Living in China

[Xcalibir]

Language skills are incidental. The point is seeing if the numbers add up. (They likely don't.) In any case, differing language has not been an issue in other countries. Why should it be an issue in China? (No one has ever complained about German being spoken in Switzerland and therefore records of their companies being inaccessible.)

My GF is an auditor and believe it or not, there is actually a lot of language skills required in being an auditor.

I think the issue lies with experience. What I heard is that most of the partner level employees do not review the audits and they are mostly there to try to get business and to make sure everything is going smoothly. Most of the work is done from the manager / senior manager level. The lower level staff checks the papers and the managers and senior managers double check just to make sure everything is correct. Looking for mistakes whether purposeful or accidental is sometimes like finding a needle in a haystack. Also, it is nearly impossible to check every single transaction. Since the lower level staff is usually not very experienced, it is going to be very difficult for them to detect any sort of fraud. Keep in mind the fraudulent techniques that some reverse merger companies use are sophisticated. They don't just adjust the balance sheet. I suspect that the big 4 in China have a ton of foreign managers and senior managers. Since they probably do not have a lot of local experience they probably have a difficult time telling which numbers look reasonable.

[Clandestine782]

Language skills are incidental. The point is seeing if the numbers add up. (They likely don't.) In any case, differing language has not been an issue in other countries. Why should it be an issue in China? (No one has ever complained about German being spoken in Switzerland and therefore records of their companies being inaccessible.)

[Loveasiangirls]

Http://articles.latimes.com/2012/may...rules-20120511

A similarly related article. Looks like China is trying to force all accounting partners based in China to pass the Chinese version of the CPA exam. With the auditing problems that Chinese companies are having right now, I don't see how turning the "reins" over to not so experienced locals will do anything to fix the situation. It will probably make things worse.

Pretty standard in most civilized countries. If you want to practice as as CPA you need to pass the (local) exam to get your license.

I don't see the use of an accounting trying to work in China who could not even read the financial statements due to lack of language skill.

[Xcalibir]

Thank you for that. Glad to see that someone else reads the newspaper. They sure are a funny race, the Chinese. What I get from these articles (and years of experience) is: rather than than be about the business of trying to build profitable companies, they are going to go much further and try to trick people into believing that the companies are profitable. And since local people are genetically inclined to lie, then it makes sense to hire them and no foreigners. Yet another example of taking 20 steps to try to do something the wrong way when it would only take 2-3 to do things the RIGHT way.

But in that article that I read, it mentioned that investors learned the hard way that investing in US-listed Chinese companies that were acquired through reverse mergers were sure ways to lose money.

I'm ethnically Chinese but grew up here in the west. I think part of the reason why China is playing "hardball" is because of a historical mistrust of "the west." These events include the colonialization of various areas in China in the 1800s, the isolationism of the 1950s, and the current "bash China" environment of possibly unfairly blaming China for certain problems in the West. China's power is increasing daily. Unlike in the past where they were almost forced into certain decisions by the West, China has enough power now to disagree with the west. On top of that, I think the USA has also unfairly blamed China on many issues such as the high unemployment rate in China. The only thing that both REpublicans and Democrats can agree on these days is to blame China. It has almost turned into a game between the USA and China. If China says X, the US almost always says the opposite of X. If the USA says Y, China will say the opposite of Y. I think eventually there will be a compromise but China is just trying to make things hard for the US.

Secondly, I think the pendulum has swung entirely the other way with reverse merger companies. Many investors are having a hard time telling the difference between solid companies and the fraudulent companies. Since investors cannot tell which ones are fraudulent and which ones aren't they are treating all reverse merger corporations as fraudulent. Some companies legitimately use reverse mergers as a low cost way of raise capital.

[Clandestine782]

Thank you for that. Glad to see that someone else reads the newspaper. They sure are a funny race, the Chinese. What I get from these articles (and years of experience) is: rather than than be about the business of trying to build profitable companies, they are going to go much further and try to trick people into believing that the companies are profitable. And since local people are genetically inclined to lie, then it makes sense to hire them and no foreigners. Yet another example of taking 20 steps to try to do something the wrong way when it would only take 2-3 to do things the RIGHT way.

But in that article that I read, it mentioned that investors learned the hard way that investing in US-listed Chinese companies that were acquired through reverse mergers were sure ways to lose money.

