China Economy

1

China’s state grid goes ex-growth

Via the FT: State Grid, China’s largest utility company, is bracing itself for the rate of economic growth to fall to as low as 4 per cent over the next five years in the world’s second-largest economy, according to people familiar with its internal forecasts. The state-owned monopoly, which generates and distributes most of China’s

2

Chinese credit going nowhere fast

Neither up nor down though you have to look carefully. New yuan loans appeared to boom in December with total socail financing at 2.1tr yuan. Banks issued 1.14tr so shadow finance jumped: The 3MMA turned upwards: The rolling average for new loans too: And M2 jumped to 8.7%: But the strength is a little deceiving.

3

Chinese house prices still slowing but…

Chinese house prices for December are out and are still slowing year on year to 6.6%. Monthly gains were 0.35%, slightly up from November: Growth is still slowing across tiers: But breadth of price gains improved a little to 46 cities: Here’s the raw data: Reuters has useful discussion: Many analysts are forecasting a further

0

China is not coming to the rescue in 2020

Via Fathom Consulting: As our clients will know, we have long been sceptical about the accuracy of China’s official GDP data. To gain a better insight into true economic activity we developed the China Momentum Indicator (CMI), first published in 2014. This combined rail freight volumes, electricity production and nominal bank lending; all three of

8

China’s daisy chain default disaster

Via Zero Hedge: Just days after China’s “moment of reckoning” in the dollar bond market arrived, when China was rocked by not only the biggest dollar bond default in two decades but also the first default by a massive state-owned commodities trader and Global 500 company, when Tianjin’s Tewoo Group announced the results of its “unprecedented” debt

2

Rhodium: China’s stimulus binge bill “coming due”

Rhodium Group with an absolute cracker of report on Chinese debt: Local-level credit events in China are piling up, and evidence of broader stress across China’s financial system is accumulating. The ultimate cause is the contraction in shadow banking under the deleveraging campaign, as the informal financial system had previously kept highly indebted local governments

1

Another Chinese bank goes bust

Via the WSJ: China’s sovereign-wealth fund is coming to the aid of a troubled lender in a 100 billion yuan ($14.28 billion) bailout, the latest show of government support for the banking sector, which has come under intensifying financial stress as the economy slows. Hengfeng Bank, based in eastern China’s Shandong Province, will sell 100

2

“Prudent” PBOC cuts rates

Recall the words of CCP economic working group: First, we will unswervingly implement the new vision for development; 二是坚决打好三大攻坚战 Second, we will resolutely fight the “three tough battles”;三是确保民生特别是困难群众基本生活得到有效保障和改善 Third, we will ensure that people’s well being, especially the basic living standards of those in need, are effectively guaranteed and improved; 四是继续实施积极的财政政策和稳健的货币政策。 Fourth, we will continue

2

Chinese economy pivots from empty apartments to bridges to nowhere

The greatest capital misallocation in the history of human civilisation continues today with China’s November data dump. On the surface, all appears well as data beat expectations comfortably. Industrial production was in at 6.2%. Retail sales at 8% and fixed asset investment at 5.2%: However, I am neither impressed nor comforted. The story of 2019

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Infographic: Electric vehicles will not save coal

The purpose of this Infographic is to debunk the common misconception that a switch to Electric Vehicles will hugely increase demand for electricity. This Infographic breaks down and depicts the data that it won’t, and in turn, Electric Vehicles will not save Coal as many suggest is might. The resulting effect is that Oil has

4

Middle income trap! RBA destroys Hugh White’s China grovelling

At last some sanity from an Australian economic institution on China (perhaps it was hacked by the CIA?). A terrific article in the RBA Bulletin from Ivan Roberts and Brendan Russell: Abstract Slowing trend growth in China, and the risks around this trajectory, are relevant to the future economic prospects of its major trading partners,

1

CCP commits to slowing Chinese economy

Courtesy of Sinocism comes the results of the Central Economic Work Conference (CEWC): 一是坚定不移贯彻新发展理念 First, we will unswervingly implement the new vision for development; 二是坚决打好三大攻坚战 Second, we will resolutely fight the “three tough battles”; 三是确保民生特别是困难群众基本生活得到有效保障和改善 Third, we will ensure that people’s well being, especially the basic living standards of those in need, are effectively guaranteed

2

Chinese car sales keep falling

Vai ZeroHedge: The ongoing recession in the global auto market has undoubtedly been lead by China – and if November’s trends are any indication, the entire industry could be setting up for an ugly 2020.  Sales of sedans in China fell 4.2% in November to 1.97 million units, according to the CPCA on Monday. This marks

1

Chinese credit slowly slows

Chinese new yuan loans for November are out and remain subdued. Total social financing was 1750bn yuan while bank lending was 1390bn yuan of that: Year on year growth rebounded to 15% but the three month moving average is just 2%: Shadow banking contonues to trend lower: Rolling annual new loans has stalled: M2 is

