Chinese house prices out today. The monthly gain was 0.6% and annual up to 4.9%: Gains are still largely lower-tier cities: But the gains are broadening out: What is so interesting about this is that it has the appearance of a sustainable real estate regime that no longer misallocates capital and aids in its rebalancing
China has released its May data and the news is boom! Not. The data is so distorted by COVD base effects that it’s still very difficult to read. Simple year-on-year and year-to-date comparisons looks outrageously good. Year-to-date growth to the end of May is 17.8% for industrial production, 25.7% for fixed asset investment and 15.4%
As expected, China continues its systemic push towards tighter credit and economic restructuring away from construction. This time it’s wealth management products, an old favourite for developers to raise cash: Highly rated WMP will be prevented from buying junk debt from developers. This addresses the underlying duration mismatch. $400bn in junk debt will need to
Chinese credit tightening has turned into a crash. Paradoxically, it’s a controlled descent but the pace of it is akin to a crisis. Total social financing in May came in at 1.92tr yuan with bank lending making 1.47tr of that: The non-bank share is still falling away after its brief COVID flourish: May loan flow
Readers will know that we are of the view that China has entered a new round deleveraging and economic restructuring that will crash commodity prices in due course. This plan is two-pronged. It aims to slow the development sector to end overbuilding. And it aims to deleverage local governments as well. I have already discussed
Chinese inflation out today. CPI barely worth mentioning. The PPI is where the action is: In May , international crude oil, iron ore, non-ferrous metals and other bulk commodities prices rose sharply, domestic demand recovered steadily, and China’s industrial product prices continued to rise. Here’s the detail: It’s all steel and oil. Undoubtedly, China put a
Lordy, already! A few months of three red lines policy and the titans totter. China’s largest property developer, Evergrande, is increasingly on the nose for credit markets: And equity markets: Regulators have instructed Evergrande counterparties to stress test their exposures. Evergrande denies any wrongdoing in its partly-owned Shengjing Bank Co, as well as heavy discounting
Readers will recall that there has been something a mystery in some components of the very steep slowdown in Chinese debt issuance over the last four months. Most pointedly, local government borrowing, which accounts for a lot of infrastructure and property investment, cratered 80% year on year in the four months to April despite having
TSLombard with the note: Property investment slump. Real estate investment is set to slow in H2/21 on tighter credit and higher input costs. Falling land sales will hit local government revenue and investment. Beijing will welcome a property FAI slowdown as officials battle to rebalance the economy and curb soaring China PPI. After leading the
Demographics is destiny, they say. A young demographic bulge provides a strong tailwind for economic growth. An aging demographic bulge is an equally strong headwind. Alas for China it is increasingly the latter and more so than anybody previous thought: China has shifted to a three-child policy. COVID crushed its birth rate. This has brought
This is the second in a series of four posts I’m publishing on the contrarian view for inflation. Part one: Inflation today is not the same as inflation in the 1970s. Part two: commodity inflation is far more leveraged to Chinese stimulus than developed market stimulus. And the signs are ominous. Part three: the inventory
HSBC with the note: Slower total social financing (TSF) growth, mainly due to a higher base last year, has likely led to tightened monetary conditions; but the structure of lending is improving with still robust mid-and long-term lending to support the real economy. We expect outstanding RMB lending to stay steady at 12.3% y-o-y in
Via China’s NBS: In May , China’s Manufacturing Purchasing Managers Index ( PMI ) was 51.0% , slightly lower than 0.1 percentage point last month , and continued to be above the threshold. The manufacturing industry maintained steady expansion. From the perspective of enterprise scale, the PMI of large and medium-sized enterprises was 51.8% and 51.1% , respectively , up 0.1 and 0.8 percentage
Because this time “it’s different”. Last night witnessed some aggressive rebounds in commodity prices thanks, in part, to a new Goldman note assuaging rising concerns for commodity prices emanating from the imminent Chinese slowdown. There are some days when Wall Street really does take the cake. Buy the China led dip. The bullish commodity thesis
