http://www.zerohedge.com/news/2012-09-28/china-delivers-crude-supertanker-iran
China Delivers Crude Supertanker To Iran
The US takes... and China makes. With the Western world doing all it can to cripple the Iranian regime with embargo after embargo, desperate to provoke the country into an offensive move that would be promptly retaliated as a move of "liberation", Iran, which in a few short months has achieved just what all the Western central banks have been desperate to do and see its currency collapse to record lows, continues to find eager allies in the unlikeliest of places. Namely China, which today delivered the first of 12 crudesupertankers to Iran " giving Tehran extra capacity to transport its oil to Asia as it struggles against Western sanctions, but it is unclear if the ship has the permits necessary to call at global ports." What is most amusing is the glaring override of the western isolation of Iran by China, which together with India and Russia, have now become critical trading and strategic partners of Iran, a consideration which any offensive moves by Israel or the US will most likely need to factor in.
This is where the Iranian tanker fleet was, and where it will be courtesy of China:
From Reuters:
Asian countries including China, India and South Korea are among Iran's biggest oil customers, but, to get around a European Union ban on shipping insurance imposed since July 1, they must use the fleet of the National Iranian Tanker Co. (NITC) to bring the crude home.Shipments, however, have become unpredictable as NITC's limited shipping capacity is overstretched, and industry sources said the arrival of the 318,000 deadweight tonne "Panda" in the Gulf in early October may help ease the strain.The very large crude carrier (VLCC) left Waigaoqiao Shipbuilding on Sept. 18. It was initially due to sail to Iran in May, but the sanctions delayed its delivery. A second vessel, the Souvenir, is conducting sea trials in China, but it is unclear when it would begin commercial operations."The first of Iran's VLCCs is on its way to Iran. It is unclear how the tanker is being insured in light of the Western sanctions, but I'm sure Iran has found a way," said a Singapore-based oil shipping executive who declined to be named as he was not authorised to talk to the media.Western insurers provide indemnity for the majority of the world's tanker fleet. Western sanctions to pressure Tehran to halt its disputed nuclear programme have cut its crude exports by nearly half to less than one million barrels a day.Europe is confused: what is the point of the embargo if everyone is skirting it, and why does nobody fear the "developed west" anymore?Under a $1.2 billion contract, Waigaoqiao Shipbuilding Co Ltd, a unit of China CSSC Holdings Ltd, and Dalian Shipbuilding Industry Co. Ltd plan to deliver 12 supertankers by the end of 2013 to NITC, which would boost the capacity of its fleet by nearly 40 percent to around 86 million barrels.Seven more VLCCs are scheduled for delivery by the end of this year, with the remaining four being built in 2013, giving Iran greater flexibility to store and transport its oil.Earlier this week the U.S. government officially linked Iran's state oil company to the Islamic Revolutionary Guard Corps, which would enable Washington to apply new sanctions on foreign banks dealing with the company.The U.S. Treasury, however, said there was not enough information to conclude that NITC was linked to the revolutionary guards, which industry sources said boded well for the shipping firm, for now."NITC will carry on trading and it seems the U.S. government obviously does not want to kill all trade in oil as otherwise, why was NITC not targeted?," said a European industry source. "The big issue will be to what extent will there be sufficient demand from China and India to keep them in the money."As to who is doing the actual trading of Iran oil, we now know that too: it is Vitol, the world's largest oil trader.Vitol, the world's largest oil trader, is buying and selling Iranian fuel oil, undermining Western efforts to choke the flow of petrodollars to Tehran and put pressure on Iran's suspected nuclear weapons program.Vitol last month bought 2 million barrels of fuel oil, used for power generation, from Iran and offered it to Chinese traders, Reuters established in interviews with 10 oil trading, industry and shipping sources in Southeast Asia, China and the Middle East.The Swiss-based firm issued a statement saying Vitol Group is in compliance with all international laws on trade with Iran."A Bahraini subsidiary company purchased a spot cargo of fuel oil from a non Iranian counterparty in July 2012. The fuel oil delivered under contract was of Iranian origin. Vitol Group companies no longer purchase any product of Iranian origin," Vitol said, without elaborating.Vitol is not obliged to comply with a ban imposed in July by the European Union on trading oil with Iran because Switzerland decided not to match EU and U.S. sanctions against Tehran.The company earlier in the year stopped trading Iranian crude oil from its main European offices before the July 1 EU embargo deadline. But the trading sources said it has continued to deal in Iranian fuel oil from the Middle East.The tale of the cargo of Iranian fuel oil involves tanker tracking systems being switched off, two ship-to-ship transfers, and blending of the oil with fuel from another source to alter the cargo's physical specification.Privately-held Vitol SA is led by its long-time CEO Ian Taylor, a Briton. Taylor was among leading donors to Britain's ruling Conservative Party named in March by the Prime Minister's office as having dined with David Cameron at his private apartment in Downing Street amid the fall-out from a "cash for access" party funding scandal. Britain is a vociferous critic of Tehran's nuclear program and a leading advocate of the EU sanctions.In short: pretty much nobody (at least not anyone who is solvent and does not rely on US wealth redistribution) cares what Uncle Sam has to say any more whenever money and geopolitcs are concerned. Goodbye Globocop: every reserve status ends some day.
