China Economy


Money is fleeing China

The detailed statistics from China’s April monetary statistics show that the change in the position of forex purchases has turned negative again in April. With a relatively large trade surplus in April, this indicates that capital flow turned hugely negative.  I estimate that excluding the trade surplus, capital outflow would be RMB177 billion (I don’t distinguish the type


Wenzou’s debt deflation

In a debt deflation, debt liquidation leads to falling asset prices. As the process continues, the repayments of debt (and default) outpace extension of new credits, meaning that the banking system is destroying money through credit contraction.  That means deposits fall, and so does money supply. That leads to sharper falls in asset prices, more repayment


Is China entering a debt deflation?

Yes, I am talking about the dreaded debt deflation (in Irving Fisher’s sense) in China. It works like this, more or less: Banks create money by extending credit; when banks lend you money, your deposit account balance increases.  That money created by bank’s extending credit is included in the money supply calculation.  Increasing debts in the economy means increasing


China cuts the RRR

With uniformly bad data in April, the PBOC decided to cut the bank reserve requirement ratio (RRR) last night by 50bps. As I have stressed, when the cause of the slowdown is an asset deflation, loan growth is more demand driven than supply driven. Also, we have to pay attention to the trade surplus and


China’s ugly April

It’s official, the Chinese economy did not bottom out in the first quarter, and the latest data confirms just how badly the economy is doing (or just how optimistic the market has been). While I am bearish on China and did not think the worst was over for the Chinese economy, I did think that


Big miss in Chinese industrial production

by Zarathustra The latest figures from the National Bureau of Statistics show that industrial production in China was weak. Industrial production grew by 9.3% yoy (real terms) in April, below market estimates of 12.2% yoy, and down from 11.9% yoy of March. As can be seen from the charts, industrial production figures have completely diverged


More on tepid Chinese inflation

From Zarathrustra, note retail sales and industrial production numbers will follow this afternoon. China’s consumer price inflation continued with the downward trend in April. Consumer price inflation increased by 3.4% on an year-on-year basis, falling from 3.6% yoy of the previous month, in-line with market estimates.  On a month-on-month basis, consumer price fall by 0.1%


China links

Courtesy of Sinocism: We hear a lot about Weibo and censorship. Baidu, which failed in its own attempt to run a microblogging service, has in some ways benefited from the rise of Sina and Tencent Weibo, as so much of the regulatory focus, pressure and costs have shifted from Web 1.0 to Web 2.0, and specifically


Chinese inflation a very Western 3.4%

No surprises today with Chinese CPI printing on the button of consensus at 3.4%: The PPI, on the other hand, undershot consensus by a couple of points at -0.7%: A good result for the CPI then and some evidence of ongoing weakness in the industrial economy in the PPI although at least the sharp price


China trade underwhelms

Chinese trade balance figures for April just came out and surprised to say the least, with expectations of a $9.9 billion positive balance blitzed by coming in at $18.42 billion: The year on year growth figures were not impressive. Whilst export growth remained positive, it has decelerated markedly, with y-o-y growth of only 4.9% (expected


A soy Taiping point?

by Michael Feller Like a pensioner on his birthday, the Australian financial media yesterday enjoyed an annual spasm of exuberance with the release of the 2012-2012 Federal Budget. Yet amid the dense pages of analysis over every minutiae of detail,  few dared ask whether the prospects for the Chinese economy are a realistic backdrop for Treasury’s


China’s unbelievable banks

If you can recall, some time ago I talked about the CBRC’s annual report on the Chinese banking system. The report said that Chinese banks are very well capitalised, with non-performing loans falling every year and capital adequacy ratio rising every year. You could have guessed that I disagree.  As I have talked about previously, China simply


China’s divergent PMIs

On Tuesday, the official PMI showed continued expansion in manufacturing.  Yesterday, theHSBC/Markit China manufacturing PMI, on the other hand, remained in contractionary territory for the 6th consecutive month, with the latest reading at 49.3, slightly improving from 48.3, indicating a slower slowdown. The chart below from Michael McDonough of Bloomberg Brief slows the continued divergence in two PMIs’ headline numbers: The usual


China official PMI edges up

Courtesy of ANZ • The headline PMI rebounded to 53.3 in April, lower than market expected, but higher than with March’s 53.1. • The production index rose strongly to 57.2 from 55.2 previously. • While the new orders index declined by 0.6pts to 54.5; the export order index rose 0.3pts to 52.1. • Inventories of finished goods


Hugh Hendry remains bearish on China

Hugh Hendry of Eclectica Asset Management hasn’t written for quite a while, nor has he been actively out there on the telly as his clients “ban him from media appearances”. Hendry has been bearish on China for quite a while, since he posted a video talking in his Scottish accent in front of large empty buildings in China talking


An L-shaped recovery for China?

