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Chinese Fund Managers Sentenced to Death after Cheating Investors out of 1 Billion USD

HANGZHOU – Two brothers and their father were sentenced to death on Monday for cheating 15,000 investors out of over $1.1 billion in east China’s Zhejiang province. Ji Wenhua, president of the Yintai Real Estate and Investment Group, was sentenced to death for the crime

Gold at $7,000 article goes viral in Chinese media

Dan Collins CMR “Gold going to $7,000”, an article today in the Chinese media is going viral and one of the most viewed articles in the financial press. The article references American Jim Rickards and his concept of comparing inflation-adjusted gold prices. Most Chinese economists

Western paper markets manipulate gold prices lower as China takes the real stuff off the market.

It’s not uncommon for the large Wall Street banks to combine in shorting an entire years supply of minded silver in a single day.The same goes for all commodities. Endless paper printing getting funneled to Wall Street has destroyed all real price discovery. Capitalism fails

“American Collapse Theory” Gaining Ground in China

Dan Collins CMR When I moved to China back in 1998 I was surprised to learn how highly the Chinese thought of America. Of course China was a much poorer place back then but coming from the Detroit area I couldn’t fathom where was all

Chanos is back….This is getting sad

Chanos is back! His short China thesis is very long in the tooth but as it goes with most ego maniacs he cannot accept failure or that fact that he might be wrong. Being wrong on an entire country where you have never visited and

China Car Sales Up 22.6% -The Chinese economy is collapsing?

You have to laugh at the whole “China will collapse crowd” on CNBC and even respected sites like Zero Hedge. Personally, I love the Zerohedge stuff. They understand the ponzi-financial fraud-money printing-welfare state economy that now envelops the West. But China is a real economy,

Cloud Computing in China booming as American giants are pushed out

D.Collins CMR China’s cloud computing market is expected to be worth 37.2 billion yuan (US$6 billion) in 2017 as demand for the service grows, the Chinese-language China Securities Journal reported on Friday. Some American tech companies are watching the largest and fastest I.T. market in

China now runs 4 of the world’s 5 biggest banks

Stockswatch China has become a banking powerhouse. Four of the five largest banks in the world are Chinese, according to SNL Financial’s latest global bank rankings. It’s a big change from the past few years when only two Chinese banks made the top five. Beijing-based

France relents to China, Chinese police to help patrol Paris streets

Scared of losing the Chinese tourist dollar, France has relented to China and will allow Chinese police on the streets of Paris. More signs of the benefits of third-world immigration into the West to the point where cultural breakdown has occurred and law and order

Oil rig dispute could see repeat of Sino-Vietnamese War: report

Breaking News today that a Chinese vessel as rammed and sunk a Vietnamese fishing boat. All countries in the South China Sea and East China Sea are using fishing boats in a game of cat-and-mouse to challenge each other on their respective areas. This time

People’s Bank of China will take down global gold price manipulation

Gold has been flowing East for a decade. When the West wakes up to the fact that their gold is gone, they will no longer have sound money with which to back a currency. The world has only been off a gold standard since 1971

China to lower reserve requirement ratio

From the China Daily… BEIJING – China will lower banks’ reserve requirement ratio (RRR) by 0.5 percentage points starting May 18, the country’s central bank announced Saturday. The cut, the second of its kind this year, will drop the RRR for the country’s large financial

Japan Learning the Hard Way, Destroying your Currency is Not an Economic Strategy

Japan will learn the hard way that destroying your currency is not an viable economic strategy. Shanghai Daily JAPAN posted a record 1.63 trillion yen (US$17.4 billion) trade deficit in January as rising exports trailed surging imports of crude oil and gas due to rising

Renminbi-yen trade growing strongly a year after launch

One year after the launch of direct trading between the renminbi and Japanese yen, the daily trading volume between the two currencies has reached 50-100 billion Japanese yen on the Shanghai market and 15 billion yen on the Tokyo market, a combined volume double that

Chinese Officials Falsify Data To Mask Slowdown, NYT Says

Is China tweaking its numbers on GDP? Probably. For twenty years Chinese GDP roughy came in right on the governments target. This would be an almost magical performance record considering economists in the West can predict absolutely nothing. For years, China most likely lowered GDP

Chinese Cities You Have Never Heard of That Will Have 2 million or More “High Income” Residents by 2030

Jing Daily

These Lower-Tier Chinese Cities Will Have 2 Million or More ‘High-Income’
Residents by 2030

Cities like Foshan, Wenzhou, or Changsha may not be considered to be among
China’s luxury epicenters, but a new study by The Economist Intelligence
Unit finds that by 2030, lower-tier cities like these will have more “high-
income” consumers than Beijing has now.

