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E.g., 24-08-2017
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    Gavekal Dragonomics

    The Risk Avoidance Strategy

    China’s economy has turned in another slate of decent growth data for October. The three drivers of loose credit, recovering construction, and rising commodity prices that have supported the economy are still holding firm. But Andrew cautions that the government’s objective is not exactly growth at all costs, but rather avoiding downside risks.

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    Gavekal Dragonomics

    The Advantage Shifts To China

    Donald Trump’s victory was also a victory for Xi Jinping. Trump’s more isolationist stance and transactional attitude hands the edge to China in the battle for influence in Asia. Trump’s threats of economic warfare with China are also mostly empty; if anything, Beijing has gained a bit of advantage in its bilateral ties with the US.

    0
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    Gavekal Dragonomics

    Trump, Risk, And The Renminbi

    Will the election of Donald Trump prove to be a major “risk-off” event for the Chinese currency and financial assets? Trump’s policies do make it more likely the US dollar will strengthen, and thus that the renminbi will keep weakening. But the chance of an uncontrolled move in the currency is still low, and the stock market also looks insulated.

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    Gavekal Research

    A Very Chinese Reshuffle

    The forces of market-oriented economic reform in China seemed to take a hit yesterday when it was announced that the tough-talking finance minister Lou Jiwei was stepping down from his post. But contrary to what the Western media suggests, this was not at all the untimely end of a superstar reformer who was achieving spectacular results.

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    Gavekal Dragonomics

    A Good Quarter For Corporate China

    China’s listed firms have finished reporting Q3 earnings, and they turned in a good quarter. Net profits at the median nonfinancial firm rose 14% YoY, picking up from 9% in Q2, while sales growth accelerated to 10% from 6%. Both industrial and consumer sectors did well. In this piece, Thomas analyzes the latest key trends in corporate earnings.

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    Gavekal Dragonomics

    The Squeeze On Capex Loosens

    After slowing for years, fixed-asset investment in manufacturing and mining is showing signs of steadying as stimulus policies stabilize demand for their products. Manufacturing FAI could even recover modestly to 6-8% real growth next year. But firms’ caution after years of growth disappointment is unlikely to suddenly turn to exuberance.

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    Gavekal Research

    The Gavekal Monthly: Deflation Ends; What Next?

    The biggest market move of the past month was a significant rise in bond yields across the US and Europe. Much commentary has suggested that this might be a symptom of a sustained rise in inflationary pressures, as wages and rents start to push up prices in the US, and Chinese producer prices end four long years spent in negative territory. We are skeptical. The recent rise in yields has so far reversed only half of the decline in the first half...

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    Gavekal Dragonomics

    The New Reality Of Housing Prices

    The wild ride of Chinese housing prices is a sign of how the housing market has become more speculative and policy-driven as fundamental demand has peaked. Policies intended to help small cities have only made prices in the largest cities frothier. Rosealea thinks this policy-driