The China Syndrome......

I was talking with an investor-friend of mine the other day after he had read my "Shape of Things to Come" post.  He was very complimentary on my content and style, but then he said something I found interesting.  .... "DT".....(all my friends call me DT)....."DT... why are you so enamored with these silly Chinese ADRs?  If you feel so strongly that they're dogs just don't buy the stock(s)....or short 'em if you feel so inclined.  China's the worlds second biggest economy growing at 7%.   I wish the US had that growth!  I just don't see how this is worth getting your shorts in a bunch.  Why are you spending time on this? What's your end game."

I thought about what he said for a minute, and to a certain extent, he was correct, I have no end game, other than to make an effort to protect myself and my readers from what I perceive to be the impending, inevitable melt-down. My verbal response to him was a poorly articulated, flailing rant of the bullet point list below.  Since I knew I had done a poor job of communicating my ideas,  I promised him that I would elaborate with details in a future post.  Accordingly, I'm posting a summary addressing the gravity of the situation that I would hope he (and you) will read with the same vigor and concern as the panicking Jack Lemmon had shown while tapping the glass of the malfunctioning gauge in the reactor control room.  In the movie classic for which this post is titled, things at the Ventana nuclear plant (Like the Chinese economy today) were/are simply not as they appear to be.  Here are the Summary Bullets:

• The US Markets have never before been as exposed to an International Financial Contagion as they are today. 
• "Bad Gauges"  - Fraud, puffery, bad decisions, impossible business models, inaccurate data and corruption are ubiquitous throughout the Chinese economy.
• There is a debt crisis brewing in China unlike anything we've seen before.  The People's Bank of China (PBoC) is "out of bullets".
• Capital flight & Currency risk will destroy the PBoC's ability to avoid the "abyss".

Exposure & International Financial Contagion: 

ADRs
Currently there are 107 Chinese ADR's with an aggregate Market Cap of US$1.532 Trillion listed on the NYSE and NASDAQ.  (Table #1 Below)  Five years ago that figure was only $1.183 Trillion and ten years ago the Market Cap was only $415 Billion.  There are another 196 Chinese stocks traded OTC representing a Market Cap of $990 Billion.   (Table #2 Below)  Generally, these stocks are either thinly traded, have a limited market, have been de-listed from the NYSE or NASDAQ, have been taken private or simply "gone dark".   Oddly, most of the larger SOE Chinese banks have a US OTC presence.  In any case, the result of a failed or languishing listing is obviously never a good result for the ADR shareholder. 

Another relatively shocking number is the "Calculated Maximum Market Cap" of US$2.484 Trillion which represents the highest Market Cap calculated based on the highest US share value recorded.  Generally,  for more mature issues, the highest values were recorded in 2008-2009 when the market was at a peak for these stocks.  The difference between the Current Value ($1.532 T) and the CMMC (US$2.484 T)  represents the theoretical loss (US$ 952 Billion) investors would have had if they had purchased these ADRs at their peak.  I've written extensively on this blog re: the mis-rep and lack of disclosure which is ubiquitous in these IPOs so I won't bother repeating myself here, but suffice it to say that the quality of these ADR IPOs has generally been disastrous for investors.

Finally, to put it in perspective, the current value these ADRs represent roughly 6% of the NYSE/NASDAQ combined US$ 26 Trillion Market Cap.   Put another way, the Market Cap of Chinese Stocks listed on US Exchanges is about half the Current Market Cap of the entire Hong Kong Exchange.  Again, this is no accident. 

Bonds in US Markets:

The Chinese Bond Market has roughly doubled over the last five years and stands as the Worlds 3rd largest behind only the US and Japan at roughly US$ 4.5 Trillion.  The growth has been accelerating dramatically in the last few years.  There are government/market restrictions on who is allowed to own/trade and make a market in Chinese debt securities, (See ref: below) but the products that concern me most are the US Listed bonds as described in the table below.    Similar to the ADRs above, since 2011 there have been roughly 400 separate new issues of Chinese Bonds which are trading in US markets.  These products didn't exist 10 years ago.  A Summary of this Data (available upon request) is shown below:

	(millions of US$)
	Chinese Bonds Issued in US Markets				Thru
	Thru				1st Qtr
	2011	2012	2013	2014	2015
Principal	$33,929	$52,865	$101,065	$181,334	$202,670
New Issue		$18,936	$48,200	$80,269	$21,336
New Issue - Interest %	3.11%	4.30%	4.62%	4.78%	5.79%
High-Yield> 6%	$0	$2,300	$10,188	$25,926	$10,016*
% High-Yield	0	12.1%	21.1%	32.3%	46.9%
* $5.2 Billion issued on "distressed" developers: Evergrande, Times Properties, Country Garden & Shimao Properties.

The following leaps out from the above:

• The issues are accelerating. US$201 Billion issued since 2010.  US$80 Billion in 2014 & $21 Billion issued in Q1 2015.
• The quality of the issues is deteriorating rapidly.  Roughly half of the bonds issued in the 1st quarter of 2015 were higher-yield bonds issued to struggling developers and businesses willing to pay a much higher cost of capital, and/or are unable to find lower cost financing inside China.