According to the “Chinese Consumer in 2030” report released this week,
35 percent of China’s population is predicted to be “upper-middle class” or
above by 2030. This will amount to about 480 million people, marking a massive
increase from the current estimate of 132 million upper-middle class people in
China. (10 percent of the population).

The Economist defines a concept of “upper-middle class” as anyone with disposable
income of at least US$10,000. Meanwhile, luxury retailers will be especially
interested in tracking the growth of “high-income” earners, which it categorizes
as those with RMB200,000 (almost US$30,000) in disposable income—a group that
will surpass 10 million people in Shanghai by 2030 (up from around 4 million now).

But it’s not just the staggering Tier 1 city growth in high-income consumers that
is especially of interest to luxury brands—it’s also their populations’ rapid
expansion in smaller cities across China. The report finds that Shanghai, Beijing,
Shenzhen, and Guangzhou will continue to dominate as the top four cities for
number of high-income consumers, respectively, in 2030.

But a staggering number of smaller cities will also have passed up where the top
tier is at now, which is set to have a dramatic impact on the ways retailers
target consumers in these cities.

Tianjin is expected to surge to fifth place by 2030 as the government works to
incorporate it into the “Jing-Jin-Ji” metropolis. Meanwhile, southern cities
Hangzhou and Suzhou will be sixth and eighth, while Sichuan powerhouses Chongqing
and Chengdu will come in seventh and ninth.

The 2030 high earner population projections for all of these cities are higher
than Beijing’s number as of 2015, which is about 2 million people. Many other
smaller cities ranking after Chengdu will surpass this 2 million benchmark,
including Wenzhou,Nanjing, Foshan, Changsha, Qingdao, and Ningbo. Rounding out
the list of top 20 cities for high-income individuals will be Wuhan, Wuxi, Jinan,
Xiamen, and Xi’an.

Growing incomes will lead to diversified spending and a demand to upgrade to more
premium brands and expensive options, says the report, which notes that the average
Chinese consumer must now allocate 30 percent of their income to food. It also notes
that even beyond the top 20 cities listed, there are prime options for growth,
including Zhuhai in Guangdong, which will have a population with 36 percent high-
income consumers by 2030, while Shaoxing in Zhejiang will have 26 percent.

Income growth will not take off in all cities equally, however, as the ones primed
for growth have specific advantages (for example Qingdao and Ningbo are port cities
while Foshan is part of the Pearl River Delta Economic Zone that also encompasses its
giant neighbors Shenzhen and Guangzhou). The report notes that “those undergoing
industrial restructuring risk being left behind,” and China will still suffer from
rampant income inequality geographically even as some cities reach the levels
Beijing and Shanghai are at now.

China Market Update

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Philippine Peso Attack Begins- Get ready for lean times

CMR-
Editor

As we have written in the previous several weeks. Due to the geopolitical
stance the Philippine President has taken against the United States, by firmly
going under the protection of the Chinese economic umbrella,the resulting counter-
action would be the U.S. unleashing one of its most powerful,covert weapons
against any less developed nation which is to attack the currency.

As we speak, the Peso is now under coordinated attack in global markets and
nearing an eight-year low of 50 to $1 USD.

Credit Suisse Group AG and Rabobank Groep predict the currency will weaken past
50 per dollar next year, a level last seen in November 2008.

Global funds have pulled more than $600 million from Philippine stocks since
inflows already this year.

Expect the People’s Bank of China to have to start some Bank Swaps with the
Philippines Central Bank in order to try and shore up the currency. If they
have not already thought of this…they better get started.

I would expect the U.S. intelligence agencies will try and drive the currency
down all the way to the 75-100 range. It will drive up costs of everything in
the country and it will be the best attempt to polarize the people against the
President.

1x-1

China Market Update

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Telling the Fortune by Fondling the Breasts

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Shock Update: Duterte wants U.S. Troops out in Two Years

Yahoo
Tokyo (AFP) – Philippine President Rodrigo Duterte said Wednesday he wants US troops out of his country in the next two years and is willing to scrap defence pacts with longtime ally Washington if necessary.

The comments follow a series of anti-American tirades by the firebrand leader, who has repeatedly attacked the US while cosying up to Beijing, upending his nation’s foreign policy in comments that have sometimes been quickly retracted.

“I want, maybe in the next two years, my country free of the presence of foreign military troops,” Duterte told an economic forum in Tokyo, in a clear reference to US forces.

“I want them out and if I have to revise or abrogate agreements, executive agreements, I will,” he added.

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Do you see what happens Kerry?

From Reuters…U.S. Secretary of State John Kerry is confident after speaking
that the two countries can “work through” a period of confusion caused by
anti-American rhetoric from President Rodrigo Duterte, the State Department
said on Monday.

At the same time, Kerry emphasized strong and stable ties between the longtime
allies, while Kirby said Washington had seen no practical action by Manila to
move away from those.

No practical actions by Manila? We will let the video be the judge of that.

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China dominates list of world’s top 10 Fintech companies in 2016

China Daily

China cemented its status as a world leader in financial technology services this year, claiming five of the top 10 spots in the annual list of the globe’s leading fintech companies, compiled by UK-based advisory firm KPMG and Australian investment company H2 Ventures.
China’s Ant Financial, which owns and operates the country’s largest online payment platform Alipay, topped the 100 Leading Fintech Innovators 2016 released Monday and was joined by four other Chinese companies. Student microloan site Qudian came in second this year, internet based lending and wealth management platform Lufax took fourth, online insurance business ZhongAn took fifth, and risk management company JD Finance came tenth.

Last year two Chinese companies made the top ten – ZhongAn claimed top spot, while Qufenqi, an electronics retailer that lets buyers pay in monthly instalments, took fourth. This year, eight Chinese companies made the top 100, compared to seven last year.

The emergence of China, increased competitiveness from emerging markets and the impact of Brexit to funding in the sector is now threatening the UK’s status as the world’s leading fintech center, according to analysts. The UK went from 18 companies in the top 100 last year to 13 this year, with just one – banking app Atom – in the top ten compared to two in 2015.

“The continued dominance of China, which rapidly rose last year to take the top spot, tells only part of the story,” Toby Heap, founding partner of H2 Ventures, said. “We are seeing the emergence of exciting fintech players in countries across the world – from India to Israel, from Portugal to the Philippines.”

Established Fintech companies are ranked based on four groups of factors: total capital raised, rate of capital raising, location and degree of sub industry disruption.

In the first quarter of this year, fintech companies in China attracted $2.4 billion from venture capital firms in nine deals, or 49 percent of the $4.98 billion in investment in the sector recorded globally. In April, Ant Financial raised a record-breaking $4.5 billion in funding.

China to approve 7 more Free Trade Zones. U.S. economy continues to languish under worlds highest corporate tax rates.

Free Trade Zones in Detroit, Cleveland, Memphis, Buffalo, etc…
You could transform these cities overnight. But the U.S. will not do that
as the country suffers from a “cancer of the heart” in wanting to take down
anyone who builds something. Soak the rich so to speak. How dare someone employee
somebody. That is in direct competition with the government getting them on the
welfare system. 47% and counting are collecting a government check in the U.S.
Rationality left the U.S. long ago. The U.S. continues down the road to serfdom.

China Daily.com
BEIJING – General plans for China’s third group of free trade zones (FTZs), announced in August, will be approved soon, the Shanghai Securities News reported Monday, the latest step in the country’s expanding FTZ network.

In August, China approved the establishment of seven new free trade zones, including coastal Zhejiang and Liaoning provinces and the landlocked provinces of Henan, Hubei, Sichuan and Shaanxi as well as Chongqing municipality, as the country looks to replicate the success of previous trials.

The total number of FTZs now stands at 11 after the first one was founded in Shanghai three years ago and a second group was established in coastal Tianjin, Fujian and Guangdong in late 2014.

According to Minister of Commerce Gao Hucheng in August, Liaoning province in Northeast China will focus on market-oriented reforms to transform the old industrial base into a more competitive area, while Zhejiang is expected to explore trade liberalization of commodities and improve its abilities in the global distribution of commodities.

Central China’s Henan will tap its potential in transportation and logistics, and Hubei will build high-tech bases and facilitate the development of the Yangtze River Economic Belt.

China hopes the FTZs in Chongqing, Sichuan and Shaanxi, all in the country’s less developed west, will help open the regions to bring out their economic vitality.

FTZs are part of government efforts to test reform policies, including interest rate liberalization and fewer investment restrictions, to better integrate the economy with international practices.

Among the successful trials in the first two groups of FTZs has been the introduction of a “negative list,” which specifies investment sectors off-limits to foreign investors and allows industries not on the list to follow the same new investment rules as domestic firms.

Encouraged by the results, China is considering expanding the approach nationwide.

Western Media wake up to global boom in Chinese M&A but miss the elephant in the room

Editor
CMR

Bloomberg published an article today which shows some in the media are waking
up to the massive global boom in M&A coming out of China. What they are not
connecting, however, is the cause or danger to indigenous industries in
the West. In capitalism, the productive and efficient replace the weak and
inefficient. This is no longer the case.

In many of these recent Chinese M&A deals, it is state-owned money
being crammed into both state-owned enterprises and public enterprises to buy
up foreign assets and control more of the global supply chain and technology.
Inefficient companies with low technology are acquiring high-tech firms whom
are generally very efficent. The money coming out of China is just to large to
say no to for the acquired firms stockholders.

Indeed, China buying up these companies are a form of real assets with know-how
and productive capacity that can achieve rent-seeking returns in the West and
upgrade domestic know-how in the China market. It is a much smarter bet than
buying more U.S treasuries which China has not added significantly to its
stockpile since 2009.

One case, in point. When low-end Geely automotive bought into Swedish car maker,
Volvo, the acquisition was worth 3 times the value of the acquiring company itself.
The money and credit to acquire Volvo of course coming from the local government.
China is flush with cash but its corporates not so much. They are being given access to
credit worth hundreds of billions to buy up corporate titans around the world.

The article is here..

How China’s Dealmakers Pulled Off a $207 Billion Global Spree

http://www.bloomberg.com/news/articles/2016-10-23/china-s-art-of-the-deal-how-m-a-pariahs-became-global-players

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China Market Update

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Pentagon Military Planners in Shock…. Chinese tourists and gamblers take down the Asian Pivot.

CMR

President Rodrigo Duerte has just announced that the Philippines is leaving the
orbit of U.S. influence. The entire Asian-Pivot, the plan to move 50% of U.S.
Naval and Airforce assets (outside of the U.S.) to Asia and ring China with
missile bases is in tatters.

The Philippines is the first, but will not be the last country in the region
to declare they are in the “China camp”. Indonesia is also quickly moving towards
China. Well, at least the U.S. still has Vietnam…oh wait, I hope they don’t hold
that whole Vietnam war thing against us.

According to Reuters, $13.5 billion in deals will be signed by Duerte during this
China trip. That represents about 5% of the countries entire GDP. Chinese companies
will flood in building ports,high-speed rail, telecom networks, and factories of
all types. The U.S has lost influence as it as let its real economy go.

The Philippines doesn’t need anything American companies can provide,it needs
infrastructure and a developing economy. President Duerte was quoted in a speech,
“How can you be the most powerful industrial country when you owe China and you
are not paying it?”

So …let’s do the math. China had 120 million outbound tourists in 2015 and the
Philippines had close to 20% of its workforce and 20% of its GDP tied to tourism.
The Philippines only received roughly 5 million tourists in 2015, China will be in a
position to double or triple the tourism industry of the Philippines by encouraging
Chinese tourist companies to route big spending Chinese tourists to the islands.

You can also imagine the casinos of the Philippines are also chomping at the bit as
Duerte is also expected to announce visa-free travel for Chinese citizens.

Americans meanwhile have new strict rules and must obtain a visa if staying longer
than 7 days.

So , for my investor friends out there, how to play this? The Philippine currency will
be attacked on the global currency markets by the Western intelligence agencies in a bid
to bring down Duerte. Let it unfold, then go long on Philippines tourism and the currency.

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China new bank loans surge in September

Yahoo News

New loans by Chinese banks in September surged nearly 30 percent from the previous month, official data showed Tuesday, deepening concern about risky credit expansion in the world’s second largest economy.

New loans extended by banks jumped to 1.22 trillion yuan ($181.3 billion) last month from 948.7 billion yuan in August, said the People’s Bank of China, the central bank.

Beijing has relied on stimulus measures such as loose credit to boost the economy, which faces a tough structural transition and sluggish global demand. But the rapid rise in borrowing has sparked alarm.

The International Monetary Fund warned earlier this month that China’s dependence on debt was growing at a “dangerous pace” and called on Beijing to curb credit growth.

“By maintaining high near-term growth momentum in this manner, the economy faces a growing misallocation of resources and risks an eventual disruptive adjustment,” it said.

China is set to release a set of economic indicators on Wednesday, including third-quarter GDP growth, industrial output and retail sales.

While the lingering effect of earlier easing may prop up growth in coming months, Beijing is expected to slow down the pace of lending, Capital Economics China economist Julian Evans-Pritchard said in a response to the latest figures.

“The focus of policymakers has shifted away from immediate growth concerns toward containing credit risks,” he said.

Economists have warned that the ballooning borrowing could risk sparking a financial crisis as bad loans and bond defaults increase.

China’s total debt hit 168.48 trillion yuan ($25 trillion) at the end of last year, equivalent to 249 percent of GDP, the China Academy of Social Sciences has estimated.

ANZ Research also predicted that loan growth may cool down in the fourth quarter as local governments tighten restrictions on a red-hot housing market.

GM ventures into China car-sharing with investment in app developer

U.S. automaker General Motors Co made its first investment in a Chinese car-sharing start up, the company said on Tuesday, as its attempt to reshape itself as a mobility solutions company spreads around the globe.

A GM spokeswoman declined to disclose the size of the investment in Yi Wei Xing (Beijing) Technology Co Ltd, which developed Feezu, a car rental and car-sharing app.

“This cooperation is very important to our company to explore ride-sharing market in China,” the spokeswoman said in an email to Reuters. “It is GM’s first investment in a start-up in China related to urban mobility.”

GM is “looking at our footprint in China and opportunities there, and Yi Wei Xing is a step in that direction,” said Vijay Iyer, GM spokesman for the Maven car-sharing service and based in Detroit, in a telephone interview on Wednesday. “How that will ultimately show itself in a service perspective is in the exploration phase.

“We are now purchasing technology in that market to be able to deliver ride-sharing experiences and we’ll take it from there,” he said.

GM and other major global automakers have rushed to team up with technology companies as services like ride hailing and car sharing pose a threat to the traditional model of car ownership.

This year GM made a $500 million investment in U.S. ride-hailing company Lyft, while Japan’s Toyota partnered with Uber [UBER.UL] and Germany’s Volkswagen (VOWG_p.DE) tied up with Israel-based car-hailing firm Gett.

Yi Wei Xing did not respond to requests for comment.

Feezu, whose Chinese name translates as “micro car rental,” allows users to rent vehicles for as little as 10 minutes. The app differs from services like Uber and Lyft that primarily hail cars with drivers

Central Bank Governor Hints at Credit Squeeze to Deflate Nation’s Property Bubbles

Caixin

(Washington) — The head of China’s central bank said the country will put in place “certain controls over credit growth,” signaling a squeeze on liquidity that has been blamed for the property sizzle in dozens of major cities across the country.

Zhou Xiaochuan made the comments at a meeting of the IMF board — the International Monetary and Financial Committee — on Saturday.

New loans in August reached 948 billion yuan ($142 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, mainly to fund mortgages.

“China will use various policy instruments to keep banking liquidity at an adequate level and allow credit and total social financing to grow at a steady and moderate pace,” Zhou said in a written statement published in connection with the meeting in Washington.
Investors armed with cheap credit have flocked to China’s property market in recent months, and home prices in 70 major cities rose 7.5 percent in August compared with a year earlier, according to China’s National Bureau of Statistics.