and....
http://www.zerohedge.com/news/2012-09-27/how-fed-crushed-chinas-ability-join-ease-fest
How The Fed Crushed China's Ability To Join The Ease-Fest
It will not come as a surprise to anyone who has spent any time reading Zero Hedge (here, here, and here very recently) but now yet another one of our 'crazy fringe blog' non-consensus ideas - the fact that China is cornered by inflation concerns and unable to ease aggressively - has now been confirmed by none other than the Bank of China and Bank of Korea themselves. As the WSJ reports, "The rise in global liquidity could lead to rapid capital inflows into emerging markets including South Korea and China and push up global raw-material prices."
The latest round of easing by the U.S. will increase inflationary pressures for emerging-market economies, Mr. Chen said. "This contributes to a monetary-policy dilemma for Chinese authorities", he added. While markets have looked for signs of more forceful action by China's leaders to rekindle growth, some officials attribute the government's caution to fears of reigniting inflation.
This confirms previous comments by the PBoC that "A domestic policy may be optimal for the U.S. alone. However at the same time it is not necessarily optimal for the world," he said at the time. "There is a conflict between the U.S. dollar's domestic role and its international settlement role."
BEIJING--Chinese and South Korean central-bank officials criticized the U.S. Federal Reserve's latest easing efforts and advocated reducing Asia's dependence on the U.S. dollar.The comments Thursday, at a joint seminar in Beijing by the two central banks, are the clearest indication yet of a rising backlash in Asia against U.S. monetary policy, suggesting it could speed up the search for alternatives to the dollar as the main global currency."The rise in global liquidity could lead to rapid capital inflows into emerging markets including South Korea and China and push up global raw-material prices," said Bank of Korea Gov. Kim Choong-soo. "Therefore, Korea and China need to make concerted efforts to minimize the negative spillover effect arising from the monetary policies of advanced nations."...Asia needs a "regional core currency" to reduce its dependence on the dollar. China's ultimate goal is for the yuan to be as important as the euro or the dollar, he said.
The latest round of easing by the U.S. will increase inflationary pressures for emerging-market economies, Mr. Chen said. This contributes to a monetary-policy dilemma for Chinese authorities, he added. While markets have looked for signs of more forceful action by China's leaders to rekindle growth, some officials attribute the government's caution to fears of reigniting inflation."On the one hand, China needs to stabilize growth, but on the other hand China is very worried about a property-price rebound," Mr. Chen said....The Korean and Chinese economies are also likely to be affected differently by the Fed's easing. The freer flow of South Korea's currency, the won, means sudden rushes of capital can destabilize the financial system quickly, while China's tighter controls means pressures build more slowly.Mr. Kim of the Bank of Korea is already on the record fretting about the effects of QE3 on Korea. Earlier this month he said that the Bank of Korea may need to take steps to curb the potential influx of liquidity into South Korea...."A domestic policy may be optimal for the U.S. alone. However at the same time it is not necessarily optimal for the world," he said at the time. "There is a conflict between the U.S. dollar's domestic role and its international settlement role."
