China has an ambitious industrial upgrading plan, called Made in China 2025, which targets Chinese leadership in about 30 technological segments. In this video interview Dan explains how the government aims to achieve this, how this plan differs from previous Chinese policy goals, and whether it is likely to succeed.
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Gavekal Research
July 17, 2018
Video: China's Technology Strategy
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Gavekal Dragonomics
July 16, 2018
Time To Get Fiscal?
China’s latest data reinforce an economic trajectory that is getting worrisome for policymakers, with weaker domestic activity, an escalating trade conflict and a greater-than-expected slowdown in credit growth. Further easing of monetary policy is definitely in the cards, but there is now rising pressure on Beijing to step up fiscal spending.
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Gavekal Dragonomics
July 13, 2018
The Biggest Winners In Real Estate
China’s real-estate developers are getting hammered in stock and credit markets. But the largest of these firms are well-placed to ride out current strains, and are the main beneficiaries of accelerating consolidation and government policy. As the Chinese property market matures, the winners are likely to be a small group of the largest companies.
Trade war
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Gavekal Dragonomics
July 2, 2018
The End Of Normal Trade
The US may have backed down from imposing new restrictions on Chinese investment in the US. But it would be wrong to see this as a de-escalation of the US-China trade conflict. In this piece, Andrew argues that the tariffs taking effect Friday will mark the end of two decades of normal US trade with China, and the return of political uncertainty.
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Gavekal Dragonomics
June 27, 2018
How China Can Fight Back In The Trade War
China is a veteran in economic warfare. As the US prepares to hit China with trade and investment penalties, China can draw on years of experience and an arsenal of regulatory tools to craft a response. The local operations of US companies present a large target. In this piece, Yanmei explains how China is most likely to retaliate against the US.
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Gavekal Research
June 18, 2018
Trade War Escalates. What’s Next?
With the imposition of tariffs on US$34bn of imports from China last Friday, the US has expanded the trade war it launched two weeks earlier with steel and aluminum tariffs, mostly on friendly countries.
Policy and the cycle
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Gavekal Research
June 21, 2018
Easing Won’t Help Chinese Equities
When the White House rattled global markets earlier this week with its threat markedly to escalate the international trade war, mainland Chinese stock markets were hit the worst. That is not surprising, considering that the US administration’s threats were targeted specifically at imports from China.
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Gavekal Dragonomics
June 15, 2018
Parsing The Slowdown In Credit Growth
China’s credit growth slowed to a new low in May, but the deceleration in real economic activity remains a moderate one—although sharp contrasts are now appearing among different indicators. In this piece, Chen Long explains why credit growth is likely to continue to slow, and how that will affect different parts of the economy.
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Gavekal Research
May 31, 2018
China Comes Off The Boil
Chinese growth surprised on the upside in the early part of the year, but Andrew thinks that a gradual loss of altitude is now unfolding. This is mainly due to slowing property market activity, which increasingly displays late-cycle characteristics.
The financial system
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Gavekal Dragonomics
May 15, 2018
Bond Yields Have Further To Fall
After a sharp decline in March and April, Chinese onshore bond yields have bounced back over the past three weeks. But based on the latest economic data and policy signals, Chen Long thinks that bond yields have further to fall. Growth is continuing to slow, and the central bank seems comfortable with a slightly more accommodative stance.
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Gavekal Dragonomics
May 1, 2018
Punishing People, Not Institutions
The strategy behind China’s financial overhaul is becoming clear. It is helping banks by allowing an extended transition to a new set of rules. But prosecutions of executives are also ramping up. This is the opposite of what some Western countries did after the 2008 crisis: people, not institutions, are paying the price for financial risk-taking.
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Gavekal Research
April 18, 2018
A First Step Towards Easing
The Chinese central bank is no longer in full policy tightening mode. That’s good news for Chinese bank shares. Shortly after government statisticians released economic data for the first quarter on Tuesday, the People’s Bank Of China announced a 100bp reduction in bank reserve requirement ratios.
The property market
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Gavekal Dragonomics
June 29, 2018
A Rethinking Of Housing Subsidies
China's government, worried about continued rapid growth in housing prices, is now reconsidering a major program for subsidizing housing sales. As Rosealea explains, this policy change shows the government is still more focused on curbing frothy housing prices than on boosting growth, and will weigh on housing sales in the rest of 2018.