[Xcalibir]

http://chovanec.wordpress.com/2012/0...ng-armageddon/

you can't access this most of the time (from inside china without a vpn or a proxy server) , so i will copy and paste the article in full.

can usa and china avert accounting armageddon?

june 17, 2012.

china and the usa appear to be an a collision course over accounting. that's a lot more serious than it sounds. by the end of this year, unless a compromise can be reached, there is a very real chance that usa securities regulators may end up employing the 'nuclear option': forcibly delisting every chinese company currently listed on a usa stock exchange — such as sinopec, sina. com, china life, and china unicom. it's a potential catastrophe-in-the-making that few investors or politicians have given any serious thought to.

last year, the us-listed stocks of more than a few chinese companies took a beating following accusations by short sellers and research shops like muddy waters that sinoforest and other companies — many of which had avoided ipo scrutiny by arranging reverse mergers with already-listed entities — were grossly exaggerating their real assets and business performance in their official financial statements. these accusations prompted the securities and exchange commission (sec) to launch several fraud investigations into the chinese companies in question.

rather than assisting the sec in its cross-border probes — as other countries regularly do — the china securities regulatory commission (csrc) has actively blocked the sec's information requests, insisting that audit materials on chinese firms fall under china's ambiguous yet draconian state secrets law. this april, when the sec issued a subpoena to the chinese arm of deloitte, demanding the audit records of longtop financial (which collapsed last may after deloitte resigned as its auditor) , deloitte refused, noting that the csrc directly ordered them not to turn over such papers. the firm argued it could be dissolved and its partners jailed for life if they were to comply. in may, the sec responded by initiating administrative proceedings to punish deloitte china for violating its duties under the 2002 sarbanes-oxley act. penalties could include suspending the firm's authority to perform audits for us-listed companies, which are required under usa securities laws. apparently similar subpoenas have been issued to each of the other 'big four' global audit firms (e&y, kmpg, and pwc) , and have met with similar replies.

there is a further complication. the sarbanes-oxley act established the public company accounting oversight board (pcaob) , a five-person body appointed by the sec. public accounting firms that wish to perform audits on us-listed companies must register with pcaob, and pcaob is required, by law, to conduct inspections of those firms. so far, chinese authorities have refused pcaob permission to inspect auditors based in china, including the local arms of 'big four' global audit firms. last month, it looked like pcaob might have worked out a compromise that would let it observe chinese regulators perform their own inspection, but the sec action against deloitte china appears to have derailed that plan. the stage is set for a deadlock with serious, potentially disastrous implications, as my fellow cpa and peking university counterpart paul gillis describes in his blog:

the pcaob faces a december deadline to complete inspections of chinese accounting firms that are registered with the pcaob. it seems highly unlikely that they will meet this deadline, since chinese regulators will not let them come to china. while the pcaob could extend the deadline, they have already been under political pressure to act. without resolution, the only meaningful option for the sec, and the pcaob, is for the pcaob to deregister the firms and for the sec to ban them from practice before the sec.

the consequence of those actions would be that usa listed chinese companies would be without auditors and unable to find them. having an auditor is a listing requirement of the exchanges, so under exchange rules the companies face delisting. the usa listed chinese companies would be unable to file financial statements as required. that should lead the sec to eventually deregister the companies with the sec.

paul notes that shareholders in the delisted chinese companies would still own their shares, but would be unable to trade them on usa exchanges. the companies would probably try to list their stock on other non-usa exchanges such as hong kong, which could prove an expensive and cumbersome option. the effect on us-china relations, and on investor confidence in cross-border investments in either direction, would be devastating. yet the alternative would be to allow chinese companies to trade their shares on usa exchanges while openly flouting usa securities laws — not just sarbanes-oxley, which is somewhat controversial, but anti-fraud provisions dating back to the 1930s.

in the meantime, chinese regulators have been moving to exert even greater secrecy and control over companies' financial information. local bureaus of the state administration for industry and commerce (saic) have started restricting public access to domestic corporate filings, after short sellers and analysts used information gleaned from those filings to call company financial statements into question. of more immediate concern, the ministry of finance is following through on plans to force the 'big four' global audit firms to surrender majority control of their chinese operations over to local cpas, and dramatically reduce the number of foreign-certified cpas they employ. as paul gillis notes on his blog:

one of the unintended outcomes of the restructuring of the big four in china will be that the firms will likely be required to re-register with the pcaob. that could pose a problem, since the pcaob has said they will accept no new audit firm registrations from china until the issue of inspections is resolved.

i was pondering the irresistible-force-meets-immovable-object dilemma here last night when i happened across a seemingly unrelated passage in jim fallows' new book china airborne, which offered a glimmer of hope.