Zhou had warned earlier against the emergence of housing bubbles. Speaking at the G20 meeting of finance ministers and central bank governors in Washington on Thursday, Zhou said the government has already enacted policies to develop “a healthy property market.”

About 20 Chinese cities tightened home purchasing requirements in late September to cool an overheated market, with some prohibiting property developers from selling homes to residents who don’t have a local hukou, or residency registration, and to those who already own more than one home. Other cities have raised the minimum down payment required.

Zhou also proposed controlling credit growth to corporations by “lowering corporate leverage and dealing with piling debt through market-based approaches, such as debt restructuring, debt-to-equity swaps, securitization, and liquidation.” This came after the IMF warned that the country’s growing debt “posed risks to financial stability.”

China’s gap of credit to gross domestic product, taking into account loans to the private sector excluding financial institutions, was 30.1 as of March, according to the Bank for International Settlements, a governance body comprising representatives from central banks from around the world. China’s gap was highest among all 43 economies monitored by the financial watchdog. A debt level above 10 signals a potential crisis, according to the agency.

China’s economic downturn and overcapacity in certain heavy industries have resulted in a group of “zombie companies” that are struggling to survive and repay debt.

Zhou said that although the bad-loan ratio in the banking system has risen, the overall risks are “controllable” because banks have sufficient reserves to deal with them.

China market Update-17OCT2017

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China sentences former Communist Party boss to death for bribery with reprieve

China has sentenced the former Communist Party boss from the southwestern province of Yunnan to death for bribery with a two-year reprieve — the latest official to fall in President Xi Jinping’s sweeping war on graft.

Key points:

Bai Enpei illegally amassed over $49 million in assets, court said
He was handed a reprieve due to admitting his crimes, expressing regret
Dozens of senior officials have been jailed in President Xi Jinping’s campaign
A court said Bai Enpei, 70, abused his posts, including as party chief in Yunnan until 2011, and earlier as the top official in the western province of Qinghai, illegally amassing more than $49 million in assets.

Bai was handed a two-year reprieve, as he had admitted his crimes and expressed regret, and because the assets were recovered in full, the court said.

Typically death sentences are converted to life imprisonment subject to good behaviour.

“The amount of bribes Bai Enpei accepted was huge, the details of his crimes extremely serious, and their social impact especially pernicious,” the Anyang city intermediate court in the central province of Henan said on its official blog.

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U.S. losing the Philippines -The Fulcrum country in the Asian Pivot

The U.S. defense structure has been planning for years to contain China
with an “Asian Pivot strategy” which means basically grouping all countries
around China into a blocking organization. The TPP trade agreement is the
economic arm of the TPP. An economic trade agreement which includes all of the
countries around China, with the exception of China, the world’s largest economy
on a PPP basis. The military arm of the Pivot including the planned re-opening
of Naval bases in the Philippines and working together with Japan, Korea, and
the ASEAN countries to militarily contain China.

What the U.S. has not planned for is the loss of economic and military clout
among the countries around China. The economic clout of China is in process of
overwhelming the Asia-Pacific region. Now, the fulcrum country of this
pivot strategy is in process of breaking -away from the United States where
it is perceived weak both economically and military weak.

Reuters

Philippine leader Rodrigo Duterte on Tuesday told U.S. President Barack Obama to
“go to hell” and said the United States had refused to sell some weapons to his
country but he did not care because Russia and China were willing suppliers.

In his latest salvo, Duterte said he was realigning his foreign policy because
the United States had failed the Philippines and added that at some point, “I
will break up with America”. It was not clear what he meant by “break up”.

During three tangential and fiercely worded speeches in Manila, Duterte said the
United States did not want to sell missiles and other weapons, but Russia and
China had told him they could provide them easily.

“Although it may sound shit to you, it is my sacred duty to keep the integrity
of this republic and the people healthy,” Duterte said.

“If you don’t want to sell arms, I’ll go to Russia. I sent the generals to Russia
and Russia said ‘do not worry, we have everything you need, we’ll give it to you’.

“And as for China, they said ‘just come over and sign and everything will be delivered’.”

