For a long time, China has been the promised land for bitcoin miners and much of the network's hashing power has been on Chinese soil. However, this year the Chinese government has launched a manhunt for bitcoin miners and the industry has almost completely disappeared from the country. In recent days, the story suddenly came out that China is considering revising and possibly lifting the ban on bitcoin mining. However, if we look at the source in question, none of that seems to be true. The National Commission for Reform and Development (NCHO) has published a notice that does not say anything about lifting the ban on bitcoin mining. The only thing in the notice regarding bitcoin mining is that the NCHO plans to add “crypto mining” to the list of undesirable industries.
List should help entrepreneurs in the country The idea of the list of undesirable industries is to give entrepreneurs insight into the policies of the Chinese government. So, “Crypto mining” is now likely to be on this list as an industry that the government intends to eliminate. That at least gives entrepreneurs the information they need to determine whether it's a good idea to invest in the industry in question. Contrary to what we heard in the media, China does not seem to be considering lifting the ban on bitcoin mining at all. It is purely about adding “crypto mining” to the list of undesirable industries. The NCHO has given the public until November 21 to respond to the plans. Interestingly, the NCHO has already tried the same with regard to “crypto mining” in 2019 and that it failed to get the industry on the list at the time due to the reluctant mining sector. Now that it has almost completely disappeared from China, it seems unlikely that there will be much opposition to the NCHO's plans. The public consultation on this idea therefore appears to be a formality. Biggest geopolitical blunder of the 21st century Contrary to what we have been able to read in the media in recent days, the ban on bitcoin mining in China does not seem to be up for discussion at all. With which the country can easily write the biggest political blunder of the 21st century. Bitcoin continues to grow and the mining industry is more profitable than ever. If bitcoin is indeed the money of the future, then having a large part of the mining industry in your country is a huge advantage. That has been the case for years, but after the ban earlier this year, all companies with the northern sun have left and a large part has settled in the United States. If bitcoin continues to grow in the same way it has over the past twelve years, China has given the United States a huge gift. Even if China does decide to lift the ban on bitcoin mining, it remains to be seen to what extent miners will come back. Doing business in a climate where those in power can change their point of view at any time is also not attractive. It seems that China has shot itself in the foot with this.
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It has been teetering on the brink of collapse for weeks but China Evergrande, the country's second biggest property developer, could be facing up to doomsday as it admitted it may not be able to meet its financial obligations. With more than US$300 billion in debts, the property developer is dealing with several looming deadlines to pay up, as attempts to save it fall through. An offshore bond payment that China Evergrande initially missed on September 23, but got a 30-day grace period on, is set to expire on Saturday with US$100 million owing. There's another US$60m interest payment too, which wasn't paid when due on September 29, and the grace period is also set to run out. Discussions for a US$5b deal for Hong Kong-listed Chinese developer Hopson to take a majority stake has also fallen through. Credit rating service Moody's has basically given the property developer a junk rating, warning that there are "weak recovery prospects for Evergrande's creditors if there is a default". Experts believe that China Evergrande's collapse is all but inevitable. The Chinese government has been reluctant to bail out the ailing property developer and the People's Bank of China governor Yi Gang has claimed the risk to the economy could be contained. Yet there are 70,000 investors in Evergrande, which has also paused construction on homes for more than 1 million home buyers.