in 1997, jim relates, three chinese airlines — air china, china eastern, and china southern — had just been awarded or applied for very prestigious and strategically important routes to the united states, and had purchased brand-new state-of-the-art boeing planes to fly those routes, with many further orders expected. however, the safety record of chinese airlines in the 1990s was atrocious. in order to actually fly those routes, the airlines required approval from the usa department of transportation (dot) , the parent body of the faa. the dot, at the faa's urging, demanded 'confirmation that china's regulatory standards, as applied by the caac, conformed to the worldwide guidelines laid out by international agreements. ' until then, it was no fly.

the chinese were furious, believing the americans had double-crossed them by selling the planes and then reneging on the routes. the whole thing could have concluded in respective chest-beating and a very ugly, damaging stand-off. instead, boeing took the initiative (since its future sales were on the line) through a series of seminars, tours, and training sessions to reconcile the two points of view. key to its success was the way it handled chinese sensitivities:

one [way] was to present all their recommendations in terms of meeting international standards for air safety and airline procedures, rather than seeming to say, this is how we do it in the usa of a. presenting the challenge this way made it far more palatable to the chinese side. learning to comply with international standards was one more sign of modernization in china; doing things the 'american way' could seem like a sign of continued subservience. the examples were, of course, from american practices at the faa or the operational details of boeing and united airlines, but the leitmotif was that americans had learned how to make their practices meet international standards, and they could help the chinese do the same thing.

bridging the gap in securities regulation will surely be more difficult than fine-tuning some phrases — especially since chinese companies that truly are fraudulent have a lot to hide. but chinese aviation officials had a lot to hide too, back then. many of them, once they realized how far they fell short of 'international standards, ' doubted whether they could ever make the grade, and feared losing face and making others lose face if they tried. but working with their american partners, they succeeded: china's airline industry today has an admirable safety record, which has laid the foundation for ambitious plans for china to claim a leading role in the global aviation industry. caixin reports that at least some officials at csrc are sympathetic to what the sec is trying to achieve, and they certainly don't want to seem too far out of step with their international (and much more cooperative) peers.

if china wants shanghai to become a 'global financial center, ' or the renminbi to develop into an 'international currency, ' it has to do the same thing in securities regulation that did in airline safety regulation. it has to win the confidence of global investors just as it successfully won the confidence of global travellers. china closing the windows and battening the hatches to avoid embarrassment is not a solution; but neither is americans telling the chinese 'it's our way or the highway. ' the usa has to make a forceful, compelling argument that adopting international norms of openness and cooperation on securities fraud investigations will help china achieve its ambitions — but that until then, it's 'no fly' for unsafe stocks on usa markets.

http://articles.latimes.com/2012/may...rules-20120511

a similarly related article. looks like china is trying to force all accounting partners based in china to pass the chinese version of the cpa exam. with the auditing problems that chinese companies are having right now, i don't see how turning the "reins" over to not so experienced locals will do anything to fix the situation. it will probably make things worse.

[Clandestine782]

http://chovanec.wordpress.com/2012/0...ng-armageddon/

you can't access this most of the time (from inside china without a vpn or a proxy server) , so i will copy and paste the article in full.

can usa and china avert accounting armageddon?

june 17, 2012.

tags: audit, backdoor listing, big four, china airborne, china securities regulatory commission, csrc, delisting, deloitte, james fallows, longtop, muddy waters, paul gillis, pcaob, public company accounting oversight board, reverse merger, sarbanes-oxley, sec, securities and exchange commission.

china and the usa appear to be an a collision course over accounting. that's a lot more serious than it sounds. by the end of this year, unless a compromise can be reached, there is a very real chance that usa securities regulators may end up employing the 'nuclear option': forcibly delisting every chinese company currently listed on a usa stock exchange — such as sinopec, sina. com, china life, and china unicom. it's a potential catastrophe-in-the-making that few investors or politicians have given any serious thought to.

last year, the us-listed stocks of more than a few chinese companies took a beating following accusations by short sellers and research shops like muddy waters that sinoforest and other companies — many of which had avoided ipo scrutiny by arranging reverse mergers with already-listed entities — were grossly exaggerating their real assets and business performance in their official financial statements. these accusations prompted the securities and exchange commission (sec) to launch several fraud investigations into the chinese companies in question.

rather than assisting the sec in its cross-border probes — as other countries regularly do — the china securities regulatory commission (csrc) has actively blocked the sec's information requests, insisting that audit materials on chinese firms fall under china's ambiguous yet draconian state secrets law. this april, when the sec issued a subpoena to the chinese arm of deloitte, demanding the audit records of longtop financial (which collapsed last may after deloitte resigned as its auditor) , deloitte refused, noting that the csrc directly ordered them not to turn over such papers. the firm argued it could be dissolved and its partners jailed for life if they were to comply. in may, the sec responded by initiating administrative proceedings to punish deloitte china for violating its duties under the 2002 sarbanes-oxley act. penalties could include suspending the firm's authority to perform audits for us-listed companies, which are required under usa securities laws. apparently similar subpoenas have been issued to each of the other 'big four' global audit firms (e&y, kmpg, and pwc) , and have met with similar replies.