Again, the quality if these securities is what is ultimately important.  If the above referenced ADRs and Bonds had the underlying cash flow, collateral and characteristics of public debt or were truly AAA there wouldn't be a problem, Unfortunately, this is not reality. As you can see from my prior posts on this blog, and for that matter, anyone familiar with the history of these poorly underwritten securities, many/most of these businesses are at best not economically viable or at worst, poorly designed Ponzi schemes.


Finally, the Chinese government and the PBoC have launched a new institution (AIIB) as an Asian alternative to the World Bank.   The goal is to finance an additional US$ 8 Trillion of infrastructure in Asia using Western money. The AIIB article below summarizes the developments much better than I can in a few paragraphs.  Suffice it to say that in this author's opinion the last thing the global financial system needs is yet another poorly regulated vehicle to finance (or refinance) China's already over-built, ill-conceived infrastructure.


Bad Gauges:

Nothing in China is as it seems to be.  Official figures from the National Bureau of Statistics (NBS) and the CNNIC simply can't be reconciled with any degree of certainty.  Things just don't add up. My friends/contacts "in country" tell me that, despite what the government data says, the Chinese economy may actually have begun to contract in Q4 2014.  Here are some examples of a few the odd inconsistencies in the data: Keep in mind that the published GDP target is 7%.

All of the below refer to 2014:

• Revenues reported by public companies on the Shenzhen & Shanghai exchanges actually declined slightly in Q4 2014 YOY, while the NBS published 7.4% GDP growth..
• Per proprietary "in country" data, steel production had decreased 4.8% the last half of 2014 while the NBS reported an increase of 1.8%. 
• Cement production only increased 1.8% YOY according to NBS.   NBS also reported a 1.4% decrease in December YOY cement production.  Oddly, a recent Washington Post article cited "China's cement consumption over the last 3 years was greater than that of the United States for the entire 20th Century".  (See article below)  The only observation I'd make about that statistic is that it's bad if it's a lie.  But, if all of that cement was purchased with bad credit, it's even worse if it's true. 
• Railway Freight has been declining for a year, down 6% per month in Q4 2014 (NBS)
• Highway traffic has been declining at a rate of 5% per month for the last half of 2014 (NBS)
• Crude Oil Production increased 0.6% for 2014 with a 2.1% increase in December YOY. (NBS)
• Cell Phone manufacturing increased 7.5% for 2014 with an increase of 7.8% YOY in December.(NBS)
• Home Refrigerator manufacturing decreased 1.0% for 2014 with an decrease of 6.3% YOY in December.(NBS)
• Power Generation increased 3.2% for 2014 with an increase of 1.3% YOY in December. (NBS)
• Computer Equipment manufacturing decreased 0.8% for 2014 with an decrease of 10.8% YOY in December. (NBS)
• E-commerce, smart phone usage and on-line payment growth is reported to be growing at a pace that is simply not possible (as discussed throughout this blog)
• We've all seen the video's of China's "Ghost cities"

Based on the anecdotal data above, as well as my familiarity with the continuous flow of mis-reps contained in the ADR IPOs, I've become more than skeptical that China's economy is growing at anything close to the 7% that's being bantered about.  I don't pretend to be able to recreate the NBS data set or methodology, but if all of the above described segments of the economy are growing at rates much less than 7%, and nothing I've seen indicates sector growth higher than 7%,  it's simply impossible for China to come close to hitting its' GDP target.   Math is a wonderful thing...it works regardless of your political ideology.  As an investor, like Jack Lemmon in the control room......if you think the reactor cooling water is full (vs empty), the potential to make uninformed, catastrophic decisions increases enormously.


Debt Crisis:

Investors generally don't seem to either understand the severity of the debt load or, up to this point, care much about it.  The McKinsey reports cited below have been illuminating.  Since the pre-bubble peak in 2007, global credit has grown at an astonishing pace, adding $57 Trillion to outstanding debt, with more than a third of this increase taking place in China.   China's debt load has gone from US$ 7.4 Trillion in 2007 to roughly US$ 28.2 Trillion as of Q2 2014. Again, it's widely presumed that this debt load is manageable for an economy the size of China's.  That said, keep in mind the "Bad Gauges" discussion above and that the McKinsey data is nine (9) months old.  A lot of bad things can happen in nine months.....ask any new single Mom who's dealing with a dead-beat Dad.

What if China's GDP growth hasn't been running at 8% + for the last decade as has been widely reported/assumed? What if China is actually in a recession today? What if significant investments had been made in vacant real estate, failed construction projects, speculative solar energy and Ponzi E-commerce and Internet businesses?

Moreover, most of the new debt created within China's borders is unregulated "Shadow Bank" debt consisting of privately placed WMP's, B2B and P2P loans of which the underwriting discipline or the debt product and credit-worthiness of the borrower is inconsistent at best (See my "Alibaba.....the Ultimate Shadow Bank" Post on this blog)  These products are generally rollovers of prior troubled loans re-bundled at a higher interest rate to keep the borrower solvent for another year or two.  They are "kick the can down the road" loans.  The PBoC has exhibited little/no ability to control these loans since they are outside the banking system (Alibaba, Tencent, Vanke, Evergrande, Yue' Bao et al) and they continue to grow exponentially.  Even though there is currently no deposit insurance in China's financial system the Chinese people have always held to the belief that, no matter what the asset might be, a home, apartment, Money Market Account, or other WMP, their purchase price/principal will always be recoverable at some point. Unfortunately, the system of "implied" guarantee is already being tested on the periphery (Kaisa, Evergrande, SunTech, Chaori Solar, Huatong Road & Bridge, et al). The question looms, "What Happens when the music stops?

