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Monetizing debt does not relieve China’s debt burden
CHINA FINANCIAL · Presentation · 26 Sep 2017

The relative pick-up in nominal GDP growth and the deflator reduces the cost of servicing the debt in real terms, but households absorb part of the cost by providing borrowers with hidden rate subsidies. Policies involving any form of monetization to manage debt, such as low lending rates relativ...

Waiting for the 19th Party Congress
CHINA FINANCIAL · Report · 22 Sep 2017 · 1 response

Special points to highlight in this issue: • Economic activity continues to slow in China, according to the most recent monthly data, and credit continues to accelerate, pretty much in line with what we expected. We have to be very careful, however, about how we interpret the economic activity d...

What will Wang Qishan Do?
CHINA FINANCIAL · In Brief · 31 Aug 2017

If the rumors are true that Wang Qishan will retire for health reasons, and will have no role, either in the Standing Committee or in a Leading Group, it would not represent, in my opinion, good news for China's economic adjustment. This will in the best of cases be a brutally difficult process a...

The Party Congress Date is Set
CHINA FINANCIAL · In Brief · 31 Aug 2017

The Party Congress has been officially set for October 18, which seems smack in the middle of the expected range. I asked one of my students to get me the previous dates, and she told me: 18th Congress: 2012.11.8 17th Congress: 2007.10.15 16th Congress: 2002.11.8 15th Congress: 1997.9.12 One piec...

Monetizing debt does not relieve China’s debt burden
CHINA FINANCIAL · Report · 14 Aug 2017 · 3 responses

Special points to highlight in this issue: • China’s GDP was 11.4 percent greater in the first half of 2017 than it was in the first half of 2016, and 6.9 percent greater at comparable prices, implying a GDP deflator of 4.2 percent. This is broadly in line with the prime lending rate for banks ...

Why do Chinese borrowers like risky structures?
CHINA FINANCIAL · Report · 10 Jul 2017

Special points to highlight in this issue: • Roughly two-thirds of all the outstanding putable bonds in the world, according to Fitch Ratings, were issued by Chinese corporations. Historical precedents suggest that the popularity of this type of structure in China almost certainly reflects diff...

People’s Bank promotion?
CHINA FINANCIAL · Report · 20 Jun 2017

Special points to highlight in this issue: • It has long been expected that Zhou Xiaochuan will soon retire as governor of the People’s Bank of China. Guo Shuqing and Yi Gang have usually been suggested as his most likely replacement, with Liu Shiyu sometimes mentioned as a possibility. • Anot...

Chinese politics and financial sector reform
CHINA FINANCIAL · Report · 08 Jun 2017

Special points to highlight in this issue: • While in many ways it seems that Xi Jinping will be able to emerge from this year’s Party Congress having placed allies in many of the key positions, including in the all-important Standing Committee, the recent stepping-up of what seems to be a conc...

The pro-cyclical Chinese economy
CHINA FINANCIAL · Report · 26 May 2017

Special points to highlight in this issue: • Moody’s has downgraded China one notch from Aa3 to A1. Except for a brief flurry within the first half hour after the announcement, when markets reacted quite negatively to the news, the market response has been minimal. • The main consequence of the...

Credit Expansion, Interest Rates and the RMB: China’s Policy Choices
CHINA FINANCIAL · Presentation · 04 May 2017

Although first quarter data was seen by many as confirming the new optimism, it does no such thing. The increase in Total Social Funding (a wide and more accurate measure of credit used by the PBOC) was higher than expected. The way in which China’s debt burden is resolved is key to its adjustmen...

China’s First Quarter Credit Expansion
CHINA FINANCIAL · Report · 27 Apr 2017

Special points to highlight in this issue: • What many analysts call China’s higher-than-expected GDP growth rate for the first quarter should not be classified as “higher than expected” if it is accompanied by higher-than-expected credit expansion. In China, growth is largely a function of th...

Liquidity Crunch and the Budget Reform Process
CHINA FINANCIAL · Report · 29 Mar 2017

Special points to highlight in this issue: • Early in the week of March 20 the Chinese financial system suffered the latest of a string of temporary liquidity shocks that sent short-term rates soaring and unleashed rumors of smaller banks unable to roll over liabilities that funded highly mism...

After the National People’s Congress
CHINA FINANCIAL · Report · 21 Mar 2017

Special points to highlight in this issue: • There have been many arguments proffered over the past several years in favor of both depreciating and stabilizing the RMB and in favor of both raising and lowering Chinese interest rates. • From a purely economic point of view, the benefits for Ch...

Global trade dynamics seen through a US-Mexico lens
CHINA FINANCIAL · Report · 21 Feb 2017 · 1 response

​Special points to highlight in this issue: January credit data suggest that economic activity in China is still heavily dependent on credit growth. The data reinforce the argument that as long as Beijing expects to maintain its GDP growth target, the growth in credit will continue to accelera...

The politics of China’s economy
CHINA FINANCIAL · Report · 30 Jan 2017

Special points to highlight in this issue: • The most important event in 2017 is the Party Congress that will be held towards the end of this year, in which a large number of the top leadership will be retired or promoted. Any useful analysis of the Chinese economy must begin with the political ...

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