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COUNTRY INSIGHTS

Defaults in China
CHINA ADVISORY · Report · 30 Nov 2020

The recent wave of defaults has raised questions about China’s support for the state sector. It is unusual for Beijing to allow state firms to default on their bond or debt obligations, which opens the possibility of a failure of the state sector, and thus a risk to the economy from a systemic co...

Covid-19 weekly update – confusion in the growth of industrial stimulus
CHINA ADVISORY · Report · 25 Nov 2020

Weaker property sales, declining traffic volume in some cities suggest a decline in economic activity. However, float glass prices remain strong and blast furnace operating rates are near flat. Film box office showed some gains but this may be the result of a new mix of films in theaters. The...

Biden and China flows
CHINA ADVISORY · Report · 19 Nov 2020

Biden’s presidency is being well received in China. However, foreign investors continued to invest in the country even during the Trump Administration. We look briefly at the domestic response to the Biden election and also at the flows data. Our thesis is that capital moving out into USD and oth...

Covid-19 weekly update – week ending November 16, 2020 – confusion in the growth of industrial stimulus
CHINA ADVISORY · Report · 17 Nov 2020

We saw more weakening in economic activity – but very modest. Cement prices notched up slightly YoY but industrial glass prices are dropping, as are blast furnace operating rates. On the consumer side, traffic congestion fell slightly while property transactions dipped sharply. Retail car sale...

Week November 10
CHINA ADVISORY · Report · 11 Nov 2020

We may be seeing beginning signs of the industrial/FAI-driven stimulus weakening, but the data is mixed. Cement prices are declining but float glass prices jumped. Rebar inventory growth is slowing. One theory is that the early stages of property development, which use cement, have tapered off wh...

The cancellation of the Ant IPO and the Chinese financial system
CHINA ADVISORY · Report · 04 Nov 2020

What does the cancellation of the Ant IPO mean for China’s global financial integration and for China’s economy? In a word, not much on the integration front, due to significant and continuing financial flows. Within China, though, the decision was a sign of policy confusion and an affirmation of...

Covid-19 weekly update − week ending November 2, 2020
CHINA ADVISORY · Report · 03 Nov 2020

We may be seeing the beginning signs of the industrial/FAI-driven stimulus weakening. Cement, rebar and float glass prices are weakening, and blast furnace operating rates are trending lower. This may simply be the end of the peak, and continued lending from the state banks will allow the stimulu...

Covid-19 weekly update - week ending October 26, 2020
CHINA ADVISORY · Report · 28 Oct 2020

The weakness we have been seeing in the consumer sector continues, but it may be flattening out. There is a slight downward trend in traffic congestion, auto sales and other sectors, but it is very mild. The strength remains in the industrial/infrastructure area, but the fact that consumers appea...

Response to Ray Dalio
CHINA ADVISORY · Report · 26 Oct 2020

Ray Dalio published an op-ed in the Financial Times last week, "Don’t be blind to China’s rise in a changing world", October 23, to which I take issue. He displays a distinct lack of subtlety when it comes to knowledge of China and makes broad statements that are either exaggerations or are outri...

How are Chinese banks in the U.S. responding to decoupling?
CHINA ADVISORY · Report · 23 Oct 2020

U.S.-China relations have put the Chinese banks in an awkward position. They need to maintain their international presence but reduce the risks of exposure to the United States to prepare for the chance of further decoupling between the two countries – even under a Biden administration. To that e...

Covid-19 weekly update – week ending October 19, 2020 – further signs of mild weakening among consumers
CHINA ADVISORY · Report · 20 Oct 2020

The trends continue of mild growth in the state sector and growing weakness in the consumer sector. Generally weakening growth in key consumer metrics, including auto sales, congestion, and mixed film attendance, suggest that the demand side is still a problem for China. Much of the recovery is ...

Shenzhen's challenge to Hong Kong
CHINA ADVISORY · Report · 16 Oct 2020

Beijing has just thrown its political and financial backing to Shenzhen in a clear slap in the face to Hong Kong. Xi Jinping gave a speech in Shenzhen this week promoting Shenzhen. As a result, Hong Kong Chief Executive Carrie Lam postponed her state of the union address, although later reporting...

Covid-19 weekly update - week ending October 11
CHINA ADVISORY · Report · 13 Oct 2020

October 1 through 8 was China’s Golden Week, when families gather to celebrate the holidays and presumably spend money. Despite the holiday period, though, consumer spending was relatively flat. Bloomberg did point out some positive trends, including higher major retail and catering enterprise sa...

China’s weak recovery
CHINA ADVISORY · Report · 09 Oct 2020

China’s recovery has been driven by rapid improvement in the Covid situation, along with monetary injections, state-driven fixed asset investment, and a strong property market. Fourth quarter activity will be constrained, however, by weak disposable income, continued unemployment, and growing deb...

Covid-19 weekly update - week ending October 5, 2020
CHINA ADVISORY · Report · 06 Oct 2020

Generally weakening growth in key consumer metrics, including auto sales, congestion, and film attendance, suggest that the demand side is still a problem for China. Much of the recovery is being driven by fixed asset investment, which is underscored by property sales. The recapitalization (throu...

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