Philippines President Rodrigo Duterte (C) clenches fist with members of the Philippine Army during his visit at the army headquarters in Taguig city, metro Manila, Philippines October 4, 2016. REUTERS/Romeo Ranoco

Philippines President Rodrigo Duterte (C) clenches fist with members of the Philippine Army during his visit at the army headquarters in Taguig city, metro Manila, Philippines October 4, 2016. REUTERS/Romeo Ranoco

China’s Gasoline Exports Surged to Record High in June

China’s manufacturing prowess is spilling into gasoline refining which threatens
to squeeze margins on refining. Old U.S. refineries with outmoded equipment and
straight-jacket regulatory processes will not be able to compete.

WSJ
China’s Gasoline Exports Surged to Record High in June
In June, China exported 1.1 million tons of gasoline, or around 269,000 barrels a day

HONG KONG—China’s exports of gasoline hit an all-time high in June as local refiners are aggressively shipping out their surplus barrels to alleviate bloated inventories.

In June, China exported 1.1 million tons of gasoline, or around 269,000 barrels a day. The volume is 42% higher than last month and more than double the amount a year earlier, according to data released Thursday by China’s General Administration of Customs.

As China’s output of gasoline outpaces demand, analysts say it is no surprise that the country is cranking up exports of the fuel mainly used in automobiles.

“The problem is not consumption because consumption has been fine. The refiners have just over done it,” said Peter Lee, a BMI Research energy analyst.

What worries investors is that as China inundates the market with oil products, regional refining margin will suffer. In the first quarter of this year, regional refining margin averaged around $5 to $6 a barrel, but could drop to around $3 a barrel in the third quarter, said CLSA analyst Nelson Wang.

“The weakening margins means refiners in China, South Korean and Japan, will have no choice but to pull back production in the third quarter, if not, early fourth quarter,” said Mr. Lee.

Much of the increase in Chinese refined-product exports is because of shifts in the way the domestic industry is regulated. Beijing has more than doubled the amount it allows refiners to sell abroad this year, according to Energy Aspects data.

The resurgence of China’s independent crude refiners, known as “teapots,” has also been key. Last year, Beijing allowed these teapots to directly import crude from abroad for the first time, rather than having to buy more expensive crude from domestic state-owned oil companies.

Their subsequent ramp-up in production has provided big state-owned refiners such as Sinopec and China National Petroleum Corp. with greater competition at home, leading them to sell more abroad.

In June, China’s exports of diesel hit 1.1 million tons, equivalent to a 64% on-year rise. In the first half of the year, China’s diesel exports more than tripled to 6.6 million tons.

The surge in China’s refined-products exports isn’t the only thing worrying analysts. Last month, China’s imports of crude dropped to a five-month low of 30.62 million tons — a 3.8% rise. In the first half of the year, China’s crude buying rose 14.2% to 186.5 million tons.

The lower volume is mainly due to longer transportation time due to congestion at the ports, as well as some refiners undergoing annual maintenance, analysts say.

“Many of the teapots used a bulk of their import quotas in the beginning of the year, so it makes sense to see their buying taper off,” said Mr. Wang.

However, as refiners are now required to keep at least 15-days’ worth of crude in their inventories, combined with the government’s efforts to fill the strategic petroleum reserve, China’s crude demand could still remain robust in the coming months.

Direct investment in the US a record high

CHINA’S direct investment in the United States reached a record US$8 billion last year as Chinese firms continued to expand overseas.

Investment in the US accounted for 5.5 percent of its total outbound direct investment, with manufacturing attracting the most — US$4 billion, up 122.2 percent year on year — according to a report by the Ministry of Commerce, the National Bureau of Statistics and the State Administration of Foreign Exchange.

Chinese firms carried out 97 mergers and acquisitions in 2015, worth US$13.1 billion, the report said.

Of existing investment in the US, manufacturing also accounted for the largest share — 26.3 percent — with a total value of US$10.7 billion.

The majority of that investment went to car making, ferrous metal smelting, medicine and transport equipment manufacturing, the report said.

The country’s non-financial outbound direct investment hit US$146 billion dollars last year, exceeding the US$136 billion in foreign direct investment it received and making it a net capital exporter for the first time.