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Gavekal Dragonomics
May 29, 2018
Property Tightening Is Back
Chinese government policy for the property market is turning tighter, a shift that will weigh on housing sales and construction activity in the rest of 2018. But Rosealea cautions against overreacting, arguing that the downcycle in property is still likely to be a shallow one, and that policy will loosen again once market conditions weaken.
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Gavekal Dragonomics
February 28, 2018
Is Construction Preparing An Upside Surprise?
Since markets reopened after the Chinese New Year holiday, the prices of commodities tied to China’s construction cycle have been picking up. This optimism could be justified: construction fundamentals are solid and policy interventions are mostly positive. In this piece, Rosealea explains the upside risks for construction activity in early 2018.
Technology
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Gavekal Dragonomics
June 8, 2018
The 5G Dream Will Not Be Denied
Now that the US has backed away from putting crippling sanctions on Chinese telecom-equipment firm ZTE, China looks well-placed to achieve its dreams for 5G, the next wave of mobile technology. Huawei and ZTE may be effectively blocked from the US market, but they are well-placed to grab a significant share of the global market for 5G.
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Gavekal Dragonomics
June 4, 2018
Marshals Over Markets: China Tightens Cybersecurity
Our first DeepChina report takes a close look at Beijing's efforts to exert tighter control over the internet, the flow of commercial data, and the security of its technological infrastructure. China ia nor alone in toughening regulation, but its efforts are far more expansive, and raise more serious concerns for multinational firms.
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Gavekal Dragonomics
May 3, 2018
Seizing The Moment For Artificial Intelligence
As the US and China try to position themselves for technological leadership, both are now focusing on artificial intelligence. In this piece, Andrew answers the questions of the moment: What is artificial intelligence anyway? Why does China seem to be doing so well in artificial intelligence? And how should we think about this US-China rivalry?
Consumer trends
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Gavekal Dragonomics
June 20, 2018
The Restructuring Of Retail
China’s rapid shift to online shopping is emptying malls and forcing retailers to close hundreds of stores. But at the same time, the big internet companies are investing billions to seek new growth from brick-and-mortar stores. In this piece, Ernan explains how Chinese retail is restructuring and where the growth opportunities are.
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Gavekal Dragonomics
April 20, 2018
New Jobless Rate, Same Old Problems
China has moved to rid itself of a longstanding statistical embarrassment, replacing its discredited unemployment data with a new survey based on international standards. But as Ernan explains, the old problems have not gone away: the new jobless rate is still implausibly low and stable, and likely still subject to political manipulation.
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Gavekal Dragonomics
December 7, 2017
The End Of The Preschool Boom
China’s busy and ambitious parents have driven a huge boom in private preschools, with the number of students roughly tripling over the past decade. But the sector is now clouded by allegations of child abuse, which will only strengthen a shift to tougher regulation and public provision of preschools. For now, the private preschool boom is over.
Corporate China
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Gavekal Research
July 11, 2018
Policy Headwinds For Chinese Stocks
Chinese equities have finally had a few solid trading sessions after their steep decline in the latter half of June. But the CSI 300 index is still down -14% year-to-date, and betting on a rebound from here looks unwise.
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Gavekal Dragonomics
January 29, 2018
Mixed Consequences From The Profit Boom
2017 was a great year for China’s industrial sector, with profits up 21%, but the gains were highly concentrated in mining, metals and materials. This pattern has a mix of important consequences, as Thomas explains in this piece: it’s good news for financial risk, less good news for households, and bad news for corporate investment.
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Gavekal Dragonomics
January 9, 2018
The Working-Capital Heist
Amid the ups and downs of China's recent investment cycles, one trend has stayed constant: the slowdown in private-sector investment. In this piece, Thomas shows that a key problem is state firms routinely delaying payments to their private suppliers, forcing them to hold huge reserves of working capital that can’t be productively invested.
The commodity landscape
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Gavekal Dragonomics
April 4, 2018
How Steel Survived The Battle For Blue Skies
It’s been a wild winter for China’s steel industry, with huge swings in output and prices. The main culprit is the aggressive official campaign to reduce air pollution—and the industry’s creative responses to it. Their back-and-forth has not hurt underlying growth much, but the resulting volatility in steel prices is not going away.
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Gavekal Dragonomics
March 28, 2018
The Pain Of Power Producers
The rebound in commodity prices since 2016 has been a boon for much of China’s industrial sector—but coal-burning power plants have been big losers. Coal prices cannot go much higher without causing serious financial distress. This means that policy should now be shifting to favor power producers, by ensuring coal prices do not climb further.
