China update

Why A Popsicle Stick Manufacturer Just Moved From China To Canada

CHINA STOCK FRAUD SHOCKER: Banks Were Complicit In Longtop Fraud

Longtop Financial (LFT), a popular Chinese software company, has just been exposed as a colossal fraud.
The "cash balance" on Longtop's balance sheet, it turns out, was fake--a fiction created by the company's managers and helpers.
The Longtop fraud follows other China stock frauds that have made many of Wall Street's best and brightest look like fools. It has also increased the skepticism of American investors toward Chinese companies.
As well it should.
Unlike some of the more famous American-company frauds in recent years--Enron, Worldcom--it turns out that Longtop had institutional help in perpetrating its fraud. The reason Longtop was able to fend off skeptics for so long, despite multiple analysts arguing that it was a fraud, was that Chinese banks were complicit in the scam.

Jim Chanos' One Big China Regret

China Real Estate: 100,000 Apartments Waiting To Be Sold In Beijing

Yesterday, Xinhua reported that there are now some 66,113 apartments in Beijing currently under construction are now waiting to be pre-sold, and 34,755 completed apartments are now waiting to be sold.  Totally, there are 100,868 apartments waiting to be sold in Beijing according to the Beijing Branch of Centaline.  This is the first time in four months that inventories reached 100,000.
This is hardly surprising of course.  Under new and tougher buying restrictions in Beijing, as well as tighter credit, the pool of potential buyers are shrinking fast, yet the number of apartments waiting to be sold surge naturally because the land acquisitions spree in the past two years means that the new supply will start entering the market now.
Facing tighter credit condition and shrinking pool of potential buyers, cash flows for Chinese real estate developers are turning negative as I have previously pointed out.  With declining profits, poorer cash flows, higher level of unsold inventories and higher level of debts, the question now is for how long can these developers hold the prices at high level.  Sooner or later, these developers will have to cut prices and cash in.

So the overall picture now is getting obvious, that a correction in property prices is inevitable.  The only question is when that will happen, and for how much. 

The Entire Chinese Bull-Bear Debate In One Huge Slide

Richard Koo On China: There Will Be Blood

China’s Interest in Farmland Makes Brazil Uneasy

Richard Koo Explains How China Will Try Busting A Bubble, And Sustaining A Boom Simultaneously

The Latest Chinese Methods Of Hiding Debt And Priming Growth

As of 2010, the total assets of China’s banking industry have grown to 2.39 times the amount of national GDP, breaking records once again at nearly 100 trillion yuan.  In comparison, according to OECD data, Japan’s banking assets in 2008 stood at US$ 9.81 trillion, 2.27 times the amount of its GDP, which was US$ 4.32 trillion. Germany, another country representative of economies that rely on banks for financing, had 6.6 trillion euros for banking assets and 2.48 trillion euros for GDP in 2008. Its 2008 banking-assets versus GDP ratio was 2.66, almost the same as it had been in previous years.
The surge in China’s banking assets, which took off in 2009, was attributed to political directives rather than monetary policies. In 2009, huge amounts of loans were made at the order of government. The central bank did not cut interest rates; in fact, it conducted a net absorption of liquidity from the market through its open market operations. Meanwhile, the market capitalization of domestic stock exchanges more than doubled from a year earlier, an indication of too much capital flowing around.

After Being Followed Around By Chinese Government Agents, This Reporter Confronts Them And All Hell Breaks Loose

8A striking look at a reality of China. Australian reporter Stephen McDonnell went to China to do a report on religion in the country, including underground Christian churches, and was followed around for days by Chinese government agents.
After a bunch of this, he decides to confront them (in fluent Mandarin) in a hotel lobby and all hell breaks loose.
The rise of religion, and in particular Christianity, in China, just may be one of the biggest macro stories of the 21st century. The religion is growing really fast in the country and the government doesn't like it. It tries to co-opt them with officially sanctioned state churches, but underground churches are flourishing as well.
If the Chinese start converting to Christianity en masse, that could have a profound impact on Chinese society, government, and therefore given the rising importance of China, geopolitics. It sounds unlikely today, but in his day Stalin quipped: "How many divisions does the Pope have?" and it turned out that the Pope played a significant role in the fall of the Soviet Union.