there is a further complication. the sarbanes-oxley act established the public company accounting oversight board (pcaob) , a five-person body appointed by the sec. public accounting firms that wish to perform audits on us-listed companies must register with pcaob, and pcaob is required, by law, to conduct inspections of those firms. so far, chinese authorities have refused pcaob permission to inspect auditors based in china, including the local arms of 'big four' global audit firms. last month, it looked like pcaob might have worked out a compromise that would let it observe chinese regulators perform their own inspection, but the sec action against deloitte china appears to have derailed that plan. the stage is set for a deadlock with serious, potentially disastrous implications, as my fellow cpa and peking university counterpart paul gillis describes in his blog:

the pcaob faces a december deadline to complete inspections of chinese accounting firms that are registered with the pcaob. it seems highly unlikely that they will meet this deadline, since chinese regulators will not let them come to china. while the pcaob could extend the deadline, they have already been under political pressure to act. without resolution, the only meaningful option for the sec, and the pcaob, is for the pcaob to deregister the firms and for the sec to ban them from practice before the sec.

the consequence of those actions would be that usa listed chinese companies would be without auditors and unable to find them. having an auditor is a listing requirement of the exchanges, so under exchange rules the companies face delisting. the usa listed chinese companies would be unable to file financial statements as required. that should lead the sec to eventually deregister the companies with the sec.

paul notes that shareholders in the delisted chinese companies would still own their shares, but would be unable to trade them on usa exchanges. the companies would probably try to list their stock on other non-usa exchanges such as hong kong, which could prove an expensive and cumbersome option. the effect on us-china relations, and on investor confidence in cross-border investments in either direction, would be devastating. yet the alternative would be to allow chinese companies to trade their shares on usa exchanges while openly flouting usa securities laws — not just sarbanes-oxley, which is somewhat controversial, but anti-fraud provisions dating back to the 1930s.

in the meantime, chinese regulators have been moving to exert even greater secrecy and control over companies' financial information. local bureaus of the state administration for industry and commerce (saic) have started restricting public access to domestic corporate filings, after short sellers and analysts used information gleaned from those filings to call company financial statements into question. of more immediate concern, the ministry of finance is following through on plans to force the 'big four' global audit firms to surrender majority control of their chinese operations over to local cpas, and dramatically reduce the number of foreign-certified cpas they employ. as paul gillis notes on his blog:

one of the unintended outcomes of the restructuring of the big four in china will be that the firms will likely be required to re-register with the pcaob. that could pose a problem, since the pcaob has said they will accept no new audit firm registrations from china until the issue of inspections is resolved.

i was pondering the irresistible-force-meets-immovable-object dilemma here last night when i happened across a seemingly unrelated passage in jim fallows' new book china airborne, which offered a glimmer of hope.

in 1997, jim relates, three chinese airlines — air china, china eastern, and china southern — had just been awarded or applied for very prestigious and strategically important routes to the united states, and had purchased brand-new state-of-the-art boeing planes to fly those routes, with many further orders expected. however, the safety record of chinese airlines in the 1990s was atrocious. in order to actually fly those routes, the airlines required approval from the usa department of transportation (dot) , the parent body of the faa. the dot, at the faa's urging, demanded 'confirmation that china's regulatory standards, as applied by the caac, conformed to the worldwide guidelines laid out by international agreements. ' until then, it was no fly.

the chinese were furious, believing the americans had double-crossed them by selling the planes and then reneging on the routes. the whole thing could have concluded in respective chest-beating and a very ugly, damaging stand-off. instead, boeing took the initiative (since its future sales were on the line) through a series of seminars, tours, and training sessions to reconcile the two points of view. key to its success was the way it handled chinese sensitivities:

one [way] was to present all their recommendations in terms of meeting international standards for air safety and airline procedures, rather than seeming to say, this is how we do it in the usa of a. presenting the challenge this way made it far more palatable to the chinese side. learning to comply with international standards was one more sign of modernization in china; doing things the 'american way' could seem like a sign of continued subservience. the examples were, of course, from american practices at the faa or the operational details of boeing and united airlines, but the leitmotif was that americans had learned how to make their practices meet international standards, and they could help the chinese do the same thing.

