Country Insights

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Squeezing the provinces
CHINA ADVISORY - Report 21 Jan 2022
The Evergrande default and the property crackdown show a new willingness by Beijing to force deleveraging even as the economy slows in order to avoid a financial crisis. The main solution to the Evergrande default is to force debt workouts onto the backs of provincial governments. This is part of...

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A strong RMB into 2022
CHINA ADVISORY - Report 07 Jan 2022
China’s yuan has strengthened steadily for much of 2021. Capital inflows remain strong, while exports have maintained relative strength. This is likely to continue in 2022. For 2022, China’s RMB policy will confront a number of challenges. First is the outlook for exports, particularly to the ...

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Will Beijing turn the taps back on?
CHINA ADVISORY - Report 20 Dec 2021
The Evergrande default took the market by surprise as central government support (at least until recently) was widely expected. Since then, China has issued mixed signals about its plans for handling the Evergrande crisis. On one hand, the central bank cut the Required Reserve Ratio, releasing 1 ...

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Can China avoid the Japan trap?
CHINA ADVISORY - Report 24 Nov 2021
Two concerns dominate elite politics in China. One is the collapse of the political system similar to the Soviet Union. The second is the Japanese period of economic stagnation in the 1990s. The fear of economic stagnation is behind the sharp cutbacks in the property market and the collapse of Ev...

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China’s property bubble and the wealthy – who will win?
CHINA ADVISORY - Report 02 Nov 2021
China is struggling with reducing the property bubble while maintaining adequate housing for the population along with adequate growth in the property sector. Now, there is talk of an expansion of local property taxes to replace land sales as a source of revenue. Can China restructure its revenue...

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China’s growth strategy
CHINA ADVISORY - Report 21 Oct 2021
The harsh restrictions on the property sector have thrown in doubt the primary growth engine for the Chinese economy. The Politburo has three choices: reinflate the property market, accept radically lower growth, or switch to a new growth driver. Can China find a new source of economic growth to ...

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Beijing’s Evergrande solution
CHINA ADVISORY - Report 06 Oct 2021
Beijing believes the risks of a US-style financial crisis caused by a property bubble outweigh the risks of an Evergrande default. But it is also encouraging a “soft” landing for the resolution of Evergrande’s debt problems that would avoid political unrest and a bank crisis. How will Beijing res...

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A quick note on Evergrande
CHINA ADVISORY - Report 16 Sep 2021
The Evergrande crisis appears to be accelerating. Although the dollar bonds rose Tuesday on hopes for a better recovery rate, the overall tone is very negative. The central government has hired outside advisors to assess Evergrande’s credit situation. Morgan Stanley and Fitch have downgraded thei...

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Delinking debt in China
CHINA ADVISORY - Report 14 Sep 2021
China’s leadership is promoting the concept of delinking debt from government obligations. Two recent examples are the high profile debt workouts for property developer Evergrande and asset management company Huarong, which have raised questions about the Chinese government’s support for the corp...

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What does Xi Jinping’s "common prosperity" mean for the economy?
CHINA ADVISORY - Report 30 Aug 2021 2 responses
Xi Jinping launched his vision for common prosperity officially in an internal meeting in the Politburo on August 17. This was a follow-on to the harsh regulations imposed on China’s technology sector. Although Xi has been using the term “common prosperity” for several years, its appearance in hi...

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Policy direction in China
CHINA ADVISORY - Report 13 Aug 2021
Faced with unusual challenges, including Covid and US-China decoupling, China is choosing to focus on four main policy areas. These are: * Covid response. * Macroeconomy. * Regulatory environment (including US-China policy). * The Property sector. The choices the lead...

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China’s education crackdown – How far will this go?
CHINA ADVISORY - Report 27 Jul 2021
The new regulatory crackdown on the educational sector in China was a surprising move by China. New Oriental Education’s shares plunged 17.5% on the news. What really is a shock is how small the companies are in this sector – EDU has a market cap of just $6.6 billion. What is going on and how far...

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China’s regulatory crackdown
CHINA ADVISORY - Report 07 Jul 2021
China appears to be increasing the pace of state regulation of the country’s technology companies beyond what most analysts had originally expected. The latest intervention came in the form of a probe by the country’s cybersecurity administration into Didi Chuxing’s data policy – just two days af...

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Transparency in Hong Kong
CHINA ADVISORY - Report 24 Jun 2021
The arrest and charges against senior executives at Hong Kong’s remaining independent newspaper, Apple Daily, and the freezing of US$2.3 million in corporate accounts, has sent a chill throughout Hong Kong. The move against Apple Daily signals a heightened attack against the free press in Hong Ko...

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Biden’s infrastructure plan and the China threat
CHINA ADVISORY - Report 11 Jun 2021
Biden’s new infrastructure plan is a counter-strike against China’s economic growth and investment in technology. As The Wall Street Journal noted in April, “When President Biden unveiled the plan, he mentioned China six times, including this reference: 'That’s what competition between America an...