Alarming drop in house prices Clifford Bennett, chief economist at ACY Securities, warned that China has moved further along the US style global financial crisis (GFC) pathway. China uses the property market to prop up the economy with nearly a third of gross domestic product coming from the industry. Recently, two other Chinese developers, Sinic and Fantasia, have also defaulted on payments. In further bad news, home prices in China dropped in September for the first time in six years, while real estate investment has also tanked for the first time since last year. Evergrande said real estate sales plunged about 97 per cent during peak home-buying season, with the developer selling just US$571m ($791m) since September, a tiny fraction of the US$22b it recorded in the same period last year, reported Bloomberg. If Evergrande's properties flood the market, due to its collapse, it would further drive prices down across the market causing more problems. While the Evergrande situation was already a crisis, Bennett predicted things would get much worse if property prices were to experience even greater drops. "There are the very first signs of that actually happening with prices in the 70 largest cities just reported to have fallen 0.8 per cent. Not a big deal, except they used to rise steadily and impressively. Something is happening that is more profound than a short term situation of one or two large developers being in trouble," he explained. "They are the canary in the mine. They are faltering because the easy win path of the incredible China boom of past decades, is beginning to settle back into a more typical pattern of a mature capitalist economy." Situation continues to unravel Bennett added that China, the world's second largest economy, could well be having a US-style property speculation bubble burst experience. "In the original GFC, high lending to all kinds of construction and property investment (in the US) led to a global financial crisis. China was actually the backstay then to the global economy," he noted. He added that China's continued strong growth during the GFC and the impact that had on all of Asia and Australia, certainly supported the region during the severe US and European downturn. So China's potential downturn could spell bad news for Australia considering it makes billions from the relationship, despite the trade relationships being frosty at times. So wait for doomsday October 23, 2021. After bringing the United States to within two weeks of a potential debt default, Congress late Wednesday was on the verge of a deal that would avert the crisis through November by passing a small increase of the limit on how much the federal government is allowed to borrow. The measure would do nothing to bridge the serious divide between Democrats and Republicans over how to avoid a default on the country’s debts over the longer term. It would also make it likely that by mid-November lawmakers will be dug in on the same battle lines. That means that the Biden administration and its Democratic congressional allies will be back in crisis mode, looking for ways to avoid a catastrophic default on the country’s financial obligations. When that happens, one unconventional option that has gained support in recent weeks is likely to be back in the mix: minting a $1 trillion platinum coin to provide the Treasury with the funds it needs to pay the country’s bills in the coming months.
The plan The plan, according to its proponents, is simple. Treasury Secretary Janet Yellen would order the U.S. Mint to create a single coin in the denomination of $1 trillion. The platinum coin would then be transported to the Federal Reserve, the nation’s central bank, and placed on deposit in the Treasury Department’s account there. Then, when necessary, the Treasury would draw funds from the account to pay the nation’s bills. The controversial move relies on the statutory power of the Treasury Secretary to authorize the minting of platinum coins “in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.”. While it may sound fantastical, the fact that the trillion-dollar coin is part of the conversation in Washington reflects just how fraught the fight over the debt limit, a cap on how much the Treasury can borrow, has become. Deadline approaching There is no debate over whether or not the debt limit should be raised. Leaders of both parties insist that the government must be allowed to borrow the money it needs to pay its bills. The fight is over how it ought to be done. Republicans are demanding that Democrats use a complicated procedure known as “budget reconciliation” to vote on the debt limit. Democratic leaders have rejected that proposal, saying that it is too time consuming and could bring the country dangerously close to the point of default. Concern that the country might inadvertently lurch into default because of an accident of timing has made the trillion-dollar coin idea more appealing to some because, by all accounts, it could be executed very quickly. Legal loophole This week, Philip Diehl, the former director of the U.S. Mint, explained to the news website Axios that it would be possible to design and mint a trillion-dollar coin in a matter of hours. The Mint has an ample supply of platinum “blank” coins, and could easily reconfigure the mold used to produce an existing platinum commemorative $1 coin. The legal statute that gives the Treasury Secretary the authority to mint a trillion-dollar coin was tucked into a 750-page appropriations bill in 1996, and was never meant to be used to avert a fiscal catastrophe. The reason why the law specified that the Treasury Secretary’s authority to issue new types of coin was limited to those made of platinum, is because rules already existed limiting the ability to strike coins from metals historically used for money: gold, silver, and copper. The platinum coins issued by the Treasury are typically commemorative in nature, and are purchased by collectors. However, because the law was not written in a way that specifically bars the Treasury Secretary from minting platinum currency, advocates of the idea say it remains an available option in an emergency. Idea not new This is not the first time there have been proposals to use a trillion-dollar coin to get around the debt limit. During the 2011 debt ceiling crisis the idea surfaced among some academics and political commentators, though it didn’t receive broad acceptance. The idea picked up more momentum in 2012, when it was endorsed by Nobel Prize-winning economist and New York Times columnist Paul