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COUNTRY INSIGHTS

China’s local debt clean-up squad
CHINA ADVISORY · Report · 17 Jan 2020

The four original Asset Management Companies (AMCs) established to handle bank non-performing loans have been expanded with the addition of more than 60 local AMCs. They are integral to the disposal of bank NPLs, which are increasing in size. The shift from central to local AMCs means Beijing is ...

China’s half-hearted stimulus
CHINA ADVISORY · Report · 10 Jan 2020

China is entering 2020 with a weak response to the economic decline. Beijing is accepting slower growth as one of the casualties of avoiding excessive investment that would lead to inefficient growth and the potential for financial systemic risk. However, in place of a substantial monetary or fi...

What to expect in China 2020
CHINA ADVISORY · Report · 03 Jan 2020

The obvious question for 2020 is – can China maintain growth without causing a bank failure, widespread defaults, or massive unrest as a result of unemployment? So far, Beijing has done a pretty good job, although my working assumption is that there is significant unemployment in more remote reg...

Will Rebalancing in China Work?
CHINA ADVISORY · Report · 20 Dec 2019

We have argued in a previous note that the middle class in China is most likely much narrower than much analysis would suggest. This has important ramifications for rebalancing of the economy – a policy announced repeatedly by the Chinese leadership. I decided to analyze the data concerning retai...

China’s schizophrenic stimulus policy
CHINA ADVISORY · Report · 16 Dec 2019

Recent negative economic data is forcing Beijing to devise creative responses. The responses show a political compromise between the “spenders” (the National Development and Reform Commission, the local provincial governments, and the State Council) against the “savers,” which would include the P...

China's understated global loans
CHINA ADVISORY · Report · 06 Dec 2019

Three economists in July published a paper at the Kiel Institute in Germany arguing that China’s international lending is understated by a significant margin. The authors, Carmen Reinhart, Sebastian Horn, and Christoph Trebesch, arrive at a figure of US$4.6 trillion, which includes holdings of so...

Notes from Ningbo
CHINA ADVISORY · Report · 29 Nov 2019

We just spent three days in Ningbo, China’s largest port city, 200 km from Shanghai, visiting finance companies, banks, and regulators. Four quick conclusions: 1) The trade war is having less economic impact, even on a port city, than one would expect. 2) The crackdown on shadow banking and un...

Alibaba’s singles day: Does it signal consumer strength?
CHINA ADVISORY · Report · 15 Nov 2019

Alibaba’s annual "singles day" is the largest day of online sales of goods in the world. It is viewed by some economists as a bellwether for the strength of the consumer sector in China. This, in turn, has ramifications for rebalancing of the economy from industrial production to the service sect...

The risks and rewards of index inclusion in China’s bond market
CHINA ADVISORY · Report · 11 Nov 2019

Changes in the Bloomberg Barclays index of bonds will expand foreign participation in China’s domestic bond market by $120 - $150 billion by 2020. Foreign ownership of Chinese financial instruments will become a wider part of both the Chinese financial system and the retirement funds of western i...

How Chinese banks use their offshore dollars
CHINA ADVISORY · Report · 31 Oct 2019

Chinese banks have a significant amount of USD assets. The top four state banks have close to $1 trillion in USD assets and almost $400 billion in USD investments. These dollar assets are held on the balance sheet of the corporate headquarters in China, in addition to the branch offices in the Un...

China: Notes from Washington/Trade War
CHINA ADVISORY · Report · 15 Oct 2019

I just returned from a three-day trip to Washington DC meeting local corporates, the Mansfield Foundation, CSIS, the State Department, and officials at the White House. Overall, the tone in Washington is decidedly negative. There is a growing consensus that China is rising, the trade war is hurti...

Will China “defund” Hong Kong?
CHINA ADVISORY · Report · 04 Oct 2019

Beijing has indirectly suggested two, very different, economic policies towards Hong Kong as a result of the six-month long protests. 1) One policy calls for financial support from Chinese state firms. Reuters reported Sept. 21 (never confirmed) that nearly 100 state firms met over the border...

Credit and industrial profits – Will shadow banking help?
CHINA ADVISORY · Report · 27 Sep 2019

China is using many different methods for stimulating the economy, including tax cuts, monetary policy through lower interest rates (RRR and other methods), and targeted lending. However, one of the problems the country faces is the declining effectiveness of the credit it issues through various ...

Default stress in China: The case of the Bank of East Asia
CHINA ADVISORY · Report · 20 Sep 2019

Corporate defaults reported in the 1H 2019 financials of the Bank of East Asia in Hong Kong relating to mainland corporates has raised red flags about the weakness of the Chinese economy. Do these loans point to bigger problems?

How important are Hong Kong bank loans for China?
CHINA ADVISORY · Report · 13 Sep 2019

One of the arguments for China’s hands-off approach to Hong Kong has been the importance of Hong Kong as a source of capital. Today we look at the HK banks and ask two questions: 1) Are they significant for China? 2) What is their risk in case of a significant downturn in China?

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