A year earlier, Mr. Zhou argued in an influential essay that the world should move to a multicurrency system, including an increased role for Special Drawing Rights, a synthetic international currency created by the International Monetary Fund.Mr. Kim said Thursday that China and Korea should consider making the two countries' bilateral currency-swap agreement permanent....Both countries should also try to use the yuan and the won in bilateral trade, to cut costs and reduce their reliance on the dollar in transactions, Mr. Kim said. In the long-term, the two countries may consider setting up a won-yuan foreign-exchange market, he added.
and.......
http://www.zerohedge.com/news/2012-09-27/chinese-mega-city-verge-bankruptcy
A Chinese Mega City Is On The Verge Of Bankruptcy
While most "developed world" people have heard of Hong Kong and Macau, far fewer have heard of China's province of Guangdong, which is somewhat surprising. With over 100 million people, a GDP of nearly $1 trillion - the biggest of all Chinese provinces, this South China Sea adjacent territory is perhaps China's most important economic dynamo. One of the key cities of Guangdong is Dongguan, which as the map below shows is a stone's throw from Hong Kong, has a population of nearly 10 million, and has long been considered Guangdong's boomtown and one of China's richest cities.
One notable feature about Dongguan is that it is home to the New South China Mall, which is the world's largest. It also happens to be mostly empty ever since it opened in 2005. Which perhaps is a good segue into this story. Because while for the most part the city of Dongguan has been a story of prosperity, a wrinkle has appeared. According to the South China Morning Post, which cites researchers at Sun Yat-sen University, this city is now on the brink of bankruptcy.
Make that a big wrinkle.
The irony, of course, is that as always happens, while everyone has been expecting the muni collapse to take place in the good old US of A, it may be about to strike with a great vengeance and furious anger none other than that credit black hole, in which nobody really knows who owes what to whom, China.
How is it possible that a city which as the SCMP describes was once a backwater farm town until the late 1980s, and then as China boomed was transformed into one of the most important hi-tech manufacturing centres in the world, and about which an IBM vice-president famously said a mere 15-minute jam on the expressway there would be enough to cause worldwide fluctuations in computer prices, could be facing bankruptcy?
The answer is an absolutely fascinating story, one which for the first time exposes what could be the most sordid underbelly of the broken Chinese shadow credit system, and which demonstrates very vividly just what the hard Chinese landing will look like. It also explains precisely what the real creditor-debtor relationships are like in a country in which the banks are the equivalent of government entities, and which do little if any retail crediting in a time when the government is set on contracting the money supply at the wholesale, if not at the bank level (recall the now daily reverse repos conducted by the PBOC).
Most importantly it reveals the monetary dynamic "on the ground" - one which is vastly different than the one in the "western world."
The question is whether the story of Dongguan is an isolated one. Alas, just like there is never one cockroach, we are confident that many more such provinical centers are currently undergoing the same challenges, which if unresolved would lead to a tsunami of municipal, county and city level defaults, that would leave China in ashes.
Ironically, Meredith Whitney may have had the municipal default theme right. She was just envisioning the wrong continent...
From SMCP:
Boom city Dongguan faces bankruptcy
Dongguan's derelict factories and huge deficits send chilling warning to a China in slowdown
After three decades of spectacular growth, Guangdong's boom town of Dongguan is on the brink of bankruptcy.
Up to 60 per cent of its villages are running up deficits and will soon need a bailout from the township, researchers at Sun Yat-sen University have discovered.
It is a dramatic turn of fortune for Dongguan - one of the richest cities in China - and could foreshadow a wider fiscal crisis as the country's economy cools.
Local government debt hit 10.7 trillion yuan (HK$13.16 trillion) nationwide at the end of 2010, equivalent to about 27 per cent of gross domestic product. Credit rating service Moody's estimates the actual figure could be about 14.2 trillion yuan.
Bai Jingming, a senior researcher at the Ministry of Finance,estimated in 2009 the total debt of village authorities could total 10 per cent of the country's GDP, but there is no official data.
Bai said many village chiefs he interviewed had no idea how much debt they had. Yet their failings could bring serious political and financial instability at higher level government right down to the grass roots.
Experts have found Dongguan's village debt woes stem from two factors: a tightly-bound landlord economy, plunged into crisis by failing factories in the global downturn, and political pressure on local village chiefs to pay generous "dividends" to voters under the immature rural election system.
