China Economy

15

WSJ drinks MB’s kool-aid on China

Wall Street Journal on a theme dear to our hearts – Chinese growth slowing: The Business Cycle Is Different This Time—Thank China Diverging Chinese and U.S. growth are behind the confusion in global markets right now Commodities and stocks have started 2018 with a bang. U.S. oil is trading over $60 a barrel for the

3

Chinese inflation pips higher

Chinese inflation figures have just been released for December and shows a slight uptick in the CPI, but slightly less than expected: Texture from Forexlive: CPI % y/y …. 1.8% vs. expected 1.9%, prior 1.7% Food prices -0.4% y/y, non-food +2.4% y/y For the m/m, up 0.3% PPI 4.9% y/y, a bit higher than the

8

IMF debunks “China is different” meme

The International Monetary Fund (IMF) put out a white paper Friday entitled “Credit Booms—Is China Different?” The answer? Not in any meaningful way. Here are some selective quotes and charts (the yellow notes are my comments – and apologies on the IMF’s behalf for the poor quality of their charts): Strong Chinese output growth after the

2

Chinese growth holds up well

China’s November data dump is out and carried no surprises with Industrial Production 6.1%, Fixed Asset Investment YTD 7.2% and Retail Sales YTD 10.3%: Under the hood, the all important property sector was mixed. Sales by floor area continue to slow YTD: But year on year sales for November lifted from -6.4 to 5.6. Floor area

4

Chinese credit slowdown steepens

Chinese new yuan loans for November were out last night. The headline numbers beat expectations and markets rallied as Total Social Financing came in at 1.6tr yuan. Bank lending was 1.12tr of that: However, new lending was down year on year by -8% and the year on year three month moving average is down to

2

China trade still solid

China trade data for November out with exports up 10.3% and imports 15.6%. The surplus was a very healthy $39.7bn: Steel exports rebounded a little to be down -30% year on year: And iron ore exports rebounded from what was a statistical quirk in October I suspect, roaring along at 94.8mt, if looking a bit

2

China gets control of its currency

Via Capital Economics:  China’s foreign exchange reserves suggest that capital outflows continued to be a non-issue last month. This has allowed the PBOC to step back from FX intervention which, over the medium term, should be supportive of renminbi appreciation.  The value of the reserves amounted to $3,119bn at the end of November,

10

Has China reopened the capital outflows floodgates?

Via Credit Suisse: While outbound Chinese M&A slowed in 2017, we expect it to accelerate in 2018. The almost singular focus on “stability” leading up to the 19th Party Congress resulted in increased capital controls and a fall in outbound M&A, in our view. This was in stark contrast to developments in 2016 when Chinese

2

And now for less Chinese infrastructure as well

Via Bloombergo: The nation’s fixed-asset investment in infrastructure will grow 12 percent next year, according to the median estimate in a Bloomberg survey, down from almost 20 percent in the first ten months this year. All 18 economists in the survey anticipated a moderation, adding to reports by Morgan Stanley, Goldman Sachs Group Inc. and UBS

2

China boom and bust webinar

For the late comers, here is last week’s webinar: .  Here’s the recent MB Fund performance: Source: Linear, Factset The returns above include fees and trading costs on a $500,000 portfolio. Note that individual client performance will vary based on the amount invested, ethical overlays and the date of purchase. The benchmark returns do not

0

China Caixin PMI slows

Contradicting the official version: Chinese manufacturing sector operating conditions continued to improve in November, albeit at a marginal pace. Output and new orders both rose only modestly, leading to a softer expansion in buying activity. At the same time, companies faced a further sharp increase in average input costs, that led to a notable rise

1

China PMIs solid

From the NBS comes the manufacturing PMI: 2017 Nian 11 months, China’s manufacturing purchasing managers index ( PMI ) was 51.8% , last month rose 0.2 percent, the manufacturing sector continues to steadily maintain the momentum of development. According to the scale of the enterprises, the PMI of large enterprises was 52.9% , slightly down 0.2 percentage points from the previous month and continued

1

What’s coming beyond China’s Winter shutdowns?

Via UBS’s Wang Tao: Notable progress achieved in excess capacity reduction China officially cut 65 million and 290 million tons of steel and coal capacities in 2016, and will likely exceed its official targets again this year, of 50 million and 150 million tons respectively. Aside from capacity reductions, coal production restrictions, illegal steel capacity

1

Chinese credit tightening brings marginal pain

Via Bloomie: It’s been the worst month for China’s local corporate notes in two years. And it might just be the start, as the nation’s top bond fund manager says yield premiums could rise further in 2018. “There is a high probability that credit spreads will widen next year given that there hasn’t been any

4

MB Fund webinar: The boom and bust of China

Tomorrow (November 28th) continues our series of big topic webinars with a look at where China’s economy is headed, focusing on 2018. China’s own central bank recently described it as arriving at a “Minsky moment”, when credit excesses  overrun productive growth leading to financial crisis. Join David Llewellyn Smith, Damien Klassen and Tim Fuller to discuss

1

Chinese tightening triggers stock sell-off

Via the FT: China’s blue-chip index suffered its worst one-day fall in 17 months on Thursday, as investors cited rising bond yields and tough new regulations targeting corporate debt for scaling back their exposure to equities after a strong performance this year. The yield on 10-year Chinese government bonds rose above 4 per cent, before

7

China launches massive shadow banking reform

Michael Pettis is at the FT: China’s 19th Communist party congress ended last month with an indication that Xi Jinping’s new administration plans to rein in debt by abandoning the country’s long-term economic targets and allowing gross domestic product growth to fall. Typically, analysts assume that changes in reported GDP reflect movements in living standards

27

IMF warns on Chinese property correction

A new paper from the IMF agrees with the MB outlook: After a temporary slowdown in 2014-2015 China’s real estate market rebounded sharply in 2016. As signs of overheating emerged, the government turned to tighten real estate markets through a range of macroprudential and administrative measures. Many empirical studies point out that the house price

3

Is China stimulating again?

Some recent liquidity injections have a few folks excited: A little looser there. But it looks more an attempt to stop rates from spiraling upwards. Interbank markets have not been kind recently: Nor have bond yields: I think we can expect China to loosen into 2018 but only because it’s already well and truly tight

3

Chinese property keeps on slowing

Via Caijing: Continued real estate regulation, the market to bring the impact of the overlay is still fermented. National Bureau of Statistics released on November 14 data show that in the first 10 months of this year, the national real estate development investment, sales, funds in place indicators such as the growth rate continued to

1

Chinese growth continues steady slowdown

It’s the slow slowing for China. October data came in pretty much on expectations with industrial production at 6.2%, fixed asset investment 7.3% and retail sales 10%: Real estate sales growth continues to fall at a good clip year to date: They are now falling year on year at  -6.4%. Floor space under construction is