Two comments that stood out at the Economist/McKinsey Buttonwood Conference (See ref. below)were:

Princeton's Dr. Atif Milan commenting on how long the debt bubble can continue in China:

"It can go on potentially forever.....or until the situation changes" . Referring to a theoretical point in time when lenders want their money back.

Jason Furman, Chairman of the President's Council of Economic Advisers, commenting on how a debt bubble can happen:

"Debt is not a dirty word, it depends on what it's for and what the context is.......You don't want debt when it's for stupid things....it's just hard to have a public policy that says 'don't do stupid things'.."


For various reasons, some good and some not-so-good (i.e. "stupid"), most Central Banks around the globe have relentlessly pursued at least some form of QE over the last few years.    Global interest rates have never been lower and global capital has never been so cheap.

During the 2008 Financial crisis China avoided a melt-down simply by starting at a much lower debt level and effectively "exporting it's way" out of the problem.  The RMB was devalued and inexpensive Chinese goods made their way around the world, fueling growth and a debt financed increase in even more capacity.  Unfortunately, once this next bubble bursts, "exporting out of it" won't be an option. There will be more than a few governments attempting to "export out of it" but, without available credit, there will only be so much demand at any price.  I love a good scotch.....but the repercussions of drinking a bottle a day would be less than optimal for my household.


How much can the PBoC Handle?

To paraphrase Dr. Milan, the PBoC can handle the bubble until it can't.  Let's take a look at the comparative balance sheets today.  Keep in mind that US GDP is currently about twice China's reported GDP and that US GDP per capita is about 7x that of China

Central Bank Balance Sheets Today - Trillions of US$
                                         FED PBoC
Total Assets - Current $4.4          $5.6
 as % of GDP                      24%          54%
Total Assets - 2008             $0.8          $3.0
 as % of GDP                        5%           65%

The above "apples to oranges" comparison intends to illustrate the vastly different construction of the central bank balance sheets.  To be precise, the PBoC Balance Sheet has been carrying 80-85% of its' balance sheet in foreign exchange assets for the last five years.  There are, of course, reasons for this, but interestingly, the PBoC isn't investing in China at this point in time, it doesn't yet have to.

Given the above, let's examine at the US Financial Crisis.  When the 2008 bubble popped in the US, the FED began buying up assets, consolidating and/or arranging fire sales, and spin offs to interested solvent parties.  (GM, AIG, Bear Sterns, Lehman, Countrywide, National City, Wachovia, Fannie, Freddie, etc. etc.)  Some of the assets of course stayed on the FED's balance sheet until they could be wound down,  I remember some politically charged criticism at the time, relating to all of the "junk" that was trapped on the FED's balance sheet, presumably, forever.   Other businesses were stripped down or sold off, or wound down by the courts.  In this author's opinion, the process was remarkably efficient and ruthlessly confiscatory.  Even though there was significant political hand-wringing and gnashing of teeth, choices had to be made and they were.  At the time, there also seemed to be a relatively finite capacity for the FED to make the decisions, absorb these businesses and recapitalize them, obviously with significant haircuts to investors caught in the wrong place at the wrong time.  Although no one ever defined what the FED's "finite capacity" might be,  from analyzing Geithner's and Paulson's post crisis public comments, it's clear that we were getting close to some limit.    

Therefore, the US$ 5+ Trillion question is "How much of this can the PBoC Handle?"

My guess would be, based on the current size of the PBoC's balance sheet, already at 54% of GDP, it won't be able to handle all that much.   As China's businesses fail they would be nationalized/absorbed and like the FED, the mangled carcasses would end up as discounted assets on the PBoC balance sheet or the balance sheets of the SOE Banks. Any non-China interests would likely be wiped out first, similar to what's happening selectively now, but on a swifter, grander scale.  Interestingly, one of the strengths of the PBoC compared to the FED would be, in a time of crisis, the PBoC won't have to deal with those pesky Constitutional "Right to Property" issues or defend it's actions in the press or a courtroom.  They will simply confiscate the assets. 


Moreover, even though China's equity markets are relatively small by comparison to the US, roughly US$ 9.5 Trillion (Shanghai, HK & Shenhzen) there would be an immediate "flight to safety"and a resulting unavoidable haircut for shareholders. (Chinese equities dropped more than 60% during the 2009 US crisis).  Money would flow out of equities, unregulated money-market funds an WMPs and into the perceived safety of the SOE bank accounts.  Oddly, there would be a run TO the banks rather than ON the banks.


The elephant in the room, of course, is the newly minted US $28.2 Trillion in Chinese debt. (3x GDP)  Nearly half of which is non-financial Shadow Bank debt tied to failed real estate projects, troubled businesses and outright scams.  Even if the PBoC bought/guaranteed or propped up a fraction of this debt it would push the PBoC's Asset/GDP ratio to levels not heretofore seen by a major central bank.  Moreover, the effort would most likely be insufficient to prevent a widespread collapse in asset values.   The math simply doesn't work.

