China Economy

3

Will Delta shock China?

Goldman with the note. Slowly but surely they’re all falling in behind the MB view of China: China has been back in focus over the past month with a notable pickup in policy and market volatility. Ongoing regulatory pressures—reflecting a broadening of efforts beyond financial risk reduction to include concerns over anticompetitive behavior, data security,

15

China’s corporate crackdown more Cold War 2.0

Gavekal with the note. My takeaways are very simple: Stay away from Chinese stocks, always. CNY is going to fall. Is what just happened in China a game-changer? Is what just happened in China a game-changer? The government is openly nationalizing not just companies (for-profit education), but profit pools (by instructing Tencent and Alibaba how

2

Evergrande doom loop intensifies again

Moody’s had downgraded Evergrande, making it a triptych of rating agencies: Moody’s Investors Service has downgraded the corporate family rating (CFR) and senior unsecured ratings of China Evergrande Group (“Evergrande”), the CFRs of Hengda Real Estate Group Company Limited and Tianji Holding Limited, and the backed senior unsecured ratings of Scenery Journey Limited. …”The downgrades

3

Nope, China ain’t stimulating

Yesterday we saw a nice rally in Chinese stocks and a bounce in hopes that the incipient global growth slowdown is ending before it even began. Why? This: China’s top leaders signaled more targeted support for the economy as they look to cushion growth in the face of resurgent pandemic risks, fueling a rally in

4

How far will Chinese stocks fall?

Not that I’d recommend buying them. The sovereign risk is far too great. And it is too much fun cheering from the sidelines as a self-sabotaging CCP does itself harm. Still, Chinese equities matters for many other asset prices beyond China. The crunch is a part of the post-COVID return to Chinese economic restructuring. The

7

Is the Lehman Brothers of iron ore going bust?

Evergrande appears to be going bust. It’s turning unruly and happening fast. Bloomie: China Evergrande Group’s crisis deepened after a court froze assets of its listed onshore subsidiary, spurring another selloff in its shares and bonds. The entire 20% stake in Shanghai-listed Langfang Development Co., held by the developer’s main onshore unit, was frozen from

18

China “uninvestable”

Throughout Australia’s five-year China divorce, one the of most interesting features of relationship breakdown is how much of it is led by Beijing. CCP structural constriction, paranoia and arrogance are its own worst enemy, consistently leading to glass-jawed overreactions, withdrawal from engagement and cancelled deals. Now the world is witnessing the same phenomenon in China

3

More Evergrande stress emerges

The doom loop continues for Evergrande: Two more companies said China Evergrande Group failed to pay its bills on time, adding to signs of a cash crunch at the world’s most indebted developer. Huaibei Mining Holdings Co Ltd. filed a lawsuit against Evergrande in Anhui province, alleging a unit of the company missed payments, according

1

Time to buy Chinese stocks?

UBS with the note: In a relative context, is it time to turn more positive on Chinese equities? The 18.8% fall in MSCI China this month, among the worst five months in the last 20years, has now wiped out the relative outperformance since early 2017. Structurally we like Chinese equities. Tactically we’ve been underweight. How

18

Easing birth limits won’t solve China’s ageing woes

Demographics is destiny, they say. China’s ageing population has long been considered the economy’s number one long-term headwind. The ‘One Child Policy’ implemented in the 1970s and abolished in 2016 was credited with preventing some 400 million births between 1979 to 2010. The policy initially created a demographic structure that was ideal for economic growth,

20

China readies new nuclear arsenal

Via Sinocism: China Is Building A Second Nuclear Missile Silo Field – Federation Of American Scientists Satellite images reveal that China is building a second nuclear missile silo field. The discovery follows the report earlier this month that China appears to be constructing 120 missile silos near Yumen in Gansu province. The second missile silo

3

When will China panic about growth?

