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Caixin: Social Structure Study Found China’s Middle Class Collapsing

Well-known Chinese financial news media group Caixin recently reported that a recent professional social structure study called, “The Middle Class Transition Tier and The Edge Tier” found that 19.12 percent of China’s population is Middle Class. Of those, 73 percent are very close to the borderline that divides the Middle and the Lower classes. The study was based on a model established under the International Socio-Economic Index of Occupational Status (ISEI). The sample size was 683,291 employed people who are between the ages of 16 and 64. In addition to the Middle Class, China has an Upper Class of 5.62 percent of the population and a Lower Class of 75.25 percent. In the Lower Class, 4.4 percent (of the entire Chinese population) was in the “Transition Tier” that is very close to the Middle Class line, and in the Middle Class, 13.9 percent was in the “Edge Tier” that’s slightly above the same dividing line. The entire population’s 13.9 percent is 73 percent of the Middle Class population. The study also found that the bigger a city is, the more people are in the Middle Class Edge Tier. In cities with more than 10 million residents, 25.35 percent of the city’s population is in the Middle Class Edge Tier.

Source: Caixin, April 17, 2017
http://china.caixin.com/2017-04-17/101079210.html

Chief Economist: China’s Housing Market Will Always Go Up Unless Supply and Demand Are Balanced

On April 15, Chen Dongqi, Chief Expert and former Vice President of the Macroeconomic Research Institute which is under the National Development and Reform Commission spoke at the 2017 Top Chinese Economists Forum. Chen said that the imbalance between the supply of and demand for land and money is the root cause of housing prices being pushed up.

Chen said, “If you do not solve the supply and demand issue, prices for housing will continue to go up. Of course, they will not go up every day, every month, or even every year, but overall they will steadily go up … stabilizing for some time and then rising again.”

Chen implied that the local government should increase the supply of land to balance the demand for housing. Regarding the supply and demand for money, he said that the money supply has increased by a wide margin since the beginning of the century. Most of the money has gone to the construction business including the housing market.

Chen also dismissed the idea of introducing a real estate property tax to curb the price of housing. He believes that, before the institutional mechanism of the real estate market improves fundamentally, tax increases may lead to a new boost in the price of housing.

Source: Caixin, April 16, 2017
http://economy.caixin.com/2017-04-16/101079053.html

Adidas Moved More Manufacturing Work from China to Germany

Well-known Chinese news site Sina recently reported that the sports product vendor Adidas decided to move a portion of its Chinese manufacturing work back to its robotic German facility, expecting reduced costs. Adidas entered China in 1997 for its manufacturing needs. However, starting in 2012, Adidas closed its Suzhou factory in Eastern China and began its strategy of leaving China due to increasingly higher labor costs. According to the International Labor Organization, the cost of labor in China has doubled since the year 2006. Compared to previous Adidas move-away directions, typically Southeast Asia countries, this time the manufacturing work moved to its home base in Germany, where automated robotic manufacturing lines only needed 160 people. Adidas is also developing equipment that can manufacture custom shoes right at their retail locations. In recent years, big-ticket brands such as Nike and New Balance have all focused on customization, which is not suitable for traditional labor-intensive factories. Another reason for Adidas to leave China was that German workers have much higher productivity. More and more companies are moving their manufacturing capabilities out of China. Adidas’ archrival Nike started its exit move in 2009. The same thing is occurring not just in the sports product category, but in the apparel industry as well, with brands like Zara and H&M. It seems China’s labor costs no longer matter.

Source: Sina, April 12, 2017
http://finance.sina.com/gb/economy/sinacn/20170412/23051585709.html

Publicly Traded Real Estate Companies to Face a Debt Payback Peak in 2018 and 2019

Guangming Daily carried an article on the increased debt among publicly traded real estate developers. The article disclosed that as of April 13, 86 publicly traded real estate companies had filed their 2016 annual report and that their total debt exceeded 2.750 trillion yuan (US$0.4 trillion), up 25.5 percent compared to last year, while their total capital was 3.75 trillion (US$0.54 trillion), up 24.1 percent from last year. Out of 86 real estate companies, 15 to 17 percent of the companies exceeded an 80 percent debt to asset ratio. Thirty-nine to 45 percent of the companies had a total debt exceeding 10 billion yuan (US$1.45 billion), while 17.4 percent of the companies had a debt to asset ratio greater than 80 percent. Based on the available financial data for 63 companies, even though their short term debt dropped by 6.5 billion (US$0.94 billion) their debt was still 108.7 billion yuan (US$15.8 billion). According to the article, most of the companies will face a debt payback peak in 2018 and 2019.

Source: Guangming Daily, April 14, 2017
http://economy.gmw.cn/2017-04/14/content_24202805.htm

Local Chinese Mined the World’s Oldest Fossils and Sold Them as Phosphate Fertilizers

Guizhou Weng’an County’s phosphate mining area of the Ediacaran stratigraphy, which was discovered 19 years ago, has been found to have the world’s oldest paleontological fossils (about 106 million years old). In recent years, however, large-scale mining activities have been developing the area. As a result, the fossils have been sold as phosphate fertilizer. The scientists from many countries in the world were stunned; they stood up and issued the most serious warnings (about such mining).

“Weng’an Biota not only belongs to Weng’an; it also belongs to China and to all of mankind. The whole world’s attention is on it. The action is irreversible and the fossils are an irreplaceable and precious natural heritage. The outcome should not just be a few bags of phosphate fertilizer.” Top archaeological and paleontology scholars from China, the United States, Britain, and other countries recently gathered at the Beidou Mountain phosphate mining site in Weng’an County and appealed to the Chinese authorities.

Zhu Maoyan, a researcher at the Chinese Academy of Sciences Nanjing Institute of Geology and Paleontology, said, “Last November we already found the problem very serious. We located three sites still having research value as retention sites, but when we had an onsite inspection on April 1, one of the sites had already disappeared. It’s completely gone.”

Source: Kwong Wah Daily, April 11, 2017
http://www.kwongwah.com.my/?p=301673

SPIC: Still Evaluating Westinghouse’s Bankruptcy

Well-known Chinese news site Sina recently reported that the Chairman of China’s State Power Investment Corporation (SPIC) visited Japan and had a discussion with its parent company Toshiba about the future of Westinghouse. He told the media that SPIC was still evaluating Westinghouse’s ownership structure. SPIC has not yet made a decision on whether to acquire it. China’s third generation nuclear power plants use Westinghouse’s AP1000 nuclear technology. Based on U.S. media reports, the Trump administration has been very much concerned about the potential possibility of Chinese capital acquiring Westinghouse. Westinghouse, with its 130 years’ history, is widely recognized in the world as the original inventor of nuclear power generation. SPIC paid a lot of attention to Westinghouse’s bankruptcy before it was even filed. SPIC said the restructure of Westinghouse should not concern the U.S. government, since it has already been sold several times previously. However, sources revealed that the U.S. Secretary of Energy Rick Perry has taken actions to seek the elimination of any Chinese connection among the potential buyers. Westinghouse owns a large number of military technologies as well.

Source: Sina, April 8, 2017
http://finance.sina.com.cn/roll/2017-04-08/doc-ifyecezv2467689.shtml

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