A Parallel Universe

If we examine the US FED's actions during 2009, widely regarded as a recovery from "greatest financial crisis since the Great Depression" it may be a useful road map to illustrate where the PBoC might find itself  once the bubble bursts.  Unfortunately, today, the PBoC is starting from a much more vulnerable position than the FED did in 2008.  Let's examine the following FED actions and ratios from 2008 forward:

1.) The FED increased it's assets by roughly 275% from 2008 to 2010.
2.) The FED put assets on it's books at an estimate of  FMV writing off/shuttering the balance.
3.) The US M2 increased 16% over the same period.
4.) US Equity Markets dropped roughly 40%.
5.) The Fed Funds Rate decreased from 3.5% to a 0.25% target.


So based on the above ratios, what would the PBoC balance sheet look like after a China Syndrome similar in depth to the U S Crisis?

1.) The PBoC balance sheet would/could balloon to US$15.4 Trillion, or roughly 150% of China's current GDP.  Put another way, the assets held by the PBoC would increase to 350% of the value of assets currently held by the US FED.
2.) China's M2 would increase 16% to US$ 23.5 T, or about twice the current US M2.
3.) The Shanghai, HK & Shenzhen markets would lose at least US$ 4 Trillion (40%) in value.  Again, as a point of reference, these exchanges lost roughly 2/3rds of their value during the 2009 US financial crisis.
4.) The CHIBOR rate is currently at 6.15%.  The primary reason the FED was able to successfully implement a near-zero interest rate policy was because of the dollar's reserve currency status.   Again, China isn't so fortunate.  If the PBoC attempted to adopt a FED-like near-zero rate policy, capital flight (as described below) would most certainly accelerate and new investment would dry up. Production output and efficiency would whither away.
5.) Of course, global financing would be shut down.  Governments and Central Banks tend to refrain from lending money once they've been stiffed.....unless you are the EU lending to Greece.

The new normal will most likely resemble a Japanese-Argentine-esque economy muddling along for a decade or two until it's able to absorb the excesses, convert the overbuilt, century-of-cement "luxury condos" into usable public housing more closely matching per-capita GDP and somehow force the Chinese people to pay for the past over-indulgence of China's elite.

Capital Flight & Currency Risk

It's no secret that wealthy Chinese are coming up with every scheme imaginable to  get money out of the RMB/CNY and into US$, EUR's  or any other safe haven currency denominated asset.  The smart money does indeed know where and when to run.  As described in prior posts, Caribbean Shell Corporations are the tool of choice to move significant amounts of money out of the PROC.  Every one of the 107 ADRs listed on the NYSE & NASDAQ have more than a few Caymans, BVI, et al shell companies "related" in some way to the ADR.  Alibaba alone has 290 subsidiary companies in the VIE.

The New York Times just did a wonderful five part series on foreign investment in US luxury real estate.  (Link below)  Money is finding it's way into US real estate at an unprecedented pace (Billions of UD$), again usually through these shell companies.

Oddly, even though China has increased M2 300%, the managed exchange rate has remained relatively constant over the last five years, trading in a band between 6.00 and 6.50 per US$.  Supply and demand is apparently more of a guideline than a law for the Renminbi.

So let's fast forward to the point discussed above where the PBoC needs to absorb trillions of US$ equivalent assets, increase the money supply dramatically and reduce interest rates to shore up the financial system.  The most logical consequence would be a massive flight of wealth away from the crumbling RMB and into US$ or EURs.  Fortunately, thanks to US Investment bankers, all of these shell devices are already set up, ready, willing and able to accept and convert the assets of China's elite.  Today, China's M2 stands at US$ 20 Trillion and will most likely be increased significantly once the dim-sum hits the fan.  The PBoC will no longer be able to support the RMB and it will crash. (See: the Ruble 2014)  Once the RMB de-values and starts to move off-shore the paltry $4.5 Trillion foreign currency reserves held by the PBoC that most pundits cite as "China's Great Wall of Currency" will be woefully insufficient to stop the flight.


Final Thoughts

In Janet Yellen's March report to Congress while discussing the interest rate "lift-off" she described concerns that Money Market Funds, unregulated by the FED, may not respond to the FED's toolbox as anticipated as these funds remain vulnerable to investor "runs".  She also discussed that another potential risk to FED interest rate policy might be a "possible overseas crisis" which would bring a rush of capital to safe assets like Treasuries, depressing yields, just as the FED would be starting to push the other way. 

In a way, the PBoC faces the mirror-image issues that Janet Yellen's FED faces today.  The PBoC has to deal with an impending debt crisis, bad data, a faltering economy, proliferation of unregulated financial products, currency flight and exchange risk.  The FED is charged with the responsibility of systematically raising interest rates in a non disruptive manner, in a relatively stable economy, where the US debt to GDP ratios are declining.

Yet, both the PBoC and the FED have to work within a framework where their influence has become eroded by liquidity-fueled increased asset prices, significant increases in debt and Money Market instruments outside the direct influence of Central Bank Policy; and finally, a self-inflicted QE fueled, rapidly increasing global money supply.

That said, the FED, starting in a relatively favorable position in 2009, barely had the wherewithal to deal with the Financial Crisis.  After looking at the math, I'd be hard pressed to believe that the PBoC isn't just a few false gauge readings and mis-steps away from a financial China Syndrome.  At some point relatively soon Chinese bankers will find themselves deep in the "abyss" that the FED struggled so mightily to avoid in 2009.  The next obvious question is:  How big will the spill-over be?  There's no question, at least in my mind that the US financial markets will be facing serious headwinds as a result of this melt-down.  I'll try to put some numbers to it in future posts.  Stay tuned.....





