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COUNTRY INSIGHTS

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 ...

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...

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...

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...

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...

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...

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...

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...

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...

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...

Can China fund its semiconductor ambitions?
CHINA ADVISORY · Report · 26 May 2021

China has made investment in technology a key policy for the coming decade, with semiconductors as the centerpiece. However, there are questions about China’s ability to “decouple” from the global semiconductor chain by building its owns state giants. One major question concerns funding. The pol...

Interest rates and shadow banking in China
CHINA ADVISORY · Report · 14 May 2021

China is attempting to reduce risk in the financial system. This includes controlling monetary policy and interest rates. However, the substantial participation of shadow banking in total capital flows – ranging from heavily regulated to lightly regulated forms – means that Beijing has a limited ...

China’s Credit Guarantee Funds and risk
CHINA ADVISORY · Report · 11 May 2021

China is pursuing two contradictory goals simultaneously. One calls for throttling back credit to risky parts of the financial system. The second is the creation of a default mechanism for ailing companies that in some cases includes state assistance. The policies are designed to continue to inje...

Huarong and state defaults
CHINA ADVISORY · Report · 30 Apr 2021

The Huarong near default was important because a) it is the largest of the country’s Asset Management debt workout firms; b) it is 61 percent owned by the Ministry of Finance, making it directly owned by the central government; and c) it is has a significant amount of outstanding bonds, both dome...

The Huarong default and China’s macroeconomy
CHINA ADVISORY · Report · 15 Apr 2021

China’s State Council Tuesday issued a decree ordering a “deepening” of reform of the budget management system. The key point is an order to reduce financial risk and increase transparency of local government finance. This order follows the recent cancellation of the Ant Group IPO and stricter re...

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