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COUNTRY INSIGHTS

Beijing’s debt “troubleshooter”: The China Development Bank
CHINA ADVISORY · Report · 26 Apr 2019 · 1 response

We have been arguing for the rising importance in China of private capital to support state activities and GDP growth in general. However, the role of the state in China’s capital flows should not be dismissed. One institution that is playing a growing role in China is the China Development Bank,...

China’s private stimulus
CHINA ADVISORY · Report · 19 Apr 2019

China has a significant economic “hangover” from the ten-year-old fiscal stimulus in 2009. That stimulus relied primarily on bank loans as a quick injection of capital to rejuvenate economic growth. Since then, policy has shifted through several phases and a variety of financial intermediaries an...

The financialization of the Chinese economy
CHINA ADVISORY · Report · 12 Apr 2019

The U.S. financial crisis was caused by the excessive “financialization” of the economy. Loans flowing to the residential property market were expanded into derivative products on Wall Street, sold to investors as securities, and funded primarily through short-term sources. The result was a matur...

China’s slowing property market and the impact on economic stability
CHINA ADVISORY · Report · 05 Apr 2019

The China property market has regained investors’ attention as the most important pillar of a recovery story. However, recent data on land sales, property financing, and consumption trends suggest analysts may be too optimistic. Our views are more pessimistic: * Weakening property prices...

The politics of credit allocation in China
CHINA ADVISORY · Report · 29 Mar 2019

Discussions of China’s various stimulus programs focus on the growth of total social financing, bond purchases, swaps and other announced “official” credit policies. However, one important aspect of credit intermediation has been overlooked: geography. This political credit allocation by geograph...

Privatizing credit in China – Part 2
CHINA ADVISORY · Report · 22 Mar 2019

​We have been arguing that China is increasingly privatizing credit to avoid increasing official state debt. This will have several outcomes in terms of future credit flows from the banks and shadow banks. Recent data on land sales, a key source of revenue for local governments, and on non-perfor...

Private credit for state ends
CHINA ADVISORY · Report · 15 Mar 2019

China is quietly privatizing much of its debt due to an increasing shortage of domestic capital. This will have several outcomes: * A rise in off-balance sheet financing. * An increasing division between state firms that obtain state capital and local infrastructure and private companie...

The National People’s Congress: Worrying assumptions about revenue in 2019
CHINA ADVISORY · Report · 05 Mar 2019

China’s annual National People’s Congress provides a window into the thinking of the government about its plans for the year. Both the assumptions and omissions are a valuable tool for forecasting China’s economic trajectory. The Ministry of Finance’s report on the economy outlined by Premier ...

Who’s buying China’s domestic bonds?
CHINA ADVISORY · Report · 04 Mar 2019

One large part of China’s growing credit stimulus has been the bond market. A significant portion of this increased investment has come from the private sector. But how much? And how stable and transparent is this source of funding? We analyzed data on China’s bond market to understand the cha...

Concerns at the top despite high credit growth
CHINA ADVISORY · Report · 22 Feb 2019

Premier Li Keqiang warned about excessive credit growth in a meeting at the State Council this week. The January data would seem to confirm the excess growth. Li’s comments suggest conflict within the senior levels of government about the degree of monetary expansion. We just spent several days i...

No quantitative easing for China
CHINA ADVISORY · Report · 15 Feb 2019

There is a widespread expectation among western investors that China will enact quantitative easing to counter the effects of the trade war and the slowing economy. This is highly unlikely. Although there is substantial data indicating significant pain in the economy, including defaulting SMEs, u...

China’s illegal shoppers: New rules may slow capital outflow
CHINA ADVISORY · Report · 08 Feb 2019

“Daigou,” a new word produced as the result of burgeoning e-commerce in China, refers to personal shoppers who purchase overseas goods for mainland Chinese consumers for a fee. Unlike cross-border e-commerce, daigou is a gray market where consumers enjoy lower prices and, most important, no impor...

China’s winners and losers
CHINA ADVISORY · Report · 01 Feb 2019

China has instituted several targeted stimulus measures designed to improve GDP growth and provide capital for small businesses, the country’s largest employment sector. These measures, however, are likely to be inadequate compared with the decline in capital due to the restrictions imposed on sh...

January 2019 China Bank Survey
CHINA ADVISORY · Report · 24 Jan 2019

China’s banking system is under pressure to strike a balance between supporting economic growth and reducing credit risks. On one hand, Beijing is calling for lenders to step up funding for small businesses and infrastructure projects to revive the ailing economy. On the other hand, worsening cor...

Apple’s China Problem: Is luxury consumption declining?
CHINA ADVISORY · Report · 14 Jan 2019 · 1 response

The decline in Apple earnings has gotten mixed reports about what it means for consumption in China in general. We use a novel data set to look at consumption trends in China. Our conclusion is that consumption is for the most part concentrated in a small portion of wealthy citizens. Their purcha...

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