McKinsey - China's Debt load is 4x what it was in 2007 (282% of GDP)
http://www.mckinsey.com/insights/economic_studies/debt_and_not_much_deleveraging

MGI - Buttonwood Summit - China's Debt @ US$ 28.2 Billion - Quality?
https://www.youtube.com/watch?v=74jKdW8r-j8

CSIS-Summit - 2/20/2015 - China Financial Crisis - Has the Hard Landing Already Started?....
https://www.youtube.com/watch?feature=player_embedded&v=C2SStFt-k_A
NYT - "Hidden Money" buying up US Real Estate
http://www.nytimes.com/2015/02/08/nyregion/the-hidden-money-buying-up-new-york-real-estate.html?_r=0
Central Bank Balance Sheets
http://www.yardeni.com/Pub/peacockfedecbassets.pdf

Gordon Chang on the increasingly adversarial position of China's business environment
http://www.forbes.com/sites/gordonchang/2015/03/22/chinas-thousand-shades-of-grey-a-new-campaign-against-multinationals/

Tim Geithner - The "Abyss"
https://www.youtube.com/watch?v=-BM0gAgdpLw

Hank Paulson & Geithner - Chicago Council of Global Affairs Interview
https://www.youtube.com/watch?v=0ougnrP_hdQ

China's M2 - 300% growth from 2008 to 2015 - 40,3T CNY to 125.7T CNY
http://www.tradingeconomics.com/china/money-supply-m2

US M2 - 58% growth from 2008 - 2015 - $7.48T to $11.8T
http://www.tradingeconomics.com/united-states/money-supply-m2

10 Yr. USD/RMB Exchange Rates - 8.27 to 6.04 per USD
http://www.xe.com/currencycharts/?from=USD&to=CNY&view=10Y

NBS Data
http://data.stats.gov.cn/english/easyquery.htm?cn=A01

Washington Post - China's Cement Usage
http://www.washingtonpost.com/blogs/wonkblog/wp/2015/03/24/how-china-used-more-cement-in-3-years-than-the-u-s-did-in-the-entire-20th-century/

Reuters - FED Policy - Janet Yellen's report to Congress
http://finance.yahoo.com/news/fed-market-gurus-prep-rate-181112370.html

Kaisa - debtors won't agree to concessions/restructuring of US$2.5B bond default
http://www.bloomberg.com/news/articles/2015-03-19/kaisa-offshore-creditors-won-t-agree-to-debt-plan-friday

Evergrande - gets "lefeline" of US$16B
http://www.nytimes.com/2015/03/18/business/international/china-developer-gets-lifeline-amid-slump.html?_r=0

China Vanke Rising from the "Rubble"
http://online.barrons.com/articles/china-vanke-rises-from-rubble-of-housing-bubble-1417400150

China Vanke - San Francisco Condo deal
http://www.wsj.com/articles/SB10001424127887323764804578314252141124238

China Vanke - NY Condo Deal
http://www.forbes.com/sites/michaelcole/2014/02/27/ny-developers-team-with-vanke-to-sell-homes-to-wealthy-chinese/




Dalian Wanda - Meteoric debt fueled growth
http://www.economist.com/news/business/21643123-chinas-biggest-property-tycoon-wants-become-entertainment-colossus-its-wanda-ful-life

Vanke - real estate bubble about to burst
http://www.cbsnews.com/news/is-chinas-real-estate-bubble-about-to-burst/

Vanke - "Dangerous" - 7 minutes into video
https://www.youtube.com/watch?v=9lP3f0qPNwo

ABC News - China Shadow Banking - Default Risk
https://www.youtube.com/watch?v=jrIhYRbRWXQ

Financial Times - China's Debt Addiction
https://www.youtube.com/watch?v=5mKKgvoxjZ4

Francis Lun - China's Property Crisis - 3/7/14
https://www.youtube.com/watch?v=u5ZnCnxxGP0

FT - Shanghai Property Sub-Index - Value Doubled in the last 12 months
http://markets.ft.com/research/Markets/Tearsheets/Summary?s=000006:SHH

Economist - AIIB - More Foreign Investment - US$8 Trillion in new infrastructure.
http://www.economist.com/news/asia/21646740-development-finance-helps-china-win-friends-and-influence-american-allies-infrastructure-gap?fsrc=nlw|hig|19-03-2015|NA

The Diplomat - China's Employment -  a very "Bad Gauge"
http://thediplomat.com/2014/02/chinas-delicate-jobs-challenge/2/

The Diplomat - What Happens when China's Economic Engine stalls?
http://thediplomat.com/2015/02/the-implications-of-chinas-growth-slowdown/

Goldman Sachs - Chinese Bond Market Summary 2013
http://www.goldmansachs.com/gsam/glm/insights/market-insights/china-bond-market/china-bond-market.pdf