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Gavekal Dragonomics
February 22, 2018
Taming The Inflation Risk From Pork
What are the odds that China has a surprise jump in inflation this year? In China, surges in the CPI are usually driven by food—particularly highly cyclical pork prices. But while food inflation is likely to turn positive this year, Ernan argues that the odds of an inflation spike are low, as farm consolidation has tamed the pork price cycle.
Political priorities
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Gavekal Dragonomics
May 23, 2018
Urbanization Without Migration
The story of China’s urbanization has long been the migration of people from the country to the cities. Not anymore: as Ernan explains, rural migration has slowed sharply, and is being replaced by the reclassification of rural areas into urban ones. Policymakers now prefer this “local urbanization,” even though it delivers less income growth.
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Gavekal Dragonomics
March 20, 2018
Beyond Anti-Corruption
China’s legislature has approved the creation of a national “supervision” system, an arm of government equal to the executive, legislative and judicial branches that is charged with overseeing the vast public sector. As Yanmei explains, the new system transforms Xi Jinping’s signature anti-corruption crusade into something even more ambitious.
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Gavekal Research
March 19, 2018
The New Economic Team
China’s top economic team for the next five years was released this morning, and the theme seems to be “steady as she goes”, with a vote of confidence for experts in their fields. Chen Long has looked at the list, which includes a new PBOC governor, and offers his take on what this means for financial policy in the years ahead.
China in the world
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Gavekal Research
June 13, 2018
The Way Ahead For North Korea
After the Trump-Kim summit, North Korea's commitment to denuclearization still remains a fiction. Future negotiations will be mostly about stringing along the US administration. While Washington and Pyongyang talk, Beijing and Seoul will continue to try to normalize the existence of a nuclear-armed North Korea and cement peace.
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Gavekal Dragonomics
June 7, 2018
Is A Crisis Brewing Over Taiwan?
Ominous clouds are gathering over Taiwan, as China steps up displays of military force and its campaign of international isolation. Could this escalate into a replay of the 1995-6 Taiwan Strait crisis, or something even worse? In this piece, Yanmei assesses the rising risks, but argues that military conflict is still a remote possibility.
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Gavekal Dragonomics
May 9, 2018
What’s Really At Stake In The US-China Rivalry
It is still possible that the US and China will strike a deal to avert threatened tariffs. But as Arthur argues in this piece, any deal will be mostly cosmetic. The tension between the two is not mainly about trade, but about China’s challenge to US global dominance. The US will almost certainly keep trying to counter China’s efforts to gain power.
Chartbooks: The big picture in pictures
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Gavekal Dragonomics
November 28, 2017
The Chinese Consumer: Outlook & Trends 2017
In our annual review of the Chinese consumer, Ernan outlines the short-term outlook and longer-term trends in household spending. This chartbook explains why consumption growth has been a bit disappointing in 2017, why the outlook for 2018 is better, what are the drivers of consumption upgrading, and how the transition to online is playing out.
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Gavekal Dragonomics
November 2, 2017
Housing & Construction Review 2017
In her annual overview, Rosealea summarizes the outlook for the housing market and construction activity in China. This concise chartbook reviews the drivers of growth in 2017, digs into the key indicators and explains the core scenario for 2018: a modest correction in housing sales and prices, and a gradual slowdown in construction activity.
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Gavekal Dragonomics
August 17, 2017
The China Inc. Annual Report 2017
This chartbook outlines the recent core trends in China’s corporate sector. There has been a major rebound in revenues and profits, but most firms are using this to repair balance sheets rather than boost capex. So leverage is down and debt servicing ability is up. But the profit cycle is now likely at its peak, as is firms’ ability to deleverage.
Latest multimedia
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Gavekal Research
July 17, 2018
Video: China's Technology Strategy
China has an ambitious industrial upgrading plan, called Made in China 2025, which targets Chinese leadership in about 30 technological segments. In this video interview Dan explains how the government aims to achieve this, how this plan differs from previous Chinese policy goals, and whether it is likely to succeed.
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Gavekal Research
July 12, 2018
Audio & Transcript — Gavekal Research Call July 2018
In yesterday’s call Arthur Kroeber outlined his view on why President Donald Trump’s trade war is not a bluff, and is only likely to escalate leading up to the US midterm elections in November.
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Gavekal Research
April 18, 2018
Audio & Transcript — Gavekal Research Call April 2018
During yesterday’s monthly call, Arthur Kroeber addressed rising geoeconomic and geopolitical tensions between the world’s two biggest economies.