”跻身各省份党政领导政经频道财新网 60多位下派“京官”如今仕途各异,三分之一晋升省部级:九人跻身各省党政领导层,12人回京担任副部级职务;一人辞官下海,一人落马 // interesting Caixin story looking at officials who have served in Beijing then cycled out into the provinces

5. China: Risky bets and ‘red elephants’-FT A Chinese official with the influential National Development and Reform Commission, the government ministry responsible for economic planning, says frustration is mounting in Beijing over poor returns from unsatisfactory projects and a sense that state lenders have in the past taken on too much risk in unstable countries. “China had no choice but to lend a lot to risky countries because they had the commodities we needed and because the western multilateral organisations already dominated the rest of the world,” the official says. “These days we need viable projects and a good return. We don’t want to back losers.” // Venezuela not going so well…

6. “前首富”牟其中:欠的人情太多要保命来还新闻腾讯网 Mou Qizhong out of jail, once China’s richest man, one of the crazy stories from the early days of reform…NYT in 2000 on Mou-China’s High-Flying Capitalist Crashes to Earth

7. China has now eclipsed us in AI research – The Washington Post The chart above was published Wednesday by the Obama administration as part of a new strategic plan aimed at spurring U.S. development of artificial intelligence. What’s striking about it is that although the United States was an early leader on deep-learning research, China has effectively eclipsed it in terms of the number of papers published annually on the subject. The rate of increase is remarkably steep, reflecting how quickly China’s research priorities have shifted. The quality of China’s research is also striking. The chart below narrows the research to include only those papers that were cited at least once by other researchers, an indication that the papers were influential in the field. // still surprised there has yet to be any outcry over PRC Internet national champion Baidu’s AI research lab in San Jose, CA and its employment of some of the top American AI researchers

Related: Sinica Podcast: Andrew Ng on artificial intelligence and startup culture from Beijing to Silicon Valley  September 2016 interview // What is the state of the art of artificial intelligence (AI) in China and the United States? How does language recognition differ for Chinese and English? And what’s up with self-driving cars? To answer these and many other questions, Kaiser and Jeremy talk to Andrew Ng, founder and chairman of Coursera, an associate professor in the department of computer science at Stanford University, and the chief scientist of Baidu, where he heads up the company’s research on deep learning and AI. The discussion delves into the differences between Chinese and American engineers, entrepreneurial culture in China, artificial neural networks, augmented reality, and the role big internet companies and their resources play in advancing AI. Check out the SupChina backgrounder on their conversation here.

8. In Syngenta Bid, ChemChina Follows Buyout Formula-Caixin As with previous takeovers, ChemChina’s Syngenta strategy hinges on a high degree of leverage and the use of special financing vehicles (SPVs). But questions have been raised about whether leveraging the mega-acquisition makes sense. And Beijing authorities have lately turned ambivalent. Borrowing is key because ChemChina, which according to a company document had a debt-to-assets ratio exceeding 80 percent at the end of March, might get away with providing none of its own money toward the buyout, according to documents filed with the U.S. Securities and Exchange Commission and agreements signed between the company and its lenders.

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Bill Bishop

Author and curator of the daily Sinocism newsletter.