Gavekal Dragonomics
September 21, 2017
The red-hot growth of online retailing in China has cooled in recent years, but it heated up again in the first half of 2017. Ernan argues this is likely a blip, as the fundamentals show online retail is an increasingly mature market. Leading firms are now focusing on the convergence of offline and online retail as the next big opportunity.
Gavekal Dragonomics
September 18, 2017
To reduce air pollution, China says it will run northern steel mills at just half their capacity this coming winter. Prices of steel and other metals initially rallied on the news, but now are coming off. In this piece, Rosealea argues that metals prices have seen the top of their range, and explains why capacity cuts won’t push prices higher.
Gavekal Dragonomics
September 15, 2017
Is China’s financial system going to collapse? The speed of credit growth, the proliferation of financial institutions and financial products, and the chaotic and fragmentary data all make it reasonable to fret that China is on the verge of catastrophe. This issue of the CEQ is our attempt to bring clarity to this mystifying landscape.
Gavekal Dragonomics
September 14, 2017
China’s economic data for August confirmed that growth has stepped down a bit in the third quarter. The long-anticipated slowdown is for real, but is also still quite gradual. Andrew argues that policymakers will be comfortable with this situation, and that we should not expect a big change of direction after the Party Congress in October.
Gavekal Research
August 15, 2017
China’s first monthly data for the second half of 2017 showed growth momentum softening. While reflation peaked in the first half of 2017, the story is still that the exit from reflation will be very slow and gradual. Economic policy will be largely on hold in this period: tightening has peaked, but the switch to easing is still a long way away.
Gavekal Research
July 17, 2017
Official statements following the conclusion of Beijing’s National Financial Work Conference signal that the recent tightening cycle has now peaked and that market interest rates are likely to fall from current levels, argues Chen Long. The story remains that while Chinese reflation has peaked, the ensuing slowdown will be moderate and gradual.
Gavekal Dragonomics
August 31, 2017
Housing prices have had a wild ride in China this year, but with sales now cooling, prices are also losing steam. In this piece, Rosealea argues that the coming correction in housing prices will be a moderate one—probably about half of the 10% nationwide decline in 2014—as inventories are still low and policies are not particularly tight.
Gavekal Dragonomics
July 5, 2017
It’s no secret that managing the housing market is a core part of China’s economic policy. But as Rosealea explains in this piece, government’s role in supporting housing sales is now even greater than most realize. The government is buying millions of unsold housing units directly from developers, and the scale of the program is only increasing.
Gavekal Dragonomics
June 20, 2017
China’s housing market is proving quite resilient this year, with sales growth perking up in May. In this piece, Rosealea argues the current sales recovery is broad-based: growth is strong in both central and coastal provinces. While restrictions on speculative purchases are spreading to some smaller cities, this should have only a moderate impact.
Gavekal Dragonomics
June 2, 2017
The key event in China’s political calendar is now just a few months away. The 19th Party Congress will reveal who will join top leader Xi Jinping in the ruling Politburo Standing Committee, and in the process provide clues to China’s political future. In this piece, Yanmei outlines different possible scenarios and explains their implications.
Gavekal Dragonomics
January 10, 2017
In 2017, the Communist Party will hold its 19th Congress, an event that will set the political framework for Xi Jinping’s second term as China’s leader, and beyond. The big question for the Congress is how much Xi will be able to change the rules of elite politics to strengthen his own power. This piece offers a guide to those rules of the game.
Gavekal Dragonomics
October 28, 2016
Economic policy in China is now entirely beholden to political demands for stability ahead of next year’s Communist Party Congress. Whether things change after depends on how much “core” leader Xi Jinping further strengthens his power, and how much he cares about reform. In this piece, Arthur assesses the outlook after this week’s Sixth Plenum.
Gavekal Research
September 11, 2017
The last renminbi bears are throwing in the towel: with Chinese corporates unwinding the dollar holdings they have accumulated over the last two years, the renminbi is up strongly. Although the PBOC is for now happy to step back and let appreciation happen, there are still limits to how much it will want the trade-weighted exchange rate to rise.
Gavekal Research
August 7, 2017
Since 2016 China has pursued an opportunistic currency strategy, taking advantage of periods of US dollar weakness to steer a depreciation of the renminbi’s trade-weighted exchange rate. But over the last couple of months that policy has shifted, as it looks as if the authorities are satisfied with the renminbi’s current trade-weighted value.
Gavekal Research
June 5, 2017
Over the past week and a half, the renminbi has appreciated 1.1% against the US dollar in the onshore market, and 1.5% offshore, where the PBOC has also engineered a spike in short-term interest rates. It seems China wants to send a signal about the renminbi, but markets are having trouble decoding what it is.
Gavekal Dragonomics
August 29, 2017
Despite the recovering economy, household consumption in China has slowed this year rather than accelerated. As Ernan explains in this piece, the culprit is the surge in mortgage debt, which has meant a sharp increase in the burden of mortgage payments on household budgets. While income growth is solid, less of the gains are available to spend.
Gavekal Dragonomics
August 3, 2017
Chinese outbound tourism is having a rough 2017: growth in international travelers is down to about 6%, from 20%-plus growth in earlier years. So has something fundamental in the Chinese tourism story changed, or is this just a blip? In this piece, Ernan argues this slowdown is largely temporary, caused by events in key destinations in Asia.
Gavekal Dragonomics
July 11, 2017
When you buy a house, you also buy things to go in it—yet the rebound in housing sales over the past 18 months has not done much for sales of major home appliances. As Ernan explains in this piece, Chinese demand for washing machines, refrigerators and televisions has now more or less peaked. The main exception is the humble air conditioner.