TABLE #1 - ADRs - NYSE/NASDAQ

		3/10/2005	3/20/2010	3/20/2015				(Billions US$)
		Market Cap	Market Cap	Market Cap				All-Time
Company	Ticker	(Billions US$)	(Billions US$)	(Billions US$)		Exchange	Industry	High
PetroChina	PTR	150.6	367.5	325.3		NYSE	Oil & Gas Producers	753.0
China Mobile	CHL	63.5	215.9	273.0		NYSE	Mobile Telecom.	423.3
Alibaba Group Holding Ltd	BABA	0.0	0.0	210.4		NYSE	Ecommerce	282.3
China Life Insurance	LFC	25.0	185.9	158.2		NYSE	Life Insurance	25.0
China Petroleum & Chemical	SNP	45.2	97.9	118.8		NYSE	Oil & Gas Producers	180.7
Baidu	BIDU	0.0	20.7	74.0		NASDAQ	Software&ComputerSvc	86.2
China National Offshore Oil-CNOOC	CEO	22.1	79.6	60.0		NYSE	Oil & Gas Producers	114.9
China Telecom	CHA	28.0	40.5	50.6		NYSE	Fixed Line Telecom.	70.1
JD.com	JD	0.0	0.0	40.5		NASDAQ	General Retailers	44.8
China Unicom	CHU	17.9	28.7	36.6		NYSE	Mobile Telecom.	67.0
Huaneng Power International	HNP	10.9	9.7	18.5		NYSE	Electricity	23.3
Vipshop	VIPS	0.0	0.0	15.0		NYSE	General Retailers	15.0
NetEase	NTES	1.2	5.1	13.1		NASDAQ	Software&ComputerSvc	15.7
Aluminum Corporation of China	ACH	11.8	27.5	11.7		NYSE	Indust.Metals&Mining	78.7
China Eastern Airlines	CEA	4.7	12.2	12.4		NYSE	Travel & Leisure	31.9
Yanzhou Coal Mining	YZC	14.9	26.6	8.5		NYSE	Mining	41.4
Sinopec Shanghai Petrochemical	SHI	5.3	5.8	7.4		NYSE	Chemicals	13.3
China Southern Airlines	ZNH	4.1	9.3	10.9		NYSE	Travel & Leisure	22.3
CTrip.com International	CTRP	2.9	5.7	6.7		NASDAQ	Travel & Leisure	10.0
Qihoo 360 Technology	QIHU	3.8	3.8	6.1		NYSE	Software&ComputerSvc	15.1
Autohome	ATHM	0.0	0.0	4.6		NYSE	Automobiles & Parts	5.6
Guangshen Railway	GSH	3.1	4.1	5.1		NYSE	Travel & Leisure	9.0
58.com	WUBA	0.0	0.0	3.9		NYSE	Software&ComputerSvc	4.9
Mindray Medical International	MR	0.0	4.1	3.2		NYSE	HealthCareEquip.&Ser	5.2
Qunar	QUNR	0.0	0.0	4.0		NASDAQ	Travel & Leisure	4.1
YY Inc.	YY	0.0	0.0	3.1		NASDAQ	Media	5.6
Youku.com	YOKU	0.0	7.8	3.1		NYSE	Media	13.1
New Oriental Education & Technology	EDU	0.0	3.2	3.3		NYSE	General Retailers	5.6
Weibo Corporation	WB	0.0	0.0	2.7		NASSDAQ	Software	5.2
Cheetah Mobile	CMCM	0.0	0.0	2.5		NYSE	Software	4.2
WuXi Pharmatech	WX	0.0	1.1	2.6		NYSE	Pharma. & Biotech.	2.9
Bitauto	BITA	0.0	0.0	2.4		NYSE	Media	4.6
SouFun	SFUN	0.0	0.0	2.3		NYSE	Media	6.8
TAL Education	XRS	0.0	0.0	2.6		NYSE	General Retailers	3.0
51job	JOBS	0.5	0.5	2.0		NASDAQ	Support Services	4.5
Jumei	JMEI	0.0	0.0	2.2		NYSE	General Retailers	5.7
Shanda Games	GAME	0.0	1.6	1.7		NASDAQ	Leisure Goods	1.9
Changyou.com	CYOU	0.0	1.6	1.4		NASDAQ	Leisure Goods	1.6
21Vianet	VNET	0.0	0.0	1.4		NASDAQ	Software&ComputerSvc	2.8
China Lodging	HTHT	0.0	0.9	1.1		NASDAQ	Travel & Leisure	2.0
Home Inns & Hotels Management	HMIN	0.0	1.6	1.1		NASDAQ	Travel & Leisure	1.8
Leju Holdings	LEJU	0.0	0.0	0.9		NYSE	Real Estate Inv&Serv	2.3
Noah Holdings	NOAH	0.0	0.0	0.9		NYSE	Financial Services	1.0
iKang Healthcare Group	KANG	0.0	0.0	1.1		NASDAQ	Healthcare equipment & Svcs	1.5
AutoNavi	AMAP	0.0	0.0	1.1		NASDAQ	Tech.Hardware&Equip.	1.2
Trina Solar	TSL	0.0	1.9	1.1		NYSE	Alternative Energy	2.7
Agria	GRO	0.0	0.2	0.1		NYSE	Food Producers	1.1
Perfect World	PWRD	0.0	2.0	0.9		NASDAQ	Leisure Goods	2.2
E-House (China)	EJ	0.0	2.8	0.7		NYSE	Real Estate Inv&Serv	2.7
Zhaopin LTD	ZPIN	0.0	0.0	0.7		NYSE	Software	0.9
E-Commerce China Dangdang	DANG	0.0	0.0	0.6		NYSE	General Retailers	2.5
JinkoSolar	JKS	0.0	0.0	0.8		NYSE	Alternative Energy	1.1
China Distance Education	DL	0.0	0.2	0.6		NYSE	General Retailers	0.9
