More constructive rhetoric suggests the US and China may be about to strike a truce on tariffs and market access. However, that does not mean they are about to bury the hatchet. Powerful groups in Washington want to contain China’s rise as a technological power, and the US has many tools at its disposal even if it drops tariffs.
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Gavekal Research
February 15, 2019
Video: Containing China's Tech Ambitions
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Gavekal Dragonomics
February 14, 2019
After The Crash In Car Sales
Is the long boom in China’s car market finally over? In this piece, Ernan takes stock of the prospects for auto sales after 2018’s historic decline. Since that drop was caused by expiring stimulus policies, sales can stabilize and recover. Future growth, however, is likely to be much slower than the industry has become accustomed to.
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Gavekal Dragonomics
February 12, 2019
The Long Arm Of US Export Controls
While investors eye the progress of US-China talks to avert tariff hikes, the US is mobilizing on another front. In this piece, Dan explains how the US is preparing for more aggressive use of export controls to disentangle the US and Chinese tech sectors. This can certainly hurt Chinese firms, but will also affect US and other tech companies.
Policy and the cycle
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Gavekal Dragonomics
January 21, 2019
Not Out Of The Woods Yet
China’s growth in the fourth quarter slowed to 6.4%. There were some bright spots, notably the resilience of the property market. However, the export sector was weak, and the removal of policy constraints on industry gave a mixed picture. All in all, Beijing’s policy measures so far have at best only cushioned the impact of the slowdown.
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Gavekal Dragonomics
January 7, 2019
More Than RRR Cuts Needed To Stabilize Growth
After the central bank's latest cut in bank reserve requirements, the key question is not whether Beijing will continue to loosen policy, but when its measures will begin to have a visible impact. In this piece, Chen Long argues that it will take several more months of easing before the economy and stock market begin to feel the benefit.
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Gavekal Dragonomics
December 17, 2018
2019 Will Get Off To A Rocky Start
China’s growth data continue to disappoint, as Beijing’s easing policies have not still gotten traction. In this piece, Chen Long explains his outlook for 2019: more easing is coming, but it will take a while for those policy changes to deliver a stabilization in growth. That means there will likely be more bad economic news through early 2019.
Trade war
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Gavekal Dragonomics
January 4, 2019
China And The US Still Hold The Keys To Markets' Fate
In 2018 liquidity tightening in the US and China combined with trade war fears to make a miserable year for markets. In 2019 the same forces will be at work but the outcomes may differ. The key questions are: can the US and China work out a trade deal? How bad is the Chinese slowdown and how will Beijing respond? And how much will the Fed tighten?
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Gavekal Dragonomics
December 12, 2018
The Supply-Chain Migration Begins
The US-China trade conflict has changed the equation for multinational companies’ supply chains in China. Higher tariffs and increased uncertainty are pushing some firms to invest more in other locations. But Dan argues that most firms have strong reasons to stay in China, so the shift in supply chains will be more of a trickle than a flood.
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Gavekal Dragonomics
November 29, 2018
Germany Is Rethinking But Not Rejecting China
As the US-China trade conflict drags on, both sides are looking to Europe, particularly Germany, for support. Germany does share US concerns about China’s protectionism and expansionism. But it still sees China as an economic boon and is committed to engagement. Berlin is therefore unlikely to fully take the side of either Beijing or Washington.
The financial system
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Gavekal Dragonomics
January 23, 2019
The Next Liquidity Squeeze On Private Firms
China’s private firms suffered a big liquidity squeeze in 2018 as regulators cracked down on shadow financing. But in 2019 they must also contend with the threat of another liquidity squeeze: state-owned enterprises hoarding cash and delaying payments. Unless officials force them to stop, SOEs could squeeze another RMB1trn from private firms.
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Gavekal Dragonomics
January 16, 2019
The Incredible Shrinking Current Account
China once had the world’s largest current-account surplus, but that surplus headed rapidly toward zero in 2018. In this piece, Chen Long unpacks the structural and cyclical factors behind this shift. He doubts China is headed for a persistent current-account deficit just yet, but thinks the smaller surplus will make the currency more volatile.
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Gavekal Dragonomics
November 15, 2018
Solving The Private Sector's Liquidity Crisis
China’s leaders are now falling over themselves to show love for the private sector. This political rhetoric has a practical purpose: easing the financial stress on private firms that is freezing up the corporate bond market and driving down stock prices. In this piece, Thomas examines the tools for solving the private sector’s liquidity crisis.