"The financial problems of the villages are much more serious than expected," said Shao Gongjun, the owner of a printing company who blogs on Dongguan's economy. Shao attributed much of the crisis to the local authorities' dependence on rental incomes.
A backwater farm town until the late 1980s, as China boomed Dongguan was transformed into one of the most important hi-tech manufacturing centres in the world.
An IBM vice-president famously said a mere 15-minute jam on the expressway there would be enough to cause worldwide fluctuations in computer prices.
As industry thrived, the population swelled from 1.8 million in the '80s to more than eight million. Most of the peasants cashed in and built matchbox homes on their land, letting the flats to migrant workers. Village authorities leased community land to factories and collected rent as their main source of income.
This worked perfectly until the recent downturn. Shao said many factories had either closed or moved out over the past five years to inland provinces with lower costs.
The number of Hong Kong-backed factories has dropped by 15 per cent since 2007. As factories and migrant workers left Dongguan, rents nosedived.
"I'm so worried that before long I will lose my tenants and the flats would be left deserted," said a 61-year-old woman surnamed Luo. She put together two million yuan from her life savings 10 years ago and with bank loans built a six-storey apartment building in Luowucun in Zhangmutou county. Her family occupied the first floor and let the rest out to migrant workers.
Luo used to collect about 15,000 yuan a month in rent - nearly 10 times what an average worker earned. But rents have dropped by a third since 2007.
The fall in rental values forced 60 per cent of the 584 villages in Dongguan into budget deficits, the study by Professor Lin Jiang of the finance and taxation department of Lingnan College at Sun Yat-Sen University found.
Lin's estimate is based on a study of 30 villages in relatively well-off counties, such as Tangxia, Houjie and Humen, in May.
The figure may not reflect the whole picture, but it gives a good snapshot of the problems authorities face.
"They are in deficit because their incomes are shrinking while their expenses are going up," Lin said.
This is an unexpected sideeffect of China's fledgling grass-roots democracy.
While competitive elections are still absent at almost all levels of government, Beijing has started to let villages choose their leader through universal suffrage. These elections have been getting increasingly competitive, and candidates often promise to pay generous "dividends" to villagers to attract votes.
"In some rare cases, the leader-elect promised to give each household 10,000 yuan per month," Lin said. The money would come from the village community "investment" - effectively, the rent they collected from factories.
Lately, village chiefs have found it difficult to fulfil such election pledges. But instead of reneging on their promises and sparking the anger of villagers, they turn to the rural credit co-operatives - the de facto local banks - for short-term loans at interest rates as high as 30 percentage points.
Banks are willing to lend, because they know that the township government would have to bail villages out if things go wrong.
"Some village leaders are now really worried that the bank may come to call in the loans," Lin said. "If the villages default, the burden would be transferred to the county or the township government."
The Dongguan government is in poor shape to handle a crisis. Its GDP growth slowed to 2.5 per cent in the first half of the year. The average growth in the past eight years was about 11 per cent.
Xu Jianghua, Dongguan's party secretary, urged villages last month to stop raising money to pay dividends. Few took heed.
Village chiefs may argue paying dividends are not the sole cause of their debt. They also have to pay for local fire and police services - even though these are supposed to be the local government's responsibility.
For years, the township government underinvested in such services, knowing they would be taken care of by the cashed-up village authorities.
Eddy Li, president of the Hong Kong Economic and Trade Association, said in some counties police would refuse to investigate a crime unless it involved more than 20,000 yuan.
Shao estimated Zhangmutou county authorities alone have accumulated a total of 1.6 billion yuan in debt. Annual revenue is only 600 million yuan.
Shao said the Dongguan government needs structural reform to end its reliance on rental income. He proposed the township give residency to migrant workers so they can contribute more to the local economy.
"Without a radical change in the social structure, the economic transformation will never succeed," he said.
And some pictures from the city that may soon be the first cockroach observed once the light was truly shone:
A row of empty shops that have been idle for more than nine months – a common sight in what was once a hi-tech heartland. Photo: May Tse
Commercialism came storming into rustic residential areas. Photo: May Tse
Boarded up shops in the suburbs of Zhangmutou. Photo: May Tse
Many roads but few cars in the once desirable district of Zhangmutou, a favourite with expats and retirees. Photo: May Tse
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