Renren	RENN	0.0	0.0	0.6		NYSE	General Retailers	5.1
eLong	LONG	0.0	0.4	0.6		NASDAQ	Travel & Leisure	0.9
Phoenix New Media	FENG	0.0	0.0	0.4		NYSE	Media	0.9
iDreamSky Technology	DSKY	0.0	0.0	0.3		NASDAQ	Media	1.0
Bona Film	BONA	0.0	0.0	0.5		NASDAQ	Media	0.5
500.com	WBAI	0.0	0.0	0.3		NYSE	Leisure Goods	1.5
Xunlei	XNET	0.0	0.0	0.4		NASDAQ	Software	1.0
JA Solar	JASO	0.0	0.0	0.4		NASDAQ	Alternative Energy	2.0
CNInsure	CISG	0.0	1.2	0.4		NASDAQ	Nonlife Insurance	1.2
Yingli Green Energy	YGE	0.0	2.2	0.4		NYSE	Alternative Energy	2.5
NQ Mobile	NQ	0.0	0.0	0.3		NYSE	Software&ComputerSvc	1.9
China Ming Yang Wind Power Group Ltd	MY	0.0	0.0	0.3		NYSE	Alternative Energy	1.8
LightInTheBox	LITB	0.0	0.0	0.2		NYSE	General Retailers	1.1
Daqo New Energy	DQ	0.0	0.0	0.2		NYSE	Chemicals	0.6
Xinyuan Real Estate	XIN	0.0	0.0	0.2		NYSE	Real Estate Inv&Serv	0.5
KongZhong	KZ	0.0	0.6	0.2		NASDAQ	Mobile Telecom.	0.5
Vimicro International	VIMC	0.0	0.1	0.2		NASDAQ	Tech.Hardware&Equip.	0.3
ChinaCache	CCIH	0.0	0.0	0.2		NASDAQ	Software&ComputerSvc	0.7
China Digital TV Holding	STV	0.0	0.2	0.2		NYSE	Electron.&ElectricEq	2.9
Jiayuan.com	DATE	0.0	0.0	0.2		NASDAQ	General Retailers	0.5
China Nepstar Chain Drugstore	NPD	0.0	0.2	0.2		NYSE	Food &Drug Retailers	2.5
Sungy Mobile	GOMO	0.0	0.0	0.2		NASDAQ	Mobile Telecom.	1.6
Xueda Education	XUE	0.0	0.0	0.2		NYSE	General Retailers	0.8
China Finance Online	JRJC	0.2	0.2	0.1		NASDAQ	Software&ComputerSvc	0.9
ReneSola	SOL	0.0	0.5	0.1		NYSE	Alternative Energy	2.2
Airmedia	AMCN	0.0	0.5	0.1		NASDAQ	Media	1.7
Country Style Cooking Restaurant	CCSC	0.0	0.0	0.1		NYSE	Travel & Leisure	0.7
Taomee Holdings	TAOM	0.0	0.0	0.1		NYSE	Leisure Goods	0.6
Concord Medical Services	CCM	0.0	0.1	0.1		NYSE	HealthCareEquip.&Ser	0.2
Sky mobi	MOBI	0.0	0.0	0.1		NASDAQ	Software&ComputerSvc	0.7
Actions Semiconductor	ACTS	0.0	0.2	0.1		NASDAQ	Tech.Hardware&Equip.	0.8
ATA	ATAI	0.0	0.1	0.1		NASDAQ	General Retailers	0.4
China Zenix Auto International	ZX	0.0	0.0	0.1		NYSE	Automobiles & Parts	0.3
China Techfaith Wireless Communication	CNTF	0.0	0.1	0.1		NASDAQ	Tech.Hardware&Equip.	0.6
Ku6 Media	KUTV	0.0	0.2	0.1		NASDAQ	Mobile Telecom.	0.6
Mecox Lane	MCOX	0.0	0.0	0.1		NASDAQ	General Retailers	1.1
VisionChina Media	VISN	0.0	0.0	0.1		NASDAQ	Media	1.8
The9	NCTY	0.0	0.2	0.0		NASDAQ	Leisure Goods	1.5
China New Borun	BORN	0.0	0.0	0.0		NYSE	Beverages	0.6
China Sunergy	CSUN	0.0	0.2	0.0		NASDAQ	Alternative Energy	1.0
China Xiniya Fashion	XNY	0.0	0.0	0.0		NYSE	Personal Goods	0.6
Lentuo International	LAS	0.0	0.0	0.0		NYSE	General Retailers	0.4
Zuoan Fashion	ZA	0.0	0.0	0.0		NYSE	Personal Goods	0.2
Ossen Innovation	OSN	0.0	0.0	0.0		NASDAQ	Indust.Metals&Mining	0.1
Kingtone Wirelessinfo Solution	KONE	0.0	0.0	0.0		NASDAQ	Software&ComputerSvc	0.1
Acorn	ATV	0.0	0.0	0.0		NYSE	General Retailers	0.0
Charm Communications	CHRM	0.0	0.0	0.0		NASDAQ	Media	0.2
Hanwha SolarOne	HSOL	0.0	0.0	0.0	Delisted	NASDAQ	Alternative Energy	0.0
IFM Investments	CTC	0.0	0.0	0.0	Delisted	NYSE	Financial Services	0.0
iSoftStone	ISS	0.0	0.0	0.0	Delisted	NYSE	Software&ComputerSvc	0.0
LDK Solar	LDK	0.0	0.0	0.0	Delisted	NYSE	Alternative Energy	0.0
Le Gaga Holdings	GAGA	0.0	0.0	0.0	Delisted	NASDAQ	Food Producers	0.0
Rda Microelectronics	RDA	0.0	0.0	0.0	Delisted	NASDAQ	Tech.Hardware&Equip.	0.0
WSP Holdings	WH	0.0	0.0	0.0	Delisted	NYSE	Oil & Gas Producers	0.0
Total Listed Market Cap (Billions)		$415.5	$1,183.1	$1,531.9				$2,483.5