A few days ago, I mentioned that banks were undertaking stealth easing where mortgages rates have come down somewhat and mortgages are easier to come by. With March strong loan growth, stealth easing is happening even though the more aggressive easing actions like cutting reserve requirement ratio have not happened. In his latest note, Dong Tao


Chinese banks and stealth easing

Although many are probably still hoping for official monetary cuts in China, credit easing appears underway anyway in mortgages. This is not completely new. In fact, some weeks ago I became aware of some banks offering mortgages with interest rates reduced by 10-15% for first-time buyers.  Sina is now reporting that reduction of mortgage rates


US earnings trace slowing China

Several bell weather US firms have reported earnings that provide an insight into the state of the Chinese economy. ABB (ABBN.VX) and Caterpillar (CAT.N) both blamed shifts in their accounts on slack Chinese demand. To start with, ABB’s bottom-line beat expectations but margins declined.  The company’s presentation said that a “Weaker China offset by good growth in N America”. 


China Flash PMI improves a bit

The China Flash PMI is out and shows a small improvement from 48.3 in March to 49.1 in April. Ouput, new orders and exports all contracted at a slower rate: This is welcome. However, a quick look at the charts shows that the trends are all solidly sideways: The global zombie plods on! China Flash


China’s April lending weak?

Caijing reports that sources close to the big 4 Chinese Banks (ICBC, Bank of China, China Construction Bank, and Agricultural Bank of China) suggested that the 4 banks have lost more than RMB1 trillion of deposits, while new loans are not really growing. The hugely positive picture of above expectation new loans in March appears to be


Nomura joins commodity super cycle bears

Various investment banks have been weighing in on whether or not the end of the commodity/ steel/ metal and other super-cycles, which have been led primarily by China’s increasing demand. Credit Suisse has different teams on either side of the debate, and Citi thinks that it’s over.  Now it is Nomura’s turn. Similar to Citi’s argument,


China’s Achilles Heel

By Leith van Onselen The Economist today published an interesting article about the demographic time bomb that threatens to derail China’s economic development: Over the past 30 years, China’s total fertility rate—the number of children a woman can expect to have during her lifetime—has fallen from 2.6, well above the rate needed to hold a


An illustration of China’s unsustainable growth

The corruption and purging of Bo Xilai is illustrative of the shortcomings of China’s unsustainable growth model. After Bo Xilai was purged and as new people will be running the Chongqing government, a review of the debts outstanding for the government, including the local government financing vehicles, which are used in funding many of the infrastructure projects,


Folks flee the ghost city

Remember Ordos, the ghost city? Thanks to its coal, the place was “booming” (sort of).  Not only was it a bizarre place with a real estate “bubble” (actually, I can’t quite want to find a word to describe something which is more than a bubble) even though the place is seriously over-housed, it was also a


China widens yuan trading

The People’s Bank of China has announced that is will allow more flexibility in both ways for Chinese yuan exchange rate.  From 16 April (Monday) onwards, the trading band limit for USDCNY will be increased from ±0.5% away from the daily fixing to ±1% away from the daily fixing. Increasing flexibility of the exchange has been


A decelerating Dragon

More analysis on today’s China GDP print, this time from Phat Dragon, who had forecast a 8.2% rise instead of the printed 8.1%, This was much better than most of the commentariat, who have now dismissed their miss (8.4% consensus), focusing on the resignation of Bob Brown, with none (I’ve read all the majors on


More on the China GDP miss

As reported earlier, the Chinese National Bureau of Statistics published the latest GDP growth figures (along with many other things that will be mentioned below). The year-on-year GDP grow by 8.1% in real terms, missing estimates of 8.4% growth.  On a quarter-on-quarter basis, GDP grew by 1.8% in real terms (seasonally adjusted, presumably), down from


China GDP at 8.1%

Official Chinese statistics have just been released, with real GDP (gross domestic product) for the first quarter, alongside industrial production and retail sales. Here are the quick snapshots: Quarter on quarter GDP rose 1.8%, was expected to rise 1.9% (last quarter was 2%) Year on year GDP rose 8.1%, was expected to rise 8.4% (last


12 predictions for China’s coming decade

Exclusively from Michael Pettis most recent newsletter: In the last issue of my newsletter I spoke about the economic constraints that limit China’s political options.  I argued that regardless of what Beijing claimed it wanted to do, its economic choices were largely limited either to maintaining the existing growth model, thereby running the risk of a