Credit tightening and regulation across property sectors taking effect. Mizuho with the note. Exports still booming: But domestic demand faltering as property and car sales retrench: Yields falling: Spreads widening in junk: Bloomberg has a few more indicators: Prepare to plunge to a stone-cold 1 in property sectors and a lukewarm 3-4 for the broader
As inflation-deluded markets begin to wake to the China deflation shock that’s been obvious to MB readers for months, I am beginning to wonder if what lies ahead is a little less benign than my original thoughts. There is no cause for panic. If the worst were to come to pass and a market accident
The panic about commodity prices has reached a new level of silliness at Bloomberg this morning: Despite Beijing’s best efforts, asset bubbles are forming in China. Home prices are soaring, prompting officials to revive the idea of a national property tax. A surge in raw material prices spurred pledges to increase domestic supply, toughen market oversight, and crack
Readers will recall the Skyscraper Index, that colossal monument to human folly which so often predicts imminent recession for those that dare build to the heavens. In China, it is literally crumbling: The US consulate has warned Americans to steer clear of a shaking Shenzon skyscraper. There was no earthquake. Shenzen has 297 buildings above
Goldman with a note on how China is targeting the epicentre of global iron ore demand for deflation: Striking a balance between growth and stability. We agree with the chairman of the CBIRC that the property sector is one of the gray rhinos in China. In our China Credit Conundrum published in 2013, we cited
Societe Generale with the note: The economic recovery in China continued in April but remained uneven. Growth in the industrial sector softened albeit at a still healthy pace, while services failed to strengthen further despite the containment of COVID-19. On the demand side, manufacturing and property investment quickened, but infrastructure investment slowed, probably due to
Last week, Roy Morgan Research reported that the preference for Australian-made goods rose during 2020, but fell for goods from Australia’s largest trading partner China. Specifically, 93% of Aussies said they are more likely to buy products made in Australia – up from 87% a year earlier. By contrast, only 21% of Australians said they would
It’s beginning to play out as expected. Chinese headline growth for April was absolutely fine with year-to-date numbers still wildly distorted but falling back to earth roughly in line with expectations. Industrial production was 9.8%, retail sales 17.7% and fixed asset investment at 19.9% from last year’s depressed levels: At first glance, even construction sectors
Capital Economics with the note that maps out the coming iron ore crash: Both bank lending and broad credit dropped off more sharply than most expected in April. Apart from during last year’s lockdown, loan growth hasn’t been this slow in nearly two decades. The net increases of both bank loans and aggregate financing (AFRE),
Commodity prices are a bubble and the pin is closing in fast. China released credit data for April overnight the slowdown is outpacing even my expectations. China has yanked a credit handbrake. Total social financing came in at 1.85tr yuan within which bank credit made up 1.47tr This is down 38.5% year on year, the
The ferrous complex calmed down a little yesterday after Chinese regulatory intervention but oftentimes it takes more than one hammer to hit the iron ore nail so expect further moves. Spot eased. Paper firmed overnight. Steel waltzed straight through: In data new, Brazilian April exports were soft as expected, up only 7.5% over the year.
A terrific note from The Atlantic’s David Frum sums it all up: China was mentioned only four times in Joe Biden’s first address to a joint session of Congress, but it shadowed almost every line of the speech. “We’re in a competition with China and other countries to win the 21st Century,” Biden said. His
An extraordinary convergence of everything that is good and bad is underway in China’s technology sectors. On the one hand, monopolies are being curtailed to establish a competitive market structure that may be able to deliver the innovation and growth outcomes that China needs in its development phase. On the other hand, the historical power
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, since China had a large
Just how bad is Chinese counter-party risk? Really, really bad can be the only possible answer. After just a few weeks of credit stress, Chinese authorities have folded like a deck of cards on China Huarong Asset Management: The PBOC is considering a $15bn bailout. The PBOC unit will effectively become a new bad bank
Even before COVID, China was facing stiff headwinds from an ageing population. These headwinds stem from the nation’s ‘one child policy’, which came into effect in the early-1970s and was credited with preventing around 400 million births from 1979 to 2010. The ‘one child policy’ initially produced a population pyramid that was optimal to economic growth,
