China Economy


China growth scare builds on policy, Delta

The newsflow coming out of China continues to deteriorate for growth and commodities prospects. Leading us off today is the jackboot dropped on another source of property development funding: China is halting private equity funds from raising money to invest in residential property developments, turning off the spigot on one of the last stable funding


Yep, China will cut the cash rate

The question is, what will it achieve? Bloomie has a crack at it: More Chinese economists are calling for cash rate cuts as the economy slows. Xu Hongcai, deputy director of the economic policy committee at the state-run think tank China Association of Policy Science says real estate is contained so the PBoC can act.


Chinese credit continues to slow sharply

Chinese credit continues to slow sharply. New yuan loans for July came in at 1.06tr yuan with banks actually higher than that at 1.08tr yuan, implying non-bank credit shrank: Month on month growth was -37% and the 3MMA is -22%: The rolling annual resumed falling: M2 slipped back to 8.3% Since the deleveraging began, new


China keeps slowing, no stimulus coming

A number of articles are worthy of note today. First, this: China’s bond yields climbed as quickening inflation sowed doubts about whether the nation’s sovereign bonds can maintain their world-beating advance. Without putting too fine a point on it, buy the dip. Chinese PPI inflation is exclusively commodities and they are going bust, setting up


Chinese inflation is about to violently reverse

Yesterday we saw Chinese inflation with the usual hoopla from an MSM that has no idea what it is doing. Driving through the rear vision mirror it was all panic about the headline inflation number at 9%. Here are the PPI components: ALL of the current inflation in China is commodities based. Moreover, a lot


Delta intensifies China’s growth slump

As usual, Goldman is taking the bullish view: The ongoing Covid outbreak in China, though still small in absolute terms with only a few hundred officially confirmed cases, has spread across many provinces and raised concerns among investors over its impact on economic activity. We use the previous outbreak in Guangdong province in May-June, also


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,


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


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


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


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


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


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


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


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


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,


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


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


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


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


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


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


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


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


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


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


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