TABLE #2 - ADRs - OTC

			Market Cap
			3/10/2015
S.No.	Company	Ticker	US$ (Billions)		Exchange	Industry
32	China Construction Bank Corporation	CICHY	$193.9		OTC	Banks
171	Tencent	TCEHY	$160.0		OTC	Software&ComputerSvc
94	Fufeng	FFNGY	$128.0		OTC	Food &Drug Retailers
112	Industrial and Commercial Bank of China	IDCBY	$61.5		OTC	Banks
15	Bank of China	BACHY	$46.1		OTC	Banks
138	Ping An Insurance Company of China	PNGAY	$39.8		OTC	Life Insurance
16	Bank of Communications	BCMXY	$28.2		OTC	Financial Services
53	China Overseas Land & Investment	CAOVY	$23.8		OTC	Construct.&Materials
3	Agricultural Bank of China	ACGBY	$14.7		OTC	Banks
54	China Pacific Insurance	CHPXY	$14.3		OTC	Life Insurance
175	Tingyi (Cayman Islands)	TCYMY	$14.1		OTC	Food Producers
180	Want Want China	WWNTY	$13.6		OTC	Food Producers
107	Hengan International Group	HEGIY	$13.4		OTC	Financial Services
59	China Resources Power	CRPJY	$11.6		OTC	Mining
46	China Merchants Bank	CIHKY	$10.4		OTC	Banks
23	Brilliance China Automotive	BCAUY	$9.5		OTC	Automobiles & Parts
93	Fosun International	FOSUY	$9.4		OTC	Pharma. & Biotech.
20	Belle International	BELLY	$8.9		OTC	Personal Goods
1	AAC Technologies	AACAY	$8.6		OTC	Electron.&ElectricEq
62	China Shenhua Energy	CSUAY	$8.2		OTC	Mining
48	China Minsheng Banking	CMAKY	$8.0		OTC	Banks
79	Country Garden	CTRYY	$8.0		OTC	Real Estate Inv&Serv
99	Guangdong Investment Limited	GGDVY	$7.9		OTC	Gas,H20&Multiutility
168	Sun Art Retail	SURRY	$7.6		OTC	Food &Drug Retailers
121	Kunlun Energy	KLYCY	$7.4		OTC	Oil & Gas Producers
105	Haier Electronics	HRELY	$6.9		OTC	HouseGoods&HomeConst
132	NWS	NWSZY	$6.8		OTC	Support Services
88	ENN Energy	XNGSY	$6.3		OTC	Oil & Gas Producers
98	Great Wall Motor	GWLLY	$6.2		OTC	Automobiles & Parts
66	China State Construction	CCOHY	$5.7		OTC	Construct.&Materials
31	China Communications Construction	CCCGY	$5.2		OTC	IndustrialTransport.
84	Dongfeng Motor	DNFGY	$4.4		OTC	Automobiles & Parts
24	BYD	BYDDY	$4.3		OTC	Electron.&ElectricEq
8	Anhui Conch Cement	AHCHY	$4.3		OTC	Construct.&Materials
10	Anta Sports	ANPDY	$4.3		OTC	General Retailers
177	Tsingtao Brewery	TSGTY	$4.1		OTC	Beverages
4	Air China	AIRYY	$3.7		OTC	Travel & Leisure
91	FIH Mobile	FXCNY	$3.6		OTC	Mobile Telecom.
178	Uni-President China	UPCHY	$3.2		OTC	Food Producers
56	China Railway	CRWOY	$3.0		OTC	Construct.&Materials
80	CSR Corporation	CSRGY	$2.8		OTC	IndustrialTransport.
52	China Oilfield Services	CHOLY	$2.7		OTC	Oil & Gas Producers
187	Yuexiu Property	GUAZY	$2.5		OTC	Real Estate Inv&Serv
57	China Railway Construction	CWYCY	$2.4		OTC	Construct.&Materials
110	Huabao International	HUIHY	$2.4		OTC	Chemicals
116	Jiangxi Copper	JIXAY	$2.3		OTC	Indust.Metals&Mining
97	GOME Electrical Appliances	GMELY	$2.3		OTC	General Retailers
30	China Coal Energy	CCOZY	$2.2		OTC	Mining
100	Guangzhou Automobile	GNZUY	$2.2		OTC	Automobiles & Parts
153	Shenzhen Investment	SZNTY	$2.0		OTC	Financial Services
167	Stella International	SLNLY	$2.0		OTC	General Retailers

	Remaining 145 ADRs - Mkt Cap < US$2B		$81.0
	Total Market Cap		990.85