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Chinese Corruption Probe Pivots To Bankers As Manufacturing Contracts At Fastest Pace Since August 2012

With all eyes on China as the great Eastern hope for putting a floor under crude oil prices, last night's dismally disappointing Manufacturing PMI print looks set to remove that last pillar of 'demand' - artificial or not. Having fallen 6 months in a row and printing 49.8, missing expectations of 50.2 (3rd of last 4 months) and down from the prior 50.1, this is the first official contractionary signal for Chinese manufacturing since September 2012. With Industrial Enterprises in China seeing profits collapse at 8% YoY along with the slowest GDP growth (7.3% of magic unicorns and credit expansion) since Q1 2009, the PMI components' broad-based weakness show significant signs of a cyclical slowdown. What is perhaps most worrisome though is that with cries for more RRR cuts or government-sponsored largesse, the banking system has, it appears, become the new focus of the nation's corruption probes as the President of China Minsheng Bank was taken away by the Communist Party’s Central Commission for Discipline Inspection.

Triple Whammy of Chinese ugliness...

  • Industrial Profits -8% YoY - worst on record
  • GDP growth weakest since Q1 2009

And now, Chinese Manufacturing PMI prints contractionary 49.8...

 

As Goldman Sachs notes,

January official PMI data was weak. Most sub-components showed signs of cyclical slowdown. The most important sub-indexes (production and new orders) both clearly softened (production decreased to 51.7 from 52.2 in December, and new orders moderated to 50.2 from 50.4). The only exception was backlog of orders which inched up to 44.0 from 43.8. These signals are inconsistent with the flash reading of the HSBC manufacturing PMI which rebounded in January (its final reading is to be released tomorrow 9:45 AM).

 

 

 

The fall in the official PMI is consistent with our expectations that 1Q growth will likely be weak. As the official PMI is viewed as more important by the government, the likelihood of further loosening measures has increased further.

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And while the calls for rate cuts and broad-based government bailoyts will grow stronger from this - despite the governnment's insistence that they will not embark on a broad-based credit expansion program - it appears the transmission mechanism for any such release of money is coming under signficant scrutiny... (as Bloomberg reports)

China Minsheng Banking Corp. said its President Mao Xiaofeng resigned for personal reasons after Caixin magazine reported that authorities had taken him to assist with an investigation.

 

Mao, who was appointed president last August, didn’t have any disagreement with the board, the Beijing-based bank said in a statement to the Shanghai Stock Exchange Saturday. The board accepted Mao’s resignation and appointed Chairman Hong Qi as acting president, it said in the statement.

 

Minsheng has taken note of reports on Mao, whose situation has nothing to do with Minsheng’s operations, the lender said in a statement earlier today. Mao’s mobile was turned off when called by Bloomberg News today. He was taken away by the Communist Party’s Central Commission for Discipline Inspection and removed as party secretary by the banking regulator, according to Caixin.

 

Minsheng’s comment and the Caixin report come amid President Xi Jinping’s crackdown on graft, described by state media as the harshest since the republic’s founding in October 1949. The campaign has spanned businesses, the military, and officials such as Zhou Yongkang, a former member of the Politburo Standing Committee, and Ling Jihua, who was a top aide of retired president Hu Jintao.

 

 

Turning 43 this year, Mao is the youngest president of a listed Chinese bank, according to Caixin. The president of a Chinese lender is the equivalent of a chief executive officer at a U.S. bank.

 

Mao is a graduate of Harvard University, where he completed a masters degree in public administration in 2000, according to a company profile.

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