Krugman. Lawmakers took the idea seriously enough that there was a brief effort to pass legislation banning the creation of such a coin in 2013, although it failed. There has been much speculation about what a trillion-dollar coin might look like, but in the end, that wouldn’t matter much, because virtually nobody would ever see it. The coin would go from the Mint to the Fed -- likely to the vaults at the Federal Reserve Bank of New York -- and would remain there in perpetuity. Yellen opposed The biggest impediment to the plan, at the moment, appears to be Treasury Secretary Janet Yellen herself. Last week, she dismissed the idea during testimony before the House Financial Services Committee. On Tuesday, she made her opposition to the plan more emphatic in an interview with CNBC. “I'm opposed to it, and I don't believe that we should consider it seriously,” she said. “It's really a gimmick.” She continued, “What's necessary is for Congress to show that the world can count on America paying its debts. The platinum coin is equivalent to asking the Federal Reserve to print money to cover deficits that Congress is unwilling to cover by issuing debt. It compromises the independence of the Fed, conflating monetary and fiscal policy. And instead of showing that Congress and the administration can be trusted to pay the country's bills, it really does the opposite.” Legal quandary Supporters of the plan will note one thing that Yellen did not say: That minting the coin would be illegal or illegitimate. Some argue that if Congress fails to act, the Treasury Secretary might, in fact, be obligated to use her authority to mint new currency to pay the country’s bills. While the debt ceiling places a real, legal limit on the amount of money the government can borrow, spending bills passed by Congress also legally obligate the administration to spend funds as Congress has specified. Additionally, the 14th Amendment to the Constitution specifies that “The validity of the public debt of the United States ... shall not be questioned,” which some legal scholars have interpreted as meaning that allowing a debt default would be unconstitutional. Rohan Grey, a professor of law at Willamette University, said that Yellen’s belief that the trillion-dollar coin is a “gimmick” would be no defense if minting the coin were the only thing standing between the United States and default. “You can't say, I find this silly or uncomfortable, therefore, I'm going to intentionally violate the Constitution,” he told VOA. “Their obligation is to honor the debts under the 14th Amendment and to honor Congress’s spending directives.” Lesser of two evils While minting a trillion-dollar coin might avoid a technical default on the nation’s debts, some experts worry about the effect such a radical proposal would have on public perceptions. The idea is so “wacky,” said Kenneth Kuttner, Williams College professor of economics, that it might undermine the faith that ordinary people, and even sophisticated financial markets participants, have in the U.S. government. “They're managing things so poorly that they're having to resort to these gimmicks to obviate [raising] the debt ceiling?” he told VOA. “That may look bad for regular people and for the financial markets.” Poland’s central bank, the National Bank of Poland (NBP), which stunned gold markets back in 2019 when it purchased 100 tonnes of gold bars in London and then promptly flew the gold back to Warsaw, has just confirmed that it now plans to buy another 100 tonnes of gold during 2022. The news was confirmed this week by Adam Glapiński, president of Poland’s central bank, in a 5 October special interview with Polish magazine ‘Strefa Biznesu’ in advance of the ‘Congress 590’ economic conference in Warsaw. As well as heading the Polish central bank, Glapiński is also an economics professor. While Poland currently holds 230 tonnes of monetary gold reserves and sits in 24 place in the planned addition of 100 tonnes of gold during 2022 would boost the country’s gold reserves to 330 tonnes and catapult Poland up to 18th place in the rankings, ahead of major gold holders such as the UK, Saudi Arabia, Austria, Spain and Thailand. 100 tonnes purchase in 2022 For those thinking ‘didn’t the Polish central bank earlier this year already mention buying 100 tonnes of gold?’, you would be correct. Back in March 2021, Adam Glapinski in an with Polish magazine Sieci said that Poland planned to buy 100 tonnes of gold over the coming years: “Over the course of a few years we want to buy at least another 100 tonnes of gold and keep it in Poland as well,” However, what has changed is that this gold buying timeline has now been compressed from a few years into 1 year, and the NBP will now execute the plan in 2022, with the NBP’s operating strategy being guided by the rule of thumb – as official reserve assets of the Polish central bank grow over time, it will continue to buy more and more gold using a target percentage of gold to total reserve assets. However, what has changed is that this gold buying timeline has now been compressed from a few years into 1 year, and the NBP will now execute the plan in 2022, with the NBP’s operating strategy being guided by the rule of thumb – as official reserve assets of the Polish central bank grow over time, it will continue to buy more and more gold using a target percentage of gold to total reserve assets. “Taking all this into account, in 2020 the NBP Management Board adopted a new reserve management strategy. On October 4, 2021, Chinese luxury real estate developer Fantasia Holdings fails to pay $206 million in debt due. On October 3, the $260 million dollar note from Jumbo Fortune Enterprises matured. The dollar note is guaranteed by China Evergrande Group and its unit Tianji Holding Ltd. On October 4, China Evergrande and Evergrande Property announced the temporary suspension of trading without prior warning before the opening of the Hong Kong stock market. Evergrande has defaulted on the maturity interest of two US dollar bonds in late September, involving amounts of US$83.5 million and US$47.5 million respectively. Of course, these are not the only ones that face such challenges. According to the "Times Weekly" report, as of September 5 this year, a total of 274 real estate companies in mainland China have issued bankruptcy announcements. In 2020, 408 real estate companies issued bankruptcy announcements. The reason for the bankruptcy of mainland real estate companies is generally because of the rupture of the capital chain, resulting in debt defaults.