bridging the gap in securities regulation will surely be more difficult than fine-tuning some phrases — especially since chinese companies that truly are fraudulent have a lot to hide. but chinese aviation officials had a lot to hide too, back then. many of them, once they realized how far they fell short of 'international standards, ' doubted whether they could ever make the grade, and feared losing face and making others lose face if they tried. but working with their american partners, they succeeded: china's airline industry today has an admirable safety record, which has laid the foundation for ambitious plans for china to claim a leading role in the global aviation industry. caixin reports that at least some officials at csrc are sympathetic to what the sec is trying to achieve, and they certainly don't want to seem too far out of step with their international (and much more cooperative) peers.

if china wants shanghai to become a 'global financial center, ' or the renminbi to develop into an 'international currency, ' it has to do the same thing in securities regulation that did in airline safety regulation. it has to win the confidence of global investors just as it successfully won the confidence of global travellers. china closing the windows and battening the hatches to avoid embarrassment is not a solution; but neither is americans telling the chinese 'it's our way or the highway. ' the usa has to make a forceful, compelling argument that adopting international norms of openness and cooperation on securities fraud investigations will help china achieve its ambitions — but that until then, it's 'no fly' for unsafe stocks on usa markets.

[Loveasiangirls]

http://www.economonitor.com/blog/201...tate-unravels/

China Real Estate Unravels.

Author: Patrick Chovanec · May 16th. 2012 · Comments (9) Share ThisPrint 1101 137.

As a prelude to a broader analysis of China's GDP, and the accuracy of its official GDP figures, I want to start by examining the national real estate statistics for the first four months of 2012. This discussion feeds into the broader GDP picture, but the property story that has been. Unraveling. That is why I told CNN, in late April:

'No one has hit the panic button yet, ' Chovanec said. 'Everyone is holding out hope that at some point it turns around somehow. But I also think that's a triumph of hope over reason. '

The only stats that I know for sure are that my rent in Beijing went up 25% this year and buying an apartment in my building would cost more than the equivalent in Canada.

[Clandestine782]

http://www.economonitor.com/blog/201...tate-unravels/

China Real Estate Unravels.

Author: Patrick Chovanec · May 16th. 2012 · Comments (9) Share ThisPrint 1101 137.

As a prelude to a broader analysis of China's GDP, and the accuracy of its official GDP figures, I want to start by examining the national real estate statistics for the first four months of 2012. This discussion feeds into the broader GDP picture, but the property story that has been unfolding is important and interesting enough to be worth taking a close look at on its own.

Getting an accurate view of the property sector is complicated by the fact that neither the official price index, nor the Soufun price index, nor the average price / square meter that can be calculated from the investment numbers seem to track very well with each other or with point-of-sale impressions of steep developer discounts over the past eight months. Developers and local governments also enjoy a great deal of discretion in deciding what to count as a 'start' or a 'completion. ' Monthly data releases are never revised, which often gives rise to huge corrections that are simply lumped into the end-year December data release, giving a distorted impression of how trends are unfolding (so, for instance, the 19% drop in property starts in December 2011 probably wasn't as sudden as it appears, and more likely reflected an unreported decline spread over several preceding months).

All that being said, I'm seeing some rather striking patterns in the data that tell us two main things:

1. The market is not poised to recover, but will continue to see greater downward pressure on prices; and.

2. Real estate investment is likely to flatten out or start falling, erasing several percentage points of GDP growth.

Last month, many observers took comfort from reports that overall real estate investment in Q1 rose 23. 5% (in nominal terms) compared to the same period the previous year. To be sure, this was a comedown from 2011, when property investment rose 27. 9, or 2010, when it rose 33. 2. But it still seemed to reflect resilient growth: hardly a collapse in market, more like the kind of modest slowdown consistent with 'soft landing. '

Very few people paused to ask where this investment growth was actually coming from. After all, the market was clearly struggling. Year-on-year sales in Q1, for all real estate, was down. 14. 6. The decline was even steeper,.17. 5, in residential property, which accounts for about 80% of the market. Office sales were down. 10. 2, while growth in 'commercial' (I. E, retail) property sales, which saw a boom in 2011, decelerated to +10. 5. Although many people were touting a month-on-month sales recovery in March, compared to the Chinese New Year period, March sales were still down. 7.8% from the year before, for the sector as a whole, and. 9.7% for residential properties (by comparison, sales in January-February were a disaster, falling. 20. 9% overall, compared to the first two months of 2011,.24. 7% for residential).

