China Economy

3

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

11

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

0

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

4

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

28

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

1

China keeps jackboot on lending

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

0

China PMIs stable

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

6

Goldman: Buy commodities, China irrelevant

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

0

More signs China is slowing fast

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

0

Goldman: China to keep the pressure on property

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

8

China targets property sector for deflation

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

9

A global deflationary shock is building in China

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

2

Chinese growth powers but iron ore air pocket appears

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

1

Daily iron ore price update (China census demographic doom)

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.

18

China is a paper dragon

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

8

China taps into the best and worst of the internet

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

3

China grows old before it gets rich

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

2

Chinese credit tightening to smash its stocks?

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

11

China’s demographic time bomb is rigged to blow

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,

2

China credit impulse sags

The little China financial crisis we have been tracking shows signs of a little easing as we enter a new week: Huarong bonds recovered some ground Friday after the financial regulator declared liquidity plentiful. While well short of any guarantee, some analysts expected that this is a turning point for the beleaguered debt manager. My

7

Chinese data misses big, economy slows fast

Lordy, China data is a mess. Base effects have distorted everything. If we look through the fog what we find mostly is a disappointment. First-quarter GDP was only 0.6%, far below the forecast 1.4%. That is disguised by year on year figures which are wonky as anything 18.3%: The internals for the month of March

3

China’s little finaincal crisis rolls on

Some more updates on the little Chinese financial crisis roiling its bond and equity markets. Analysts had hoped that yesterday would being relief form the PBOC, no such luck: Stocks fell as the PBOC withdrew liquidity as for a fourth straight month: Funding costs in the junk bond market will keep rising, noted ANZ. Meanwhile,