Every now and then, somebody in a senior position says something that really deserves to be noticed. Often this is when they are in a state of Denial. This was the case in the blog’s first post in the Interesting Quotes series, when CitiGroup CEO, Chuck Prince dismissed worries about subprime losses in August 2007, saying:
“We see a lot of people on the Street who are scared. We are not scared. We are not panicked. We are not rattled. Our team has been through this before. We are “still dancing“”.
It is perhaps a sign of the times that several Interesting Quotes have now appeared in recent weeks – this time relating to China and its massive debt problems. Perhaps encouragingly, three of the four are official statements, recognising that a massive problem exists. Recognition is no guarantee that the debt problem can be solved. But it is more hopeful than the state of Denial that existed amongst Western leaders in 2007-8.
President Xi Jinping‘s statement opening the 3rd Plenum is very clear about his view of the outlook:
“The good meat is all gone; all that is left are hard bones to chew”.
So is last week’s statement from Premier Li Keqiang:
“The downward pressure on economic growth remains. We can’t underestimate these difficulties. We won’t resort to strong short-term stimulus policies just because of temporary economic fluctuations. A growth rate under this year’s 7.5% target is acceptable so long as sufficient employment is ensured. We will focus more on medium- to long-term healthy development.”
Equally, state-owned news agency Xinhua has confirmed that the new leadership remains committed to bursting the real estate bubble:
“The smart ones have got it. There is no sign of a monetary and fiscal policy shift. There is no hint of loosening the housing market either. What China’s economy needs most is steady and deep reforms, which the decision-makers are determined to push even at the price of an economic slowdown, because they believe only through deep and comprehensive reforms can the Chinese economy embark on a new stable and healthy path.”
Of course, those who have done well out of the previous policy are still in Denial mode, like Chuck Prince. Thus China’s richest man, Wang Jianglin and owner of property developer Dalian Wanda has argued:
“There are only two possibilities to explain why people are predicting a collapse of Chinese real estate. Either they have ulterior motives or they have insufficient intelligence.”
Its usually a bad sign when very wealthy people resort to abuse. Why should they care? Wang’s statement is thus unintentionally strong support for the view that China’s real estate market is about to come under major pressure.
Benchmark product price movements since January 2014 are below, with ICIS pricing comments:
PTA China, down 11%. “PTA inventories in China stood at 1.6m-1.7m tonnes, compared to typically healthy levels at 1m tonnes. With credit tightening and difficulties in securing bank loans in the China markets, the majority of market participants were in agreement that there will not be a significant increase in demand in the near term.”
US$: yen, down 3%
Brent crude oil, down 2%
S&P 500 stock market index, down 1%
Naphtha Europe, up 3%. “The spring refinery maintenance season has left prompt European naphtha supply fairly balanced”
HDPE US export, up 6%. “Producers are not lowering export prices because their domestic demand is strong enough that they don’t need to participate in the export market”
Benzene, Europe, up 6%. “Many players are expecting a downward correction in the coming weeks in line with global numbers and domestic fundamentals”