Gavekal Dragonomics
July 27, 2017
The profits of China’s industrial sector handily beat expectations in the first half of 2017, rising 22% YoY. In this piece, Thomas surveys the profit cycle’s path over the next 12 months, which mirrors that for the overall economy: a slowdown in the rest of 2017 and into 2018, but quite a gradual one with little risk of a profit recession.
Gavekal Research
June 21, 2017
After three years of teasing, MSCI has agreed to include Chinese domestically-listed stocks, or A-shares, in its main equity indexes. Yet, hopes that MSCI inclusion will quickly spur huge capital inflows and a sustained domestic bull market, are almost certainly wide of the mark.
Gavekal Dragonomics
May 22, 2017
The recent financial crackdown may give the impression that “China is finally getting serious about corporate deleveraging.” This impression is wrong: while leverage is already declining, this is likely to stop in 2017. Worries about zombie companies have also faded as rising profits and falling rates make it easier to service corporate debt.
Gavekal Dragonomics
August 9, 2017
China’s market for gasoline, diesel and other oil products has gotten increasingly competitive since the government started allowing private-sector refiners to import their own crude oil. But the government has now put additional liberalization on hold, which will halt gains for independent refiners and benefit big state enterprises.
Gavekal Research
August 1, 2017
China’s property market is once again running hotter than expected, pushing prices of iron, steel and coal up by 15%-40% over recent weeks. But the gradual downward trend in property has not changed. And with high prices and government intervention both stimulating more commodity supply, the potential for further price gains is limited.
Gavekal Dragonomics
June 7, 2017
China’s iron ore price is now down by about a third from its peak in February. In this piece, Rosealea reassesses the market in light of this correction, and argues that the price is unlikely to stay substantially below US$60 per ton for long. That’s because domestic miners responding to low prices by cutting output, helping rebalance the market.
Gavekal Dragonomics
July 19, 2017
The flow of cross-border M&A from China is reviving as the crackdown on capital flight eases. But as Yanmei argues, the flow of deals is unlikely to repeat the stunning growth surge in 2016, as the government has now reasserted its control over outward direct investment.
Gavekal Research
July 3, 2017
Last week Washington soured its relationship with China by imposing sanctions on some Chinese companies and individuals that do business with North Korea and announcing a big arms sale package for Taiwan. Rumors also continue to percolate that Trump is preparing for more aggressive trade action. Arthur discusses whether it is time to worry.
Gavekal Dragonomics
May 10, 2017
Ahead of next week’s Belt and Road Forum in Beijing, Tom Miller provides an update on the progress of Xi Jinping’s signature foreign policy. More than three years after its launch, China’s Belt and Road Initiative is starting to deliver useful infrastructure, and is clearly boosting construction volumes and stimulating new investment.
Gavekal Dragonomics
June 27, 2017
At the close of 2016, Xi Jinping’s government vowed to speed up economic reform, and declared “breakthroughs” would be made in overhauling state-owned enterprises. Half a year on, these bold claims have not been matched by actions. The numerous reform trials can give the impression of activity, but real change remains a distant prospect.
Gavekal Dragonomics
May 3, 2017
Optimism about China’s growth is now higher than it has been for years, after the notable recovery in the last couple of quarters. But in this piece, Andrew argues China still can’t escape a further growth slowdown, because its continued reliance on state-driven investment is sapping productivity growth and undermining the private sector.
Gavekal Dragonomics
March 21, 2017
After forty years of market reforms, state-owned enterprises retain an exceptionally large role in China’s economy. Though their financial performance is deteriorating and their debts are growing, SOEs’ share of the economy is rising rather than falling. In this chartbook, Andrew pulls together the data to show the true state of China’s SOEs.
Gavekal Dragonomics
September 15, 2017
Is China’s financial system going to collapse? The speed of credit growth, the proliferation of financial institutions and financial products, and the chaotic and fragmentary data all make it reasonable to fret that China is on the verge of catastrophe. This issue of the CEQ is our attempt to bring clarity to this mystifying landscape.
Gavekal Dragonomics
June 8, 2017
China is attempting to become Asia’s new leader. The high costs of confronting it mean that the US’s regional influence is likely to dwindle. But widespread distrust of China means that many countries will continue to prefer investment from the EU, US and Japan. This issue of China Economic Quarterly investigates China’s role in the Asia-Pacific.
Gavekal Dragonomics
March 15, 2017
China’s growing economy has brought its people longer lives, but also a new set of health problems. Though the government is trying to improve coverage, change is happening slowly. So there is a growing opportunity for private companies to fill the gap. This issue of China Economic Quarterly investigates the nation’s health problems, and solutions.
Gavekal Research
July 18, 2017
China’s onshore financial markets are opening up. Admittedly, neither last month’s inclusion of Chinese A-shares in MSCI’s benchmark indexes, nor this month’s opening of the Bond Connect scheme, will change the world immediately. But together they signal that Beijing is serious about opening its capital markets to foreign investors.
Gavekal Research
July 13, 2017
Recent efforts to open up China's stock and bond markets have granted deeper access for foreign investors. In Tuesday's conference call Thomas Gatley outlined what MSCI's decision to include A-shares in its indexes means for investors, while Chen Long argued that the next great bond bull market may happen in China.
Gavekal Research
May 31, 2017
Louis Gave, Charles Gave, Tom Miller and Arthur Kroeber presented at Gavekal's New York seminar last week.