China Economy

2

Hong Kong property hits a wall

Recent market turmoil and a poor land auction result  have pushed the consensus view of Hong Kong property towards a possible correction of as much as 10%. At the same time, some hope that renewed US stimulus will flow through to Hong Kong real estate prices. I take issue with the view that US quantitative easing will weaken the

9

Conference Board: China slowing significantly (not)

From Bloomberg: Aug. 16 (Bloomberg) — Growth in China, the world’s second-biggest economy, is slowing “significantly,” according to The Conference Board, a New York-based research organization. “The economy is significantly moderating right now and also over the next couple of months,” Bart van Ark, the organization’s chief economist, told Bloomberg Television from New York ahead of the release of

1

China’s slowing M2

Late last week, the People’s Bank of China published the latest set of monetary statistics, which, I think, surprises on the downside. M2 Money supply grew by 14.7% compared to a year earlier to RMB77.29 trillion, lower than the expected growth of 15.8%.  Money supply growth has fallen further below the pre-crisis average level of 16.76%.  M1

14

China’s summer of discontent

Anxiety appears to be building on multiple fronts in China, threatening to spill over into social unrest. First, with the sharp rise in home prices and rents squeezing many younger Chinese out of the housing market, as well as widening the wealth divide, the Chinese Government is under intense pressure to improve housing affordability. The

4

Chinese inflation accelerates

In news that the global economy did not need, inflation in China shows no sign of coming under control, even as the People’s Bank of China has slowed its pace of tightening in the past 1 or 2 months.  The headline consumer price index (CPI) rose 6.5% on an year-on-year basis vs. 6.4% in June, and

14

China’s morbid dependency

In the lead up to Standard and Poors’ (S&P) downgrade of US Government debt, the largest holder of US Treasuries – China – had stepped-up its warnings and condemnation of the US Government’s fiscal mis-management and its deteriorating debt repayment capability. In November 2010, China’s Dagong Global Credit Rating Co. reduced its credit rating for

8

China’s shadow banking explosion

Fitch recently released an eye opening report on the staggering growth of leverage in the Chinese economy (h/t Bernard Hickey). As many readers will be aware, the Chinese Government has been implementing policies aimed at curbing bank lending in order to slow inflation. However, as is often the case with regulation, these policies have shifted

0

Chinese PMI slows, but how much?

China’s official manufacturing purchasing managers index (PMI) in July continued to show signs of slowdown, albeit at a moderating pace.  The headline PMI fell from 50.9 to 50.7, better than the expected number of 50.1. The new orders index increased from 50.8 to 51.1, which is a bit of a good news, while output fell

28

China’s crumbling infrastructure model

  China’s high-speed rail accident has attracted a lot of attention.  Even the FT Lex coloumn has something to say about it, believing that the pace of investment should be slowed.  While I have been arguing here for a while that investment has to be slowed, it is rather harder to see if the “accident” can

8

China’s believe it or not

After last week’s China update, which focussed on the massive malinvestment taking place within the Chinese economy, I received a number of articles from readers for inclusion in this week’s round-up. Thanks for everyone that sent articles in. If you find any articles that you wish to be included in next week’s summary, feel free

7

Chinese housing inventory climbs

After continuous rounds of curbs, real estate inventories in various cities have been rising to records on the back of thin volume, although prices are still holding pretty well, according to Xinhua. Unsold inventories in Beijing reached 107,000 units as of 20 July, according to the report, which would take almost 15 months to clear based on the

8

More on Chinese stagflation

As the HSBC flash estimate for China’s manufacturing PMI falls below 50, indicating a contraction of manufacturing activities, people might start to wonder again whether there will be a hard landing.  The first half economic data was robust, with GDP growing at 9.5% over a year ago while inflation hit a new high at 6.4%,

16

China’s pressures intensify

h/t WSJ The HSBC China flash PMI was out this afternoon. According to the SMH: HSBC’s China Flash PMI for July dropped by its fastest pace since March 2009 and pointed to a monthly contraction in the country’s vast manufacturing sector for the first time in 12 months, the purchasing managers’ survey shows, while a

32

Chinese malinvestment grows

Almost daily now, I come across interesting articles on the Chinese economy. Rather than share each article individually, I will from now on provide a weekly round-up of articles from around the web. If readers have come across any noteworthy articles that I have missed, feel free to add these to the comments section below.