In August last year, the Chinese authorities set "three red lines" for real estate companies and restricted their financing according to the number of red lines they stepped on. Secondly, at the end of last year, the authorities also set the ratio of bank loans to developers’ own funds for real estate projects; Furthermore, since the beginning of this year, the CCP has continuously upgraded its "control" on real estate industry, controlling the housing market from the demand side, causing the rapid cooling of the market. Thus, the desire of real estate companies to speed up the sale of properties to collect the money has been dashed. The financing of real estate companies is restricted, the method of lending the new to repay the old is also blocked, and properties are generally not easy to sell. Therefore, many real estate companies’ capital chains were broken. Most of China's real estate companies quickly expand up through a high borrowing and high turnover approach, their leverage ratios are relatively high. For example, the real estate company that ranked first in sales in September- Country Garden, starts project design immediately once it acquires land plots, opens for pre-sale within 4 months, achieves positive cash flow in the 5th month, and starts to rush into a new land acquisition in the 6th month. This kind of high turnover becomes the way to maximize the interests of real estate enterprises. Under this business philosophy, the net operating cash flow of real estate companies has always been negative as a whole. In 2014, the net cash flow of all real estate companies was as high as negative 884 Billion USD. Since then, China has been forced to start destocking to improve cash flow for the real estate industry. By 2018, the net cash flow was negative 590 billion USD. By 2020, the net cash flow has deteriorated again and reached a negative 714 billion. From January to August this year, the number is negative 512 billion, and it is expected to exceed negative 776 billion USD for the entire year. Driven by greed, real estate companies do everything they can to expand rapidly, and their cash flow has always been negative. How can these companies not collapse? China retreats behind the Great Wall. That says the club of European companies in the country. "China seems to have opted for greater economic and political control, and accepts that this could lead to lower growth," said Jörg Wuttke, chairman of the European Chamber of Commerce (EuKvK) in a new report. "Our biggest concern is: where is our place?"
From tech companies to the real estate sector and education, the space to do business for private Chinese companies has also been shrinking rapidly in recent months. A development that was already started last year when tech company Alipay was banned from going public at the last minute. Foreign companies are also noticing that the tide is turning in China. Foreign companies are being pushed out of the market in various sectors, says the Chamber of Commerce. For example, companies in several provinces were unable to sell their health equipment because they "had no Chinese majority shareholder." "China wants to do what it can do itself," says Wuttke. "Even if that is more expensive and potentially more polluting." Vulnerable economy 'Buy Chinese goods', seems to be the motto. US sanctions have convinced policymakers in Beijing that the country is vulnerable if supply chains are cut. And so China wants to become self-sufficient in a range of sectors, including the chip industry. China has said it welcomes foreign companies. But companies are noticing that the red carpet is no longer being rolled out for everyone. H&M was hit after it said it wouldn't use cotton from Xinjiang over concerns about Uyghur forced labour. "That's why companies ask themselves: am I next?" says Wuttke about this. The club of European companies in China is also concerned about the ongoing travel restrictions, related to Covid. They notice that it is more difficult to get specialists and talents to China. "China has become less attractive to send workers to. Foreigners are a dying breed in China." For the past year and a half, only limited visas have been issued by China. Incoming travelers face strict quarantines lasting up to three or four weeks. "There are now more foreigners in Luxembourg than in Beijing and Shanghai," said Wuttke. Luxembourg has more than 600,000 inhabitants, Beijing and Shanghai together just under 50 million inhabitants. However, turning your back on the market is not an option for most companies. In an earlier report by the same Chamber of Commerce, only 9% indicated that they wanted to run. "If you're not in China, you're not a global player," Wuttke says. "Twenty to thirty percent of global growth is in China, the growth potential remains enormous. But the price of self-sufficiency will eventually be paid by lower growth, and less innovation."