The property market
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Gavekal Dragonomics
January 14, 2019
It's Not All Bad News In Property
China’s property market keeps delivering bad news: declines in housing sales, land sales and prices have deepened in recent months. But Rosealea sees some positive signs in easing local government policies, lower bank funding costs, and strong momentum in construction. In this piece, she explains why she is not joining the property-market bears.
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Gavekal Dragonomics
November 19, 2018
Housing & Construction Review 2018
China’s property market has had a record-breaking run, but where is it headed next? In this concise chartbook, Rosealea delivers her annual overview of the key drivers of housing sales and construction activity and explains the outlook for 2019. An overdue correction in sales is coming, but construction should hold up relatively well.
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Gavekal Dragonomics
September 6, 2018
The Property Slowdown That Wasn't
While China’s government is talking tough about containing its frothy property market, the market does not appear to be listening. Housing sales are still growing, price rises are accelerating and construction activity is robust. In this piece, Rosealea explains why property has outperformed, and updates her outlook for the rest of 2018.
Technology
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Gavekal Research
January 29, 2019
A Huawei-Scale Problem
The charges that US prosecutors have now filed against telecom equipment supplier Huawei are similar to those thrown at two other Chinese tech firms last year. The eventual outcome is likely to be similar: the imposition of export controls that will threaten Huawei’s survival and force it to accede to a restrictive deal with the US government.
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Gavekal Dragonomics
December 19, 2018
Why China Can Succeed In Tech
Technology is at the heart of the US-China trade conflict. The US fears that China will challenge its technological leadership, and those fears are not without foundation. In this piece, Dan argues that China is in fact likely to succeed in many of its technological goals—but because of successful companies rather than big government plans.
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Gavekal Dragonomics
November 21, 2018
The Chinese Internet Ventures Abroad
Chinese internet companies are now the only credible challengers to the global hegemony of US internet companies. In this piece, Dan explains that, although they may not directly challenge Google or Facebook, the Chinese firms are pushing abroad and are well on their way to becoming a formidable presence in developing countries.
Consumer trends
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Gavekal Dragonomics
January 9, 2019
A Cold Winter In China's Job Market
China’s job market was an early casualty of the US-China trade conflict, with industrial layoffs accelerating to a pace last seen in 2015-6. But Ernan argues that the situation is worse this time, as service-sector employers are being squeezed by tighter regulations. The weaker job market means a worsening outlook for household spending in 2019.
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Gavekal Dragonomics
November 27, 2018
The Chinese Consumer In 2018
In our annual review of the economic performance of the Chinese consumer, Ernan examines the key issues affecting households. This chartbook covers the reasons for the decline in car sales, the rising burden of household debt, the effects of the income-tax cut, the prospects for consumption upgrading—and where all these trends are headed in 2019.
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Gavekal Dragonomics
September 3, 2018
An Overdue Tax Cut For Households
Facing trade conflict with the US and a slowdown in credit growth, China is under pressure to use fiscal policy more aggressively to support the economy. On Friday, the National People’s Congress delivered on at least part of the solution, passing a large cut in personal income taxes. In this piece, Ernan explains the impact of this tax cut.
Chinese equities
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Gavekal Research
January 8, 2019
What To Watch In Chinese A-Shares
Chinese A-shares were the world’s worst-performing major equity market in 2018. For the market to rally in 2019, three factors will need to show signs of clarity and improvement: China’s macro policy direction, liquidity squeezes in the bond and equity markets, and the trade war with the US.
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Gavekal Research
December 5, 2018
Trade, Earnings And The Chinese Equity Market
Yesterday’s plunge in US equities was partly attributed to fears that the trade war with China is far from settled. A similar mood is taking hold in China: news of the trade truce spurred a rally in Chinese equities on Monday, but gains softened on Tuesday. However, other factors are also weighing on investors in the Shanghai and Shenzhen markets.
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Gavekal Dragonomics
November 13, 2018
The Next Wave Of SOE Consolidation
Chinese officials are making another call to renew reform of state-owned enterprises. But a return to privatization is far away: the most concrete aspect of SOE reform is the guided restructuring of central-government-controlled firms. In this piece, Yanmei explains how big SOEs are using M&A in different ways to achieve consolidation.
