China Economy

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Is China entering its own GFC?

There is lot’s of focus on Chinese growth and stimulus at the moment and for good reason. There were a couple of crucial data releases while I was holidaying that offer a lot of insight into 2019 prospects and they are worth revisiting. First up broad credit, which still looks to be falling away: Note

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Capital Economics: Chinese GDP slows

by Chris Becker From Capital Economics on today’s GDP print from China: GDP growth edged down from 6.5% y/y in Q3 to 6.4% last quarter, in line with both the Bloomberg median and our forecast. GDP growth for 2018 as a whole was 6.6%, down from 6.8% in 2017. The official GDP figures have been

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With productivity decelerating, China’s economic miracle is over

CBA Senior Currency Strategist, Joseph Capurso, has produced a new research report arguing that “China’s economic miracle is over” owing to slowing productivity growth and demographic headwinds. This will drag China’s growth down “from around 6% currently to around 4% by 2030”: According to Capurso, despite the slower growth, China may still escape the so-called

0

Chinese credit still weak

Global markets are convinced that China is about spring from its credit funk but so far it ain’t. December credit was decent at 1.59tr yuan with 1.08tr in bank loans but hardly tearing it up: Shadow banking had a better month: The three month moving average for new credit flopped into the positive: There is

5

Capital Economics: China slowing internally

by Chris Becker Capital Economics are out with two important reports on the latest trade figures and state of the economy in China. Yesterday’s trade numbers for December shocked to the downside, and Capital’s view aligns with Houses and Holes that any slowdown in the Middle Kingdom’s economy is part of its structural re-alignment and

1

China to cut growth target

Via Reuters: China plans to set a lower economic growth target of 6-6.5 percent in 2019 compared with last year’s target of “around” 6.5 percent, policy sources told Reuters, as Beijing gears up to cope with higher U.S. tariffs and weakening domestic demand. The proposed target, to be unveiled at the annual parliamentary session in

2

Chinese inflation tanks

Chinese inflation for December is out and it’s adieu price pressures as growth fades: In December 2018 , the national consumer price rose by 1.9% year-on-year . Among them, the city rose 1.9% , the rural rose 1.9% ; the food price rose 2.5% , the non-food price rose 1.7% ; the consumer price rose 1.7% , and the service price rose 2.1% . In December , the national consumer price ratio was unchanged from

7

Is China readying “kitchen sink” stimulus?

Zero Hedge has some hints today: Over the weekend, when commenting on the latest rather disappointing RRR cut out of China (which would release just enough liquidity to offset liquidity drains via the MLP and repo) we pointed out another, far more important event which took place in late December, when traders were generally away on vacation,

2

Gold rising as China lifts its reserves

by Chris Becker What’s going on with gold? While there has been some recent weakness in the US Dollar Index, 2018 was the year for USD against almost all the major currencies as the US Federal Reserve continued to lift interest rates in an attempt at normalisation. Still, the price of gold in USD rose

9

China to build more railways to nowhere

Via the AFR: A flurry of construction may be about to take off in China, and investors have pinned their hopes on it. Stocks of Japanese machinery makers Komatsu and Hitachi Construction Machinery perked up on Monday. Over the past week, Chinese engineering and construction companies’ shares have surfaced from multi-month lows. …The optimism stems

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China’s remarkable non-rebalancing

A picture is worth a thousand words: Remarkable graphic showing that even though China rebalancing has made some progress, it is light years away and structurally a country mile from its developed and emerging peers. 1/n pic.twitter.com/rJQ4H4wbOS — George Magnus (@georgemagnus1) 6 January 2019

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Chinese capital outflow pressures remain

Via Capital Economics: The People’s Bank continues to intervene, but on a small scale • The People’s Bank (PBOC) appears to have sold only a small amount of foreign exchange last month, suggesting that the renminbi has faced little downward pressure recently. • The value of the PBOC’s reserves amounted to $3,073bn at the end

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It’s all about Apple as it blames China

by Chris Becker Looks like we’re reliving the GFC all over again with interconnectedness so high that global currency and stock markets are going to crash because some single Chinese youths are not buying as many iPhones as they should. Apple announced a near 10% reduction in its forward guidance, releasing this report: While we