8

China booms on

This morning, Chinese National Bureau of Statistics published economic data for June and for the first half of the year. China second quarter GDP increased by 9.5% in real term over the same period a year ago, beating estimates of 9.3%, and slowing only slightly from 9.7% of the first quarter.  For the first half

5

Chinese lending at trend

The People’s Bank of China just published the latest set of monetary statistics for June 2011. As of the end of June, M2 money supply reached RMB78.08 trillion, increased by 15.9% over a year earlier, vs. 15.1% in May and consensus of 15.3%.  M1 money supply increased by 13.1% over a year ago to RMB27.27

7

Chinese inflation decoded

As we know, Chinese inflation further accelerated in June.  The headline Consumer Price Index (CPI) rose 6.4% compared to a year ago, vs. 5.5% in May.  This is slightly above consensus estimate of 6.3%. Less well understood, however, is how significant food prices are in this equation. Looking at prices in different categories, food prices inflation

71

Vitaliy Katsenelson: Why China will crash

In November 2010, I published a fascinating interview with Vitaliy Katsenelson – author of the Little Book of Sideways Markets (highly recommended), and teacher and Director of Research / Portfolio Manager at Investment Management Associates Inc, a money management firm based in Denver, Colorado. In this interview, Vitaliy provided possibly the best discussion of the

35

Moody’s identifies another $540b of Chinese problem loans

Following on from today’s post on Gary Shilling’s warning that China is headed for a hard landing, credit ratings agency, Moody’s Investor Services, today released a report claiming that it has identified an additional 3.5 trillion yuan ($US540 billion) of potential problem loans that the Chinese National Audit Office (NAO) did not disclose in their

39

Another China ghost city filled

Back in April I published an article, China’s largest ghost cities filled, providing an ‘eyes on the ground’ report from Wendell Cox, co-author of the Annual Demographia Housing Affordability Survey, who was touring China at the time. Wendell had provided photographic evidence showing that one of China’s famed ‘ghost cities’, Zhengzhou New District, was in

36

SocGen on China’s construction bubble

Societe Generale (SocGen) has released a fascinating 50-page research report entitled Chinese construction bubble – Preparing for a potential burst. The report argues that the exponential growth of real estate and infrastructure spending in China is unsustainable and a painful adjustment will occur sooner or later, although SocGen acknowledges that it is impossible to predict when the slowdown or correction

36

China’s property bubble spreading

China Daily has published an interesting article, Record realty prices head to lower-tier cities, explaining how tightening measures undertaken by the Chinese Government to curb soaring property values in China’s major cities is causing bubble-like conditions to spread to second and third tier cities [hat tip World Housing Bubble]. Below are some of the key

16

Charting China’s five-year plan

Bernard Hickey at Interest.co.nz yesterday alerted me to an interesting presentation by the Brookings Institution on China’s latest 5-year plan, which has been widely discussed as focussed on sustainable growth and reducing inflation, rather than going for growth for the sake of it. The presentation contains a series of excellent charts summarising China’s progress and

25

Chinese soft landing: 1 in 3 chance

From Credit Suisse comes this must read report into Chinese bank debt, on and off balance sheet, and the likely fallout in the coming slow down. Rising risks to asset quality Our analysis shows China’s credit-to-GDPhas risen to alarming levels in the past two years due to massive off-balance-sheet financing. Market has only focused on banking

27

China and the future of capitalism

Let’s try some more scenarios, but this time with your participation. My reasoning is this. Most economic and financial commentary is about telling the story of the past leading up to the present. So why not try to tell the story of the future? After all, that is what matters for investment and policy. Can’t

64

Wolf debates Stevens

Today Martin Wolf of the FT joins the growing ranks of China skeptics. It is interesting to contrast his views with those of Glenn Stevens, enunciated in his speech yesterday. According to Wolf: Until 1990, Japan was the most successful large economy in the world. Almost nobody predicted what would happen to it in the succeeding

43

Chinese inflation bubbles on

From Bloomberg (h/t The Lorax): China’s inflation accelerated to 5.5 percent in May, the fastest pace in almost three years, and industrial output grew more than economists forecast. The annual gain in consumer prices matched the median estimate in a Bloomberg News survey of economists. Production rose 13.3 percent last month, the statistics bureau said in

1

Money supply growth tumbling in China

The People’s Bank of China has published the latest set of monetary statistics for May 2011. At the end of May, M2 money supply reached RMB76.34 trillion, increasing by 15.1% yoy, lower than 15.3% yoy growth last month, and continued to dip below the pre-crisis average growth rate.  The market consensus looked for a 15.5%