Given this consistent fall-off in sales, it's not surprising that new property starts began to stall. I already mentioned that the 19% drop in new starts in December may have been a bit of a statistical aberration. Starts (measured in floor space) in Jan-Feb were up 5. 1, although the gains came entirely from office and retail — housing starts were flat. But overall starts fell by. 4.2% in March, with housing starts down. 9.8, ensuring that overall starts for Q1 were flat (+0. 3%) with residential starts down. 5.2. Land sales for Q1 were also flat, with sales proceeds rising 2. 5% but land area sold down. 3.9. In March, they were negative (-3. 6% sales revenue,.8. 5% area sold).

So if sales were down, and starts were either flat or down, where was the 23. 5% investment growth coming from? Developers, burdened by 70% leverage ratios and loans threatening to come due, were rushing to complete whatever projects were already in their pipeline, in order to put those units onto the market and raise cash. Completions (measured in floor space) were up 39. 3% in Q1, compared to last year (residential completions were similarly up 40. 0%). But, of course, those completed units weren't selling like last year, so unsold inventories expanded. At the close of Q1, the total amount of floor space 'for sale' was up 35. 5, compared to the same date last year, while the floor space of residential units 'for sale' grew 47. 4.

(That's just the floor space that developers admitted was for sale. There are plenty of tricks they can use to hold units off the market, in order to massage the official data and avoid spooking buyers. At the end of 2011, total floor space 'under construction' was roughly 4. 6 times the floor space sold that year. Assuming it typically takes three years to build a unit, from start to finish, that suggests about a year and a half worth of excess inventory hidden somewhere in the pipeline. The ratio for residential property was 4. 0, which suggests that, while there may be about a year's worth of unsold inventory in the housing market, the overhang in commercial real estate is even steeper. Although in absolute terms, it's the housing overhang that matters).

China's developers are playing out a kind of prisoner's dilemma: rush to complete, in hopes of cashing out. But while supply keeps going up, demand is going down. In late March, a central bank (PBOC) survey reported that only 14. 1% of Chinese consumers were looking to buy a house in Q2, the lowest level since 1999. Only 17. 7% expected home prices to rise in Q2, and 62. 9% said they still consider prices to be too high. So all those rushed completions only add to the glut already on the market, driving prices down further and giving buyers — investors and aspiring residents alike — all the more reason to hold off for a better deal. Perhaps this is why Qin Hong, deputy head of research for the Ministry of Housing and Urban-Rural Development (MOHURD) , told the Oriental Morning Post in late March that she doesn't expect housing prices to rebound significantly for the rest of the year. A strong rebound is impossible, she said, due to the continued property tightening policy and high housing inventory (my italics).

The second implication of the dynamic I've just described is that the 'resilient' growth in real estate investment that seemed to promise a 'soft landing' is not very resilient at all. It's more like the last gasp of a market that's running out of steam. Once the surge in completions plays out, the declining number of new starts will become the pipeline, and growth in property investment will flatten or go negative. Property investment accounts for roughly a quarter of gross Fixed Asset Investment (FAI) , and net FAI accounts for over half of China's GDP growth. As I noted in January, in a back-of-the-envelope thought exercise, if property investment plateaus (growth falls to zero) , it could shave as much as 2. 6 percentage points off of real GDP growth. If it fell 10% (in real, not nominal terms) it could bring GDP growth down to 5. 3.

At the time I first saw this dynamic in the data, when the Q1 numbers came out, I figured it would take several months to begin playing out. But the April numbers suggest it is already happening. In April, overall completions rose only 2. 8% year-on-year (down from 39. 3% in Q1) , and housing completions flatlined at 0. 8% (down from 40. 0% in Q1). As completions petered out, growth in real estate investment decelerated markedly, to just 9. 2, with residential investment growing just 4. 0. Investment actually fell month-on-month, in absolute terms, by. 10. 7% overall and. 9.5% in housing. It only grew year-on-year at all because of a low base set last April. If you plugged this year's April versus last year's May, you'the get a year-on-year drop of. 9.1% for property investment overall, and. 11. 0% for housing. (In this context, it's worth noting that, according to the Beijing Municipal Bureau of Statistics, overall property investment growth in the capital already went negative in January-February, for the first time in three years, dropping. 4.6%).

If there's one bright side to the plateau in completions, it was that unsold inventories advanced less rapidly over the year before. Floor space 'for sale' did rise in April, in absolute terms, but not by much. It's important to remember, though, all the unsold inventory that remains held back and hidden in the pipeline, as noted before.

