China Economy

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Chimerica trade war good for Australia says RBA

As tensions heat up between President-elect Trump and the equally sensitive Chinese over trade policies that could lead to an all trade war, amid other problems arising from the “One-China” policy, the RBA is suggesting bring it on! In an interview to the WSJ, RBA board member Professor Ian Harper suggests any trade war would

12

Lazy thinking at the Economist

The Economist mounts a defense of Chinese capex today. They start with a study from last year: Western leaders often shake their heads in disbelief at the sums China spends on its huge projects. And some analysts question how much of it has been wisely spent. In a widely circulated study published last autumn, Atif

13

Rogue Yuan

The biggest shift in the post Xmas/NY market break has been the PBOC struggle to shore up the Yuan and to stop the speculative outflow of capital, which has seen alternative currencies like Bitcoin soar (and flop – down 30% today!) and gold re-inflate after the December Fed rate rise. Today saw the biggest move

40

Trump mulls 10% import tariff

CNN:  President-elect Donald Trump’s transition team is discussing a proposal to impose tariffs as high as 10% on imports, according to multiple sources. A senior Trump transition official said Thursday the team is mulling up to a 10% tariff aimed at spurring US manufacturing, which could be implemented via executive action or as part of

8

Chinese house price bubble begins to pop

With MYEFO out of the way, here comes the next problem: China slowing. November house prices are out and the slowdown we’ve been awaiting has arrived with prices up just 0.3% on the month and 12.6% on the year: The eastern bubble cities have hit a brick wall: The big fall in year on year prices

6

How far will the yuan fall?

The FT has a good take today on China’s ongoing USD problem: The dominance of bank lending and portfolio investment as a source of Chinese capital outflows casts doubt on whether Beijing’s recent clampdown on big-ticket foreign deals by the likes of Dalian Wanda and Anbang Insurance can shield the renminbi from downward pressure, intensified by

29

China dumps US debt at record pace

From SCMP: China’s holdings of US Treasuries declined to the lowest in more than six years as the world’s second-largest economy uses it currency reserves to support the yuan. Japan overtook China as America’s top foreign creditor, as its holdings edged down at a slower pace. A monthly Treasury department report showed China held US$1.12

5

Chinese bond market shut as it crashes

The US reflation and interest rate rocket is claiming a new scalp in Chinese bonds, via the WSJ: Chinese authorities halted trading in key bond futures for the first time on Thursday, as panicky investors sold the securities on concern that a long, credit-fueled bull market was coming to an end amid slowing growth, capital

4

Chinese credit booms anew

From the PBOC overnight comes November Chinese lending with total social financing at 1.74tr yuan, with banks at 794.6bn yuan: Year on year new loans were 70%: Shadow banking reform is now something of a running joke as it share of loans leaped to 54.4%: M2 growth dipped marginally to 11.4%: And the rolling annual

7

China mega-bear versus China mega-bull

Via Bloomie comes the bull: A financial crisis in China is no more likely in the coming decade than it was in the past 10 years, and pessimists predicting one have long done so without regard for fundamentals. So says sinologist Andy Rothman, a San Francisco-based investment strategist at Matthews International Capital Management LLC, which oversees

6

Chinese capital controls bite

From SCMP: Bob Li, owner of an export-oriented leather bag maker in Jiaxing, Zhejiang province, feels that his “outbound” strategy has become a bitter pill to swallow after China’s crackdown on cash outflows dealt a heavy blow to the company’s overseas business plans. Li’s business, Jiaxing Boya Leather Bag, was among the thousands of mainland

1

Hello Chinese inflation shock

Don’t say I did not warn you. Chinese inflation is out for November and it is a problem. The CPI is in at 2.3% ahead of 2.2% expected and the PPI has blown away expectations (except mine) at 3.3%: The cause is, of course, dirt: Prices do not flow straight through to these products from

15

China slams brakes on outgoing investment

From Reuters: China has begun checking some outbound investment projects as part of a crackdown on illegal cross-border currency deals, Xinhua news agency reported on Thursday, citing a foreign exchange regulator. Beijing has announced a string of measures recently to tighten controls on money moving out of the country since its yuan currency skidded to more

0

China tightens capital account again, again

Chin’a early stage financial crisis is in the spotlight again today, via the FT: “I think the Trump factor [will result in] more aggressive hiking of US interest rates, not just the one expected in December but also several times next year,” said Shen Jianguang, chief economist at Mizuho Securities in Hong Kong, speaking ahead

0

Chinese forex reserves burn!

From Investing in Chinese Stocks: Chinese forex reserves fell 2.2 percent in November 2016. It was the largest drop since the 3.0 percent one-month slide in January 2016. November and December 2015 were also larger, as was August 2015. Before that, you have to go back to September 2014 and May 2012 to find similarly

5

What would a US-China trade war look like?

Some good material from the sell side today helps us flesh out the scenario. From SocGen via FTAlphaville: In fact, nearly 37 percent of China’s exports to the US in 2015 consisted of value-added imported from other countries (Figure 3). Redistributing the imported value-added to their original source countries gives a very different deficit decomposition

19

Why did Donald talk to Taiwan?

From the WSJ: Stephen Yates, a former national security adviser to Vice President Dick Cheney who worked as a Mormon missionary in Taiwan, said that for at least a week Ms. Tsai’s name was on Mr. Trump’s list of foreign leaders whom he would speak with by phone. “To my knowledge, Taiwan was on that