China Economy

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China is enjoying a little funding squeeze

Via Bloomie: China’s central bank has acknowledged its monetary tools are insufficient. The most powerful ones are proving too blunt to drill through a hardening financial system. The country’s money markets have been shuddering since regulators took over Baoshang Bank Co. last month, despite initial assurances from the central bank and other authorities that they would maintain ample liquidity.

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Back in the USSR: How China saw the Hong Kong rebellion

Via Bloomie: As hundreds of thousands of protesters march in Hong Kong’s streets against unpopular China-backed extradition legislation, another battle is unfolding across Beijing’s Great Firewall. Photos and information about the biggest protests since the handover of the former British colony are being systematically wiped from China’s internet. Meanwhile, Chinese state media is pushing a

10

China fires up the housing bubble

Trade war? No problem. Housing bubble is the answer. Monthly house price data for May had new house prices up an accelerating 0.7% and 10.7% year on year: The breadth is now nearly complete with 68 of 70 markets rising: Including some formerly constrained first tier markets: The raw data: Expect this to continue because,

2

Chinese credit accelerates again

The new debt impulse in China continued in May with total social financing at 1.4tr yuan and banks at 1.18tr: Shadow credit remains muted: New loans have accelerated sharply through the first five months of 2019: However, they are somewhat flattered by the base effect given last year’s deleveraging hit particularly hard mid-year. Thus, M2

44

Australian dollar falls as Hong Kong protests intensify

The Communist Party of China has a problem and it’s name is Hong Kong, via SCMP: In a fresh display of defiance against the contentious extradition bill, protesters who had camped overnight at Tamar Park in Hong Kong began stopping traffic from accessing the legislature on Wednesday morning, as the government’s proposal returns to a full council

0

Caixin China services PMI stinks up

Via Caixin: The Caixin China Composite PMI™ data (which covers both manufacturing and services) showed that business activity in China rose for the thirty-ninth month running in May. The rate of expansion was moderate overall, as signalled by the Composite Output Index edging down from 52.7 in April to a three-month low of 51.5. The

3

China PMIs sink

Trade war landing in China. First the manufacturing PMI: In May 2019 , the China Manufacturing Purchasing Managers Index ( PMI ) was 49.4% , down 0.7 percentage points from the previous month . In terms of enterprise scale, the PMI of large enterprises was 50.3% , which was 0.5 percentage points lower than that of the previous month and still higher than the critical point; the PMI of small and medium-sized enterprises was 48.8% and 47.8% , which were 0.3 and 2.0 percentage points lower than the previous month . From

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China mulls MOAR stimulus

Via SCMP: The debate over whether China needs a new round of stimulus to offset weakening economic growth has returned, following disappointing April economic data and the threat by the United States to expand tariffs to cover all Chinese imports. That debate will intensify with the news that Wang Yang, a member of the ruling

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China’s new credit gusher sputters

Chinese April lending numbers were out late yesterday and the credit gusher is sputtering with 1.36tr in total social financing of which 1.02tr was bank loans: The shadow banking share remains volatile if trending down slowly: M2 fell back to 8.5%: Year on year new loans were down 12% but the three month moving average

0

China PMIs flame out

From China’s NBS: In April 2019 , the China Manufacturing Purchasing Managers Index ( PMI ) was 50.1% , down 0.4 percentage points from the previous month and continued to remain in the expansion range. In terms of enterprise scale, the PMI of large enterprises is 50.8% , which is 0.3 percentage points lower than the previous month and higher than the critical point; the medium-sized enterprise PMI is 49.1% , which is lower than 0.8 percentage points last month and is below the critical point;

1

China confirms more credit

Via Zero Hedge: Back to the Politburo statement which found that proactive fiscal policy should improve effectiveness and efficiency, “while prudent monetary policy should be appropriate in terms of looseness and tightness.” A notable change from the October, December and February meetings, is that there was no mention of the goal of maintaining “6 stabilizations” (on employment,

8

More Chinese stimulus coming

Via Bloomie: Officials are drafting measures to bolster sales of cars and electronics, according to people familiar with the matter, who asked not to be named because they aren’t authorized to discuss the plan. That news coincided with data showing a 6.4 percent year-on-year expansion in the first quarter — beating economists’ estimates. China’s latest

3

More on China’s dodgy growth numbers

From Capital Economics this time: • China’s economy stabilised in Q1 thanks to a marked improvement in activity last month. Admittedly, the latest surge in industrial production is hard to take at face value and is likely to be partially reversed in the coming months. And some downside risks to broader growth remain. But the

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China’s credit drenching turns realty prices up

Ah, as night follows day comes Chinese real estate markets already turning as the 2019 credit drenching lifts alt boats, via Reuters: Average new home prices in China’s 70 major cities rose 0.6 percent in March, quickening from a 0.5 percent gain in February, according to Reuters calculation of data released by the National Bureau

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Pettis: China to keep slowing

Good stuff from Michael Pettis at Bloomie (a few weeks old but worth revisiting): What’s less-understood even now is that if China begins a serious deleveraging, reported GDP growth rates will fall by a lot more than expected – by more than the amount of non-productive activity that had formerly been capitalised. This is clear from

1

Caixin PMI adds to China rebound

Via Caixin: China’s manufacturing sector finished the opening quarter of 2019 on a positive note, with operating conditions improving for the first time since last November. Firms signalled slightly quicker rises in output and overall new work, while employment increased for the first time in over five years. Firmer demand conditions led to a softer

2

China PMI rebounds

Yesterday China released its March PMI and the news was pop: The internals were better for domestic demand while external remains weak: The non-manufacturing PMI also firmed up: Driven, as always, by building: In terms of industries, the service industry business activity index was 53.6% , a slight increase of 0.1 percentage points from the previous month , and the service

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China house prices slow some more

Over the weekend Chinese house prices were out for February and showed ongoing slowing with month on month prices up 0.5% versus 10.4% year on year: Clearly year on year is about to peak as well. Breadth of gains is also deteriorating slowly with 50/20 split on prices rises and falls/stable across cities: First tier cities

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Daily iron ore price update (yawn)

Iron ore prices for…smack, smack, smack…snooooooooooore… Going nowhere. Nothing happening. At least we get Chinese data today. While there is a bit of excitement about an infrastructure rebound about the place the more important place to look will be this: If realty starts catch down to sales then Vale will not matter. If not, it

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China reform agenda for 2019

Via Westpac comes a nice wrap of the Chinese base case: Overview China’s 2019 National People’s Congress has come at a pivotal time for the nation as authorities continue their pursuit of quality growth amid considerable global economic and financial instability. Because of both factors, China’s growth target of 6.0%–6.5% for 2019 is lower and wider

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Chinese credit surge goes bust

Hello growth problem. Chinese new yuan growth for February was out overnight and the credit surge of January landed on the credit bust of February with total social financing up a lousy 703bn yuan: Shadow banking shrank: The three month moving average is still up 17% year on year: The rolling annual fell away: As