China Economy


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


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


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


Chinese growth is falling away

The PMIs are beginning to follow the credit tightening: Local new orders are OK but exports are eroding steadily: Steel PMI new orders were down hard at 34.8. Support is still coming from the global reopening: The global steel-using industry registered the quickest improvement in overall operating conditions since December 2010 in May, according to


Albert Edwards: Housing bubbles everywhere!

SocGen super-bear Albert Edwards with the note: The global reflation trade was already in retreat before the Fed lobbed in their surprisingly hawkish statement of intent last week. That retreat quickly turned into a rout across many asset classes. Whilst not in the league of the 2013 Bernanke ‘TaperTantrum’ it demonstrates the market’s sensitivity to


Chinese megadevelopers approach Minsky moment

The divergence between iron ore prices and what is happening on the ground in the only market that matters for iron ore demand is reaching new wides daily. Readers will know that China’s “three red-lines” policy for deleveraging the property development sector is delivering with distressed developers defaulting and dumping assets, credit lines being pulled


Spiralling Chinese megadeveloper forms Australian black hole

Evergrande. Remember the name. Because it may just be forming the dark nucleus of an economic singulatory in China that will suck Australia across an income shock event horizon. Throughout 2021, I’ve been tracking the evolution of a new policy regime for Chinese mega-developers called the “three red-lines”. It aims to deleverage one of China’s


Goldman: China to panic, unleash credit

What, already? Exports peaking: Chinese goods exports beat expectations in early 2021. Some of the upside surprise was due to supply factors such as the “staying local Lunar New Year”, and some due to demand factors such as new waves of COVIDoutbreaks ex-China. These temporary factors aside, the bigger picture remains that export volume is


China property developers a potential global growth shock

The great Chinese property developer shakeout is intensifying. This has global significance because this sector alone accounts for an enormous slice of global bulk and base metals demand and therefore inflation. Bloomie has a great article today on the unfolding drama around the “three red lines” policy: Many developers have gamed the new deleveraging rules.


China booms. Not

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%


Chinese construction sector crashes

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 crashes, commodities to follow

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


Wild Chinese inflation all commodities bubble

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


Chinese mega-developers begin to crack

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


Chinese local governments set to storm debt markets?

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


Lombard: China property bust imminent

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


China’s demographic doom arrives early

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