The great Chinese ponzi is alive and well with house prices for July off to the races up monthly 1.1% and annual 5.8%: Price gains are broad-based outside of a few top tier eastern megacities: Which is a lot of them: Here’s the raw data: And the prices versus iron ore inventories tracker: Given these
Chinese July data is out and the overall message is a clear slowing, especially in the building economy with fixed asset investment slumping to 5.5%, industrial production at 6% and retail sales at 8.8%: But real estate sales have turned and are still rising steadily year to date: Year on year took off, perhaps on
China released new yuan loans last night and the result is more slowing in July. Bank lending was strong at 1450bn yuan. But total social financing was much less so at 1040bn yuan meaning shadow finance contracted for the third straight month down a whopping -440bn yuan:: This is now an unprecedented crash in shadow
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
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
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
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
Via Capital Economics: US tariffs have so far had little effect on Chinese export growth • Chinese export growth held steady last month with few signs of much impact from the first round of US tariffs on $34bn worth of Chinese exports, which came into force on 6th July. Import growth jumped but this has
Via Capital Economics: No evidence of direct PBOC intervention in FX markets, for now A rise in China’s foreign exchange reserves in July suggests that the People’s Bank did not deploy them to defend the renminbi last month. It may do so soon, however, given growing concerns over outflows. The value of the
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
by Chris Becker Today’s retail sales and services PSI data has not had any deleterious effect on the Australian dollar, with the overnight trend halting around the 73.60 level versus USD: Daily momentum is still against the Pacific Peso here with tonight’s US unemployment (non-farm payrolls or NFP) print likely to weigh, watch last night’s
by Chris Becker The PBOC unexpectedly moved their reference rate lower for the Yuan today, pushing it down to 6.7942 from 6.8293! Offshore Yuan trading was relatively unchanged, but look at that big line of resistance at the 6.83 level as the bearish rising wedge pattern nearly reaches completeion on the daily chart: The Australian
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
by Chris Becker Following on the heels of a trade “deal” with the EU, the Trump administration is now trying to arrest the biggest front in the trade war – China. Last night and into the pre-morning session there was some speculation of a new trade deal underway. From the WSJ: Treasury Secretary Steven Mnuchin
by Chris Becker As traders trawl through the Bank of Japan’s July statement on monetary policy, all eyes were on the PBOC which again devalued the Yuan in their daily fix, but only slightly. The reference rate was lowered from 6.8131 to 6.8165, with offshore Yuan (USDCNH) extending into the 6.83s, potentially slowing this huge
Today the People’s Bank of China again let the Yuan down the slippery slope to the 7 handle versus USD by re-setting the central reference rate to 6.8131, down from Friday’s 6.7942 This has sent offshore Yuan tumbling as well as the USDCNH pair makes new highs: Meanwhile the Aussie is doing a barrel of
Via Damien Boey at Credit Suisse today: Extreme easing measures from China Over the past week or so, Chinese policy makers have announced some rather extreme easing measures to combat the slowdown in train: 1. Renewed fiscal stimulus: The government will allow firms to deduct 75% of their research and development expenses from tax, which could
Via Credit Suisse this time: 1. Credit tightening Credit has been steadily tightening in China with total social credit growth at historical lows. Credit momentum tends to lead IP by five months, and is pointing to a sharp slowdown in the latter, as shown in Figure 4 below. The slowdown is especially salient in areas
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
For those suffering from “Trump derangement syndrome” here a Trump 101 series from Steven Bannon via CNBC. On Russia: On NATO: On China: Not much reassurance there for the one trick pony Downunder except, of course, if you believe in liberal democracy.
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
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,
Hold your horses. The Chinese correction has a new entrant. June house prices are out today and there’s no disputing the emerging trend now. China has unleashed it property market as external pressures grow. June new house prices accelerated for the fourth straight month to a robust 1%: Tier one cities are still in check
China has released its June QTR national accounts and it’s some whack numbers. Growth is steady at 6.7%: But the monthly numbers for June is where the action is as internals keep slowing with industrial production at 6%, fixed asset investment at 6% and retail sales at 9%: Infrastructure investment is slowing fast with some
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
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
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
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
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
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
