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LTN: China’s One Belt One Road Plan Brought Economic Trouble to Eight Countries

Major Taiwanese news network Liberty Times Network (LTN) recently reported on China’s grand One Belt One Road plan, which involves a potential investment total of US$8 trillion and involves 68 countries in Asia, Africa, and Europe. The report showed however, that it actually has brought an economic crisis to eight countries: Djibouti, Kyrgyzstan, Laos, Maldives, Mongolia, Montenegro, Pakistan and Tajikistan. Not long ago, the Center for Global Development (CGD) published its analysis on the impact of One Belt One Road. The analysis indicated that many countries developed significant dependency on China and their debt level increased significantly. For example, the African country Djibouti’s Chinese debts are now as large as 91 percent of its GDP. Another example is Pakistan’s development plan of its Port of Gwadar. Now China has pocketed around 91 percent of the Port’s income with only 9 percent left for Pakistan. The income was obtained significantly based on the deep tax cut that Pakistan offered. Sri Lanka had to rent its port city Hambantota to China for nearly one century due to the fact that the government could not pay back its debt (US$1 billion) to China.

Source: Liberty Times Network, March 6, 2018

China’s Domestically Manufactured Mainline Aircraft C919 Acquired More Orders

China’s financial news network, A Finance, recently reported that China’s state-owned Commercial Aircraft Corporation of China, Ltd. (COMAC) just landed a new contract to sell 30 C919 aircraft. This new deal enabled COMAC’s C919 sales record to reach 815. COMAC is the company formed to realize China’s strategic goal of domestically designing and manufacturing mainline large-capacity commercial passenger aircraft. C919 directly competes with the Boeing 737 and the Airbus A320. COMAC currently has contracts from 28 buyers globally, most of whom are Chinese organizations. The C919 project was part of a national effort to develop domestic high-end manufacturing equipment and products to compete eventually in the global high-end industrial market.

Source: A Finance, February 26, 2018

China Is Set to Start Trading Crude Oil Futures in Shanghai

Well-known Chinese news site Sina recently reported that the China Securities Regulatory Commission just announced the schedule for China’s crude oil futures trading. The Shanghai Futures Exchange will open the trading on March 26. The Exchange will allow locking in crude oil futures in local currency – the Chinese currency RMB. In 2017, China became the world’s largest oil importer. The Chinese authorities have been working on setting up the oil futures exchange since 2012. Currently world oil futures are traded under two base standards, West Texas Intermediate (WTI) at the New York Mercantile Exchange and Brent at London’s Intercontinental Exchange Europe (ICE). Today, most of the global oil trading is settled in U.S. Dollars. The RMB settlement currency of the Shanghai Crude (coded INE) may eventually introduce the acceptance of RMB as the global settlement currency for oil, which could ultimately lead to more pricing power over oil.

Source: Sina, February 9, 2018

Sinchew: American Oil Is Sweeping the Global Market

Major Singapore newspaper Sinchew recently reported that, ever since the U.S. lifted the ban on its oil exports, U.S. oil has been flooding the world from large countries like China and India to small nations like Togo in West Africa. With the U.S. “Shale Oil Revolution,” American oil nowadays has caused a decrease in the global oil price and weakened the influence of OPEC. The U.S. oil output is now equal to Saudi Arabia and is only behind Russia. A large portion of U.S. oil exports go to China. In fact, since November last year, China has been the biggest importer of U.S. oil. Starting in October of last year, U.S. oil also entered the Indian market, which is the third largest oil importer in the world. Starting last November, the U.S. quickly became the fifth largest oil supplier of France. Ports in Texas and around the Gulf of Mexico are undergoing heavy construction in order to expand.

Source: Sinchew, February 9, 2018

Sohu: Average Chinese People Face Heavy Housing Debt and a Housing Surplus in Small to Mid-sized Cities

Sohu published an article on China’s housing market stating that average Chinese people face heavy housing debt. It predicts that a surplus in the housing market will develop in many small to mid-sized cities and in the countryside. A translation of two major points contained in the article follows:

1) For an average Chinese family the value of their house accounts for the largest portion of their wealth. According to a 2017 Wealth Research report that The Economic Daily published, the value of a family’s property accounts for 70 percent of their total assets. Those wealthy families who sit at the top of the pyramid find it very affordable to pay cash for their housing. However, an average family can only afford such a purchase if they take out a loan and borrow money. As they enjoy an increase in wealth they also have to bear a heavy debt payment on their loan. For cities like Beijing, Shanghai, and Shen Zhen, a house can easily cost over tens of millions of yuan. For an average middle income family that has an income of 30,000 to 50,000 yuan per month (US $4,760 to US $7,934 a month), many take out home loans in the millions of yuan. They only have 10,000 – 20,000 yuan (US $1,587 to US $3,174 a month) left to spend each month and they still have a child to raise. Their money situation is so tight that they live like poor people but sit on a high priced property.

2) We don’t need to wait for a sharp decrease in population to see signs of a housing surplus in China right now. The signs are here. For example, in Northeastern cities, where the population is decreasing and the economy is declining, the real estate market is very slow. There is a serious housing surplus in those regions. In the third or fourth tier small to middle sized cities, largest numbers of houses are vacant. For those who were born after 1980, 1998, or 2000, if they live in fourth and fifth tier cities, they may own at least two pieces of residential property. One is their own house and the other one is the house they inherited from their parents. Many of them may own as many as three or four houses. It is expected that, after decades, as the population in China drops rapidly, other than those top 20 big cities, the rest of the small to middle sized cities and the countryside will have a surplus of housing.

Source: Sohu, February 8, 2018

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