6

Chinese inflation worrying

I am not especially worried about pork prices: In November 2019 , the national consumer price rose 4.5% year-on-year . Among them, cities rose by 4.2% and rural areas rose by 5.5% ; food prices rose by 19.1% , and non-food prices rose by 1.0% ; consumer goods prices rose by 6.5% , and service

2

China happy to see growth keep slowing

Via Sinocism: Friday’s Politburo meeting set the tone for the Central Economic Work Conference (The CEWC), and that tone appears to be consistent with what we have been hearing all year, that the leadership is OK with slowing growth, that while there are plenty of risks and challenges they are up to the task, and

2

Where is all the iron ore going?

Vai Platts: China Macro & Metals: Steel output falls, but property creates bright spots Chinese steel production posted a rare drop in October, while domestic steel prices have been buoyed by the property sector. Paul Bartholomew and Sebastian Lewis analyze China’s key economic indicators, and what they mean for the metals sector. Crude steel production

49

Cold War 2.0 accelerates as “silicon curtain” drops

Via the FT: Beijing has ordered all government offices and public institutions to remove foreign computer equipment and software within three years, in a potential blow to the likes of HP, Dell and Microsoft. The directive is the first publicly known instruction with specific targets given to Chinese buyers to switch to domestic technology vendors,

7

Caixin services PMI adds more sunshine

Via Caixin: The Caixin China Composite PMI™ data (which covers both manufacturing and services) signalled a solid increase in total business activity across China in November. The Composite Output Index rose from 52.0 in October to 53.2, to indicate the steepest rate of growth for 21 months. The upturn was driven by strong performances across

9

Blundell-Wignall: China’s stimulus days are over

From the always excellent Adrian Blundell-Wignall today at the AFR: In the early phases of economic development, authoritarian governments can more or less “buy” economic growth. Asia did it in the run-up to the 1998 crisis…In effect, “costs” — such as providing capital to new workers moving from the countryside to the cities — are

3

No more Chinese stimulus coming

Via Sinocism: And do not expect any new policy moves before for the Central Economic Conference later in December, and even then expect more battening down the hatches and struggling and grinding through economic issues rather than a big set of stimulus measures China will maintain currency stability, prudent monetary policy: PBC – Global Times

1

Caixin China PMI adds more joy

Via Markit: PMI data signalled a further modest improvement in the health of China’s manufacturing sector during November. New business rose strongly, which underpinned a further solid increase in production. Notably, new export orders saw the first back-to-back monthly rise for over a year-and-a-half. Staffing levels were broadly stable following a seven-month sequence of decline,

0

China PMIs lift

From China’s NBS over the weekend comes the PMIs: In terms of enterprise size, the PMI of large enterprises was 50.9% , an increase of 1.0 percentage point from the previous month ; the PMI of medium-sized enterprises was 49.5% , an increase of 0.5 percentage points from the previous month ; the PMI of small enterprises was 49.4% , an increase of 1.5 percentage points from the previous month . From the perspective of the classification index, of the five classification indexes that constitute

12

Alarms clang as Chinese financial stress spreads

Some more nice work from Zero Hedge today on Chinese financial stresses: Something is seriously starting to break in China’s financial system. Three days after we described the self-destructive doom loop that is tearing apart China’s smaller banks,  where a second bank run took place in just two weeks – an unprecedented event for a country where until earlier

1

More incremental Chinese stimulus as bank stress grows

Via Caixin: China’s central government has issued new bond quotas for 2020 to some provincial-level governments early, as the state seeks to fund infrastructure construction in a bid to shore up a flagging economy. Several financial officials in provincial-level governments told Caixin they have already received next year’s quotas of so-called special-purpose bonds from the

10

Another Chinese bank hits the skids

Via Reuters: Bundles of yuan notes were stacked high behind the counters of branches of Yingkou Coastal Bank earlier this month, as the northeast China lender fought off a run on deposits while onsite government officials battled rumors of a funding crunch. Yingkou was the latest small bank to have its deposit-reliant funding base undermined

1

Chinese industrial profits collapse signals deflation tsunami

I don’t usually bother with this indicator but it’s worth reporting today: 1 – 10 months, the national scale industrial enterprises realized a total profit of 50151.0 billion yuan, down year on year by 2.9% (on a comparable basis, considering the caliber adjustments under the statistical system, enhancing law enforcement statistics, eliminate duplicate data, enterprise

8

Beijing blindsided by Hong Kong universal rebellion

Here’s the chart that will get somebody’s organs harvested imminently in Beijing. The Hong Kong local elections: What a smashing. Sinocism wraps it up nicely: All indications are that Beijing is still trying hard to keep trade and Hong Kong tensions separate in the relationship with the US. There are more official denunciations of the