BofA with the note: Credit easing holds the key in 2H •Despite the recent reserve requirement ratio(RRR)cut, mixed data in 2Q open adata-dependent phase of policy making. •In our view, export uncertainty and investment weakness in 2H will lead to credit easing and help stabilize total social financing (TSF) growth at around 10.7%. An unexpected

1

China’s leading indicators still fading

Bloomie runs a series of leading indicators for China. They are not comprehensive but aren’t bad, either as a general leading indicator: Bloomberg Economics generates the overall activity reading by aggregating a three-month weighted average of the monthly changes of eight indicators, which are based on business surveys or market prices. Note the weakness especially

4

Chinese property developer Minsky moment intensifies

China’s Three Red Lines policy for deleveraging property developers has pushed the largest and most highly geared to the edge of extinction. Everngrande is fighting on, pulling every string that it can: At least two of Hong Kong’s biggest lenders are reconsidering halts on mortgages for China Evergrande Group’s unfinished properties, after the decisions were

5

Evergrande morphs into iron ore Lehman Brothers

Evergrande. Remember the name. The Chinese megadeveloper is rapidly morphing into some kind of Chinese ‘Lehman Brothers moment’. The Three Red Lines policy that is designed to deleverage large developers has triggered this latest round of crisis. Evergrande is preposterously leveraged with its equity worth less than 10% of enterprise value, owing to huge debts

5

Chinese megadeveloper falls off cliff

Three Red Lines is turning into a bloodbath for China’s formerly largest developer, Evergrande. Yesterday: 2025 bond fell to nearly half its value. Equity is now less than 10% of enterprise value, down 12% in the past week. It has emerged that the charming firm has been drawing down upon funds held in escrow from

3

Professor: Chinese urbanisation rate to slow dramatically

The Chinese urbanisation rate is one of those megatrends that is rarely discussed but sets the course for asset market over decades. Bloomie has an odd piece on it today: China’s urbanization rate is set to beat previous international predictions over the next decade, providing an antidote to the country’s shrinking workforce and declining birthrate, an

4

Lombard: China not stimulating

TS Lombard with the note: Sub-consensus H1/21 growth has led us to downgrade our full year forecast to 8.8% yoy from9.3% yoy. But don’t be misled: this isn’t the start of a China crash, just a mark-to-market. GDP growth in Q2/21 came in at 7.9% yoy, and showed unexpected improvements in domestic demand as retail

2

Schvets on China’s impossible trinity

Macquarie’s magnificent Viktor Schvets on the tough choices facing China: While quantifying grow this always more of an art than a science, in China it is even more so. Based on the Soviet-style production and growth targets (vs expenditure derived ex-post estimates elsewhere), China’s economic results are even more opaque than usual. This has created

1

China heads for a soft landing

China’s Q2 and June data dump is at hand. GDP came in at a robust 7.8% though quarterly it was 1.3% so annualised growth is still decelerating: The internals are slowly returning to normal as COVID distortions wash out. Industrial production is at 8.3%, fixed asset investment at 12.6% and retail sales 23% year-to-date: Turning

7

Is China already panicked to stimulus?

Here’s Premier Li Keqiang: …it is necessary to coordinate the economic operation in the second half of this year and next year, and strive to keep it within a reasonable range. In view of the environmental changes at home and abroad and the needs of market players, we should maintain the continuity and stability of

0

Lombard: Chinese stimulus less than meets the eye

TS Lombard with the note. This is classic Chinese delusion in action. That the slowdown can be managed and won’t panic the CCP in due course…  PBOC CUTS RRR, GOES TO NEUTRAL China inflation data have signalled stress in the real economy and given the PBoC room to move firmly into neutral to counteract slowing

0

Chinese credit rebounds, PBoC cuts RRR

China released its June credit data on Friday night and it was better than it has been for much of 2021. New yuan loans arrived at 3.67tr yuan with banks comprising 2.1tr yuan of that: This was the first monthly year-on-year growth in four at a modest 6%: M2 accelerated to 8.8%: But broad credit

1

The five stages of Chinese stimulus

Honestly, sometimes the great and the good are maddeningly slow on the uptake. A steep Chinese slowdown has been obvious for six months. Yet get this from BRIC doyen Jim O’Niell: So, now that the slowdown has arrived for the rear guard of analysts, let’s ask what comes next? The first signal that not all

3

China panic builds as contruction hits the skids

All of this year we have been watching the evolution of China’s “Three Red Lines” policy for large property developers. The reason why is simple. Developers represent nearly half of China’s iron ore demand. They also impact local government funding which represents another 20% of construction demand via infrastructure. Today we have a number of