19

China builds subways to nowhere

Via the FT: The marshlands on the outskirts of Suzhou, a city of 11m about 100km west of Shanghai, are home to pods of pelicans — and a subway station. Mulberry Plantation is the final stop on Suzhou’s subway line 2 — a terminus that a station security guard estimated was used by a total

18

China won’t stimulate this time

Via Vertical Group:  Despite Mounting Signs of a Slowdown in China’s Economy, We Do Not Believe Big Gov. Stimulus Will Rescue Investors this Time. China’s total social financing (“TSF”), the broadest measure of new credit, was lower than necessary in Nov. That is, despite beating Cons. ests., and rising 105% from Oct, total credit

6

Chinese house prices ease

Chinese new home prices out on the weekend and the bifurcated market continues. Monthly values were up 0.9% and  yearly by 9.6%: Here’s the raw data: First tier cities are becalmed but below that it is all still gogo: 63 out of 70 cities are rising: Which has set up an unusual divergence between house

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Resistance is futile: Chinese workers assimilated by The Borg

Via SCMP: Workers outfitted in uniforms staff lines producing sophisticated equipment for telecommunication and other industrial sectors. But there’s one big difference – the workers wear caps to monitor their brainwaves, data that management then uses to adjust the pace of production and redesign workflows, according to the company. The company said it could increase

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Chinese credit keeps on sinking

Chinese new yuan loans for November were out last night and keep on keeping on, down. Bank loans came in at 1.25tr yuan and total social financing at 1.53tr yuan: This was down -5% year on year and 3MMA remains negative: Shadow banks remain a shadow of their former selves: M2 was stable at 8%:

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Why isn’t Chinese stimulus working?

Via Goldman: …two challenges brought us here. Internally, policymakers’ efforts to constrain the growth of shadow banking and reduce financial risks worked almost too well. Financial regulations introduced in 2017 and early 2018 led to a meaningful contraction in shadow banking, which slowed overall credit growth and tightened credit conditions, particularly for private companies. And externally,

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Chinese trade and inflation data deteriorate

China release trade and inflation data over the weekend and both showed it is slowing sharply. For trade, exports were 5.4% year on year and imports 3.0%, both large misses to expectations. The trade deficit is still large at $44.7bn: Inflation was also concerning. The CPI decelerated sharply: Aided by petrol: And the PPI slumped

6

Caixin China PMI not encrouaging

Via Capital Economics: • The latest survey data suggest that conditions in industry remained broadly stable last month. But we still think that growth will slow during the next few quarters, even though the immediate threat of additional US tariffs has receded. • The Caixin manufacturing PMI edged up from 50.1 to 50.2 in November.

5

China PMIs weaken further

From China’s NBS: In November 2018 , the China Manufacturing Purchasing Managers Index ( PMI ) was 50.0% , a slight drop of 0.2 percentage points from the previous month , at a critical point. In terms of enterprise scale, the PMI of large enterprises is 50.6% , which is 1.0 percentage points lower than that of the previous month and above the critical point; the medium-sized enterprise PMI is 49.1% , up 1.4 percentage points from the previous month , and the small enterprise PMI is 49.2% , compared

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How long can China build empty apartments?

Theoretically forever given it owns its own banks: The real problem is, it can’t keeping doing it and keep lifting living standards. There are already 50-60m empty apartments, enough to house all future urbanisation: All of that wasted capital has a cost. It destroys productivity and income growth stalls. We are already there: So, the real question

1

Chinese credit sags anew

For a stimulating economy, Chinese credit isn’t exactly lighting us up. October new yuan loans were out overnight at 729bn yuan social aggregate financing and only 697bn yuan in bank loans: October is always slow but -30% year on year is slower than it ought to be: The shadow banking share fell away again: As

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A new China shock brews for Australia

The Council of Foreign Relations has some bad news for Australia: Over the past two years, as our left-hand figure above shows, foreign portfolio investors have piled prodigiously into Chinese assets, helping to support the RMB. But history suggests this trend is about to reverse. While inflows have been rising, Chinese stocks have been tumbling—they are

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50 million apartments sit empty in China

It’s the model of efficiency! Via Bloomie: Chinese President Xi Jinping’s mantra that homes should be for living in is falling on deaf ears, with tens of millions of apartments and houses standing empty across the country. Soon-to-be-published research will show roughly 22 percent of China’s urban housing stock is unoccupied, according to Professor Gan