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Some local authorities are even giving properties away for free to solve their empty house – or ‘akiya’ – problem. Struggling to get on the property ladder? In search of adventure after months locked down in your poky little flat? Here’s a solution for you: move to Japan!
It may come as a surprise given the population density of the country as a whole, but Japan has a real problem with abandoned houses, which is great news for prospective homeowners. In a bid to fill some of these empty abodes – known as akiya – local authorities are offering people the chance to snap up a house for as little as $500 (£362). Some are even giving properties away for free, offering renovation grants or subsidising childcare for young families who move into the area. And to help prospective buyers to find the perfect property, many have also set up online ‘akiya banks’, databases that list all of the abandoned houses available in an area. Conducted every five years, Japan’s most recent Housing and Land Survey in 2018 recorded a massive 8.49 million empty homes across the country – or 13.6 percent of the total housing stock. The country’s ageing population is largely to blame. Many houses are being left empty as older inhabitants move into care homes or pass away, with fewer young people to take them on afterwards. The issue is particularly pronounced in the prefectures of Wakayama, Tokushima, Kagoshima and Kochi, where home vacancy rates are all above 18 percent. And it’s not just rural areas where the properties can be found, with plenty of empty houses available on the outskirts of major cities including Tokyo and Osaka too. Already researching overseas removal companies? There a dozens of websites and blogs that collate the various akiya banks and offer advice on relocating. You might need to brush up on your Japanese first, though! The Hong Kong Stock Exchange did not say why it has suspended trading in Evergrande shares, but there is speculation that another major developer may buy out the company's property management unit. Shares of the embattled Chinese developer Evergrande were suspended on the Hong Kong stock exchange early Monday amidst heightened speculation about a potential sale. "Due to the suspension of trading in the underlying shares, trading in Futures & Options for China Evergrande Group (EVG) have been suspended until further notice," the Hong Kong Stock Exchange said in a statement, without listing a reason. This is the first time that the shares of the company, once China's top-selling developer, have been suspended. Evergrande is currently the world’s most indebted real estate group with debts surmounting billions. It could face one of China's largest-ever restructurings. The latest development comes as a Chinese financial news service, Cailian, said Evergrande’s property management unit may be taken over by another major developer.
How much does Evergrande owe? According to reports, Chinese regulators requested Evergrande avoid a near-term default on its dollar bonds and the nearly $83.5 million (€71.1 million) in dollar-bond interest payments due last month. At the same time, reports also said the central government had alerted local governments that the property giant could collapse. The payments that were due were on a $2 billion offshore bond and a $47.5 million dollar-bond. Evergrande's bonds would default if the company fails to settle the interest payment it owes within 30 days. In total, the company owes $305 billion (€262.7 billion) in the next two years. Reports said Evergrande had stopped paying staff and factory suppliers in its electrical vehicle unit.
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The Chinese government has imposed power curbs to deal with an imbalance in energy supply and demand. A broad range of manufacturing sectors have been affected by the cuts. Fresh power cuts were enforced in China on Wednesday, as coal supply shortages combined with high electricity demand from manufacturers, industry and households have pushed the non-renewable resource's price to record highs. China's power consumption is growing at almost double its usual rate, while the ruling Communist Party is trying to reduce energy intensity. The country's heavily controlled power pricing system prevents its generators from passing on their soaring coal costs to consumers, leaving them with no choice but to suffer losses or reduce output.
A broad range of industries have been affected, including power-intensive sectors like aluminium smelting, steel-making, cement manufacturing and fertilizer production. Meanwhile, residential users have also been hit in parts of northeast China, where they've been told to limit the use of water heaters and microwaves to conserve power. Elevators and traffic lights were also reportedly affected in some parts of the northeast.
Various factors at play Analysts say the country's rigid pricing system is seen as the major culprit for the shortages. It is not the first time China has struggled to balance supply and demand when it comes to energy, as central planners often underestimate demand growth. But this year, a perfect storm of factors has reportedly taken hold. The government of Guangdong province, China's biggest manufacturing center, said low water levels in hydropower reservoirs that provide a big share of its electricity had played a role. In Liaoning province, the government said that a decline in wind power and other sources had an impact in its electricity supply. A global shortage of natural gas may also be having an impact, as a number of major economies look to stock up on fuel simultaneously following the easing of COVID-19 restrictions. |
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