China Economy

7

China is fantastically reliant upon Australia

We all know how it ends. Eventually China is overwhelmed by its own bad debt. The dreams of empire crumble to empty vestiges, wealth greys with demographics, dynamism sinks into the rentier bog and endless growth into secular stagnation. This is China’s destiny and Australia will suffer for it. But in the meantime we are

0

China pushes MOAR stimulus

Via Bloomie: The People’s Bank of China won’t implement stimulus in “flood-irrigation” style, according to the quarterly monetary policy report released Friday night in Beijing. Prudent monetary policy should maintain neutrality and “keep balance between tightening and easing,” indicating a slightly easier bias than it did three months ago. …The bank said it will flexibly

8

Is the Turkish crisis a dry run for China?

The classic emerging market external crisis engulfing Turkey should be of great interest to Aussie investors. As is always the case when the US Federal Reserve tightens monetary policy, capital repatriates from far flung jurisdictions where it sought out higher returns in the good times. If the emerging market in question was not careful during

27

Trump freaks out the Chinese communists

Via Reuters: A growing trade war with the United States is causing rifts within China’s Communist Party, with some critics saying that an overly nationalistic Chinese stance may have hardened the U.S. position, according to four sources close to the government. President Xi Jinping still has a firm grip on power, but an unusual surge

1

Westpac: Chinese economy to slow

Elliot Clarke, CFA Senior Economist Frances Cheung, CFA Head of Macro Strategy, Asia At the beginning of 2018, we outlined a growth view for China that would underwhelm the expectations of both the market and Chinese authorities. Against the official 2018 benchmark of 6.5% growth, we forecast 6.3% for 2018 then 6.1% in 2019. Given

0

Westpac: closer look at Chinese PMI

From Elliot Clarke at Westpac: For China’s PMIs, July was a month where little changed. Both the official manufacturing and service PMIs edged lower, but remained near long-run average levels. The Caixin manufacturing index held to its long-run average. In recent updates, we have paid particular attention to the external demand and employment indexes from

3

How far can China’s latest property bubble up carry it?

Some nice charts via Vertical Group (which is an MB client in case you’re wondering): While many have attributed the resilience in China’s steel prices this year to Xi Jinping’s “supply-side reform magic”, we believe a much more basic measure is at play. More specifically, we believe that as external pressures began growing last year, intensifying

5

Is the Chinese yuan a weapon or weakness in the trade war?

Kevin Rudd says weapon: Mr Rudd laid out the “danger scenario” at an Asia Society event on Wednesday and said it could follow the Trump administration’s decision to impose wide-ranging tariffs on Chinese goods. The yuan is Asia’s worst-performing currency since mid-June, down more than 4 per cent. “If China sees this as a way

1

Another view on a slowing China

Via Barclays: Credit crunch, escalating tariffs, more easing Moderating April-May data suggest the rise of a “credit crunch” due to various government bodies’ sustained policy tightening, which has started to have a visible effect on the economy. With our theme of moderating growth, tightening regulations and escalating trade tension continuing to play out into H2,

1

Chinese lending slows faster

There’s no stopping the slowdown in Chinese credit. In June banks extended RMB1840bn but total aggregate financing fell to just RMB1180bn: The shadow banking share has collapsed: Year on year new loans eased into the positive but the three month moving average remains down: The rolling annual nudged higher: M2 slumped to 8%: Mortgage growth

1

Chinese trade suggests slowing economy

Via Capital Economics: • Chinese exports held up well on the eve of US tariffs. But weaker-than-expected import figures point to a renewed slowdown in domestic demand heading into the second half of the year. • Export growth edged down last month, from 12.6% y/y to 11.3% in US dollar terms, but held up better

17

World rounds on China trade cheat

Via Bloomie today: U.S. President Donald Trump’s assault on China’s trade policies will garner several high-profile advocates on Wednesday, as some of the world’s largest commercial regions will meet in Geneva to thresh out the ramifications of Beijing’s entrance into the World Trade Organization 17 years ago. Chinese representatives will say things are going well and that the

0

Chinese inflation pulse muted

Chinese June inflation is out and shows little sign of trouble: In June 2018 , the national consumer price rose by 1.9% year-on-year . Among them, the city rose 1.8% , the rural rose 1.9% ; food prices rose 0.3% , non-food prices rose 2.2% ; consumer prices rose 1.5% , service prices rose 2.4% . In the first half of the year, the national consumer price rose by 2.0% over the same period last year . In

10

Why things are about to get much worse for China

Excellent work from Damien Boey at Credit Suisse: PBoC intervention Overnight, we saw the PBoC intervene to stabilize the USD/RMB around 6.7. Alongside the intervention, two PBoC officials spoke about the Bank’s commitment to exchange rate stability, with one also suggesting that recent devaluation was due to speculative outflows rather than a deliberate policy attempt

18

Double shock! Combined China/Australia financial crisis looms

From Spectrum Asset Management: Spectrum principal Damien Wood said both countries have seen a build-up of private debt to record levels: from the business sector in China, and from households (via residential mortgages) in Australia. Both countries are vulnerable to what is known as a ‘Minksy moment’, a term coined by US economist Paul McCulley