The commodity landscape
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Gavekal Dragonomics
December 10, 2018
Steel Prices Have Overshot
Chinese steel prices suffered their biggest decline in two years in November, falling about 20% over the course of the month. That correction was driven by a combination of a big increase in supply along with worries about future demand. In this piece, Rosealea argues that both problems will be short-lived, and that steel prices can rebound.
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Gavekal Dragonomics
November 8, 2018
The Many Misjudgments Of Supply-Side Reform
Supply-side reform, Xi Jinping’s signature policy of cutting excess capacity in steel, coal and other industries, is widely considered a success. Yet Rosealea’s extensive review finds that this campaign was marred by repeated misjudgments that caused undesired spikes in prices. The justifications for continuing the policy are now wearing thin.
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Gavekal Dragonomics
September 25, 2018
The Backlash Against The War On Air Pollution
Steel prices are high thanks to a tough government plan to reduce smog by shutting down metals production—but the rise in prices has recently started to reverse as uncertainty over these policies increases. Rosealea reports on the steel industry’s new pushback against strict output curbs, and why these controls are likely to become more flexible.
Political priorities
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Gavekal Dragonomics
September 10, 2018
The Drive For Affordable Drugs
China’s healthcare reforms have created new opportunities for global pharmaceutical firms and made healthcare a favored sector for many investors. But as Ernan explains, the government’s top priority these days is controlling healthcare costs, especially drug prices. That trend makes it trickier to profit from China’s healthcare growth story.
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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.
DeepChina
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Gavekal Dragonomics
December 4, 2018
Paying For Industrial Policy
China’s ambitious goals to lead in the technologies of the future are backed by huge resources. Since late 2014, there has been an explosion in state-backed funds targeting high technology. Our latest in-depth DeepChina report digs into these government guidance funds to find out how they work, and how successful they will be.
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Gavekal Dragonomics
August 8, 2018
Assets And Albatrosses On The Maritime Silk Road
China is going port-crazy in Southeast Asia. Chinese firms are now engaged in building 15 port projects in the region, at a total cost of more than US$50bn. Will these bricks in the Maritime Silk Road prove to be valuable assets, or financial black holes? In our new DeepChina report, Lance Noble and Tom Miller find the answer is: some of both.
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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.
Chartbooks: The big picture in pictures
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Gavekal Dragonomics
November 19, 2018
Housing & Construction Review 2018
China’s property market has had a record-breaking run, but where is it headed next? In this concise chartbook, Rosealea delivers her annual overview of the key drivers of housing sales and construction activity and explains the outlook for 2019. An overdue correction in sales is coming, but construction should hold up relatively well.
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Gavekal Dragonomics
October 3, 2018
How Demographics Are Shaping China's Future
Where is China heading as it undergoes demographic change of unprecedented speed and scale? In this chartbook, Ernan offers a comprehensive guide to the unfolding transformation of the nation’s population, focusing on changes in family-planning policy, the implications of an aging society, and the shifting patterns of migration.
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Gavekal Dragonomics
September 20, 2018
The China Inc. Annual Report 2018
In this chartbook, Thomas outlines the key trends in the fundamentals of China’s corporate sector. Growth in sales and profits has stayed stronger for longer, but is driven mainly by high materials prices. A rebound in capex is starting to fade. Deleveraging continues but more slowly, and may not last much longer as profits cool and debt rises.
Latest multimedia
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Gavekal Research
February 15, 2019
Video: Containing China's Tech Ambitions
More constructive rhetoric suggests the US and China may be about to strike a truce on tariffs and market access. However, that does not mean they are about to bury the hatchet. Powerful groups in Washington want to contain China’s rise as a technological power, and the US has many tools at its disposal even if it drops tariffs.
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Gavekal Dragonomics
January 11, 2019
Video: China In 2019
Washington and Beijing will likely find some kind of accommodation on trade and China’s economy will suffer a tough first quarter that sees the authorities adopt a range of counter-cyclical measures.
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Gavekal Research
November 14, 2018
Video: The Battle For Chinese Tech
China imports more semiconductors than it does crude oil, highlighting its dependence on foreign technology and know-how. The US recognizes this weakness and is intent on squeezing China’s tech sector before it is able to produce the most advanced chips at home and in scale. For this reason, tech sits at the heart of the US-China tensions.