Meanwhile, the contraction in sales, new starts, and land sales deepened even further in April. Although the decline in sales appeared to moderate slightly for the sector as a whole (-4. 5%) and for housing (-2. 9%) , this was again largely due to a lower base effect from last April, when sales contracted month-on-month by nearly RMB 100 billion. This year's April sales also registered a significant month-on-month decline, by. 17. 2% for all property and. 15. 5% for housing. The more striking news, perhaps, is that commercial property sales, which have been much more resilient until now, also plunged, with office sales falling. 23. 4% year-on-year and. 34. 4% compared to March, and retail property sales falling. 9.5% year-on-year and. 22. 7% month-on-month. April was the first month in which all three categories were in year-on-year decline.

New starts in April fell. 14. 6% year-on-year and. 27. 0% month-on-month, for property as a whole. Housing starts fell. 14. 4% year-on-year and. 23. 4% month-on-month. Office and retail starts, which had remained quite strong through Q1, also plunged. Office starts fell. 21. 0% year-on-year in April, and. 45. 1% compared to March. Retail property starts fell. 18. 7% year-on-year, and. 36. 8% compared to March. (The year-on-year April comparisons for office and retail rely on a reverse calculation to isolate April 2011 figures, which NBS did not provide in its earlier releases). In short, the trendline in starts has dipped into negative double digits across all categories.

Land sales, meanwhile, fell off a cliff. Land sale revenues in April (RMB 27 billion) were down. 54. 7% compared to April last year (RMB 60 billion) , and. 47. 0% compared to March (RMB 51 billion). Total area sold was down. 52. 5% compared to last April, and. 43. 4% compared to March (the year-on-year comparison here relies on a similar reverse calculation as before).

It should be no surprise, then, that foreign investors are pulling back from China's property sector. Foreign funding for property development was down. 91. 4% in March and. 80. 8% in April, compared to the same months last year.

I think most readers will agree, this is pretty powerful stuff. At least one major sector of the Chinese economy (10-13% of GDP) , which had been a leading growth driver, is undoubtedly in contraction. More importantly, the dynamics behind these numbers suggest that the market has not bottomed out, but is still in the process of unraveling. That is why I told CNN, in late April:

'No one has hit the panic button yet, ' Chovanec said. 'Everyone is holding out hope that at some point it turns around somehow. But I also think that's a triumph of hope over reason. '

[Pokerstar77]

Pokerstar,

I have lived in both. I like SH better because it is a bit edgier than HK. Other consideration it somewhat depends on age of your kids. As Fritobugger mentioned top international schools in SH are expensive. $20-25k / kid. You housing $ goes farther in SH for more space. HK apartments are very small. All depends on your package, where you will be traveling. Crossing the HK / SZ border daily sucks, etc.

I think you mentioned your kids were young, so in HK, you should consider living in Discovery Bay. Nice environment, easy access to central, good preschool named DMK. Social life in the DB plaza is good fun.

Good luck.

SH

ShangHangin, nice nick by the way, Thank you very much for your reply.

The kid is two and half years old and the second one is expected in early 2012. I made my choice and decided to relocate to HK. Contacted a broker and I'll be sure to let him include some locations on Discovery Bay. I've also lived in both cities, but as I can read from you post, Hong Kong is more family friendly. Shanghai or China for that matter is nice, especially when your single.

Again, thanks for your reply. You helped me a lot.

[Gualtier Malde]

Could you please elaborate here, you mean they show up on your doorstep at home or company or something like that and create a scene.

I think you would be crazy to let a village girl know where you live or work, unless you don't mind coming home and finding her (or her large male relatives) parked at your front door after you tried to break it off with her, or finding her there when you happen to be bringing home some paybie from Maggies.

Just my opinion, perhaps I'm paranoid, but I do know someone who had to deal with this (the girl showing up) after he preferred to move on. Consider getting yourself a "shag pad" if you want to bring them "home".

GM.

[Member #4689]

Be careful, they can be unpredictable. They won't chop off your dick like a Thai girl might when angered, but they might harass you in other ways you will come to regret.

GM.

Could you please elaborate here, you mean they show up on your doorstep at home or company or something like that and create a scene.

[Gualtier Malde]

I am going to spend a great deal of time in China in 2012. My 2nd trip but I have 0 experience withChinese women.

They seem more conservative than Pinay who seem to drip constantly and are easier to be than thai hookers.

Where and how do I learn?

I of course will continue to read here.

PP

There is an ocean of difference between Pinay women and Chinese women. Definitely read this forum to learn more, but you really can't apply what you know about Pinay girls to Chinese.

Outwardly Chinese women appear to be much more conservative in their behavior (but usually not in their clothing!). At the same time, Chinese women are not bound by the religious principles that ground a typical Pinay girl. So while maintaining a conservative façade, their moral compass swings toward a different pole (maybe your pole). You'll find that a Chinese woman who might be married or has a boyfriend won't treat that relationship with the same carnal loyalty that a girl from another culture might. So in the freebie world, opportunities may be closer than they appear. Your advantage is that local Chinese men are all too often not great partners, and also frequently not great lovers. I don't want to over generalize, but there are lots of frustrated Chinese women out there!

Something I've frequently heard normal, conservative Chinese women say, in public, is that they are "MBA", meaning "married, but available". Perhaps they are just joking, but talk to one privately about it and you might be pleasantly surprised. Sex just doesn't have the same social implications in China as it does in western cultures.

Chinese women (city women) are socially pretty sophisticated. They are good at manipulating you to get what they want. But if you know this, you can of course use it to your advantage, especially if what they want aligns with what you want. But make sure you understand the reality. Don't interpret her manipulation as infatuation or love when it is really a desire for security or a ticket out of town, or a good fuck.

Village girls may be far less sophisticated about life and love. Be careful, they can be unpredictable. They won't chop off your dick like a Thai girl might when angered, but they might harass you in other ways you will come to regret. Also, village girls who come to Beijing to work as BBS girls, masseuses, or hookers are likely to be very ignorant about the basics of safe sex. Be very careful where you dip your stick. I would recommend avoiding romantic entanglements with the less educated village girls in general, but maybe that's just me.

Best way to learn is to spend time with them. Don't jump right into the sex (except of course with the professionals, who like pros everywhere are paid to leave). Get to know some local women outside the "game". I've had good results meeting women on Badoo, but there are lots of ways to meet them.

Bottom line with Chinese women: always keep both eyes open, and always read between the lines.

GM.

[Pinaypounder]

I am going to spend a great deal of time in China in 2012. My 2nd trip but I have 0 experience withChinese women.

They seem more conservative than Pinay who seem to drip constantly and are easier to be than thai hookers.

Where and how do I learn?

I of course will continue to read here.

PP

[Gualtier Malde]

An article from the UK's Daily Mail.

GM.

Chinese madam who ran prostitution racket executed by lethal injection.

By WIL LONGBOTTOM and DAILY MAIL REPORTER.

Last updated at 2:34 AM on 9th December 2011.

A madam who forced hundreds of women into prostitution has been executed in China.

Wang Ziqi was sentenced to death for luring young women to work in brothels which were disguised as tea houses, beauty salons or hotels.

More than 300 women were victims between 1994 and 2009 of the gang she led, with seven dying in mysterious circumstances, according to Chinese news reports.

PHOTO (See attached) : Wang Ziqi, centre, was executed after being convicted of forcing hundreds of women into prostitution in the Chinese city of Chongqing, along with associate Gu Mingtao.

They were forced to work even when they had their period or had had forced abortions.

If they refused, they were beaten and put in a dark room for days without food.

Wang and her sister, Wang Wanning, were accused of stealing the women's identity cards, ruining their reputations with their families and stealing all their earnings.

The gang also arranged for people to teach the women the 'skills' of prostitution.

She was pictured along with associate Gu Mingtao, dressed in thickly padded pajamas, their hands cuffed, in court as their death sentences were upheld.

In 2003, one of her victims was left paralysed after she jumped from the eighth floor of a tea house.

Yet she was still kept locked up until she was finally released by police in 2009.

Another woman who went missing in 2005 turned up four years later at her husband's home, with scars on her hands and feet.

She would then often wake up in the night, strip naked and walk out.

A psychiatrist said her behaviour was the result of being locked up and terrified for a long time.

Wang Wanning fled the country after her sister's arrest, but was caught and extradited back to China in April. It is unclear if she has been put on trial.

Wang's punishment was part of a major crackdown against corruption and organised crime in Chongqing, a major metropolis in southwest China.

A Filipino drug trafficker was also put to death yesterday, despite a plea for clemency from the Philippine president.

Hours before he was executed, the unnamed man was allowed briefly to meet two siblings and two cousins who travelled to south China's Guangxi province.

He was then led to a courtroom, where the sentence was read and he was taken to the death chamber in Liuzhou, two hours from the prison, where he was given a lethal injection.

The Philippine vice president, Jejomar Binay, said: 'The subject was very calm, but his family was crying. '

The 35-year-old, who has not been identified in either country, was arrested in 2008 at Guilin International Airport while trying to smuggle 3. 3lbs of heroin from Malaysia.

Smuggling more than 1. 76 ounces of heroin or other drugs is punishable by death in China.

China, the world's most prolific executioner, refuses to admit how many prisoners it puts to death every year. Amnesty International estimates it is in the thousands.

Read more:

http://www.dailymail.co.uk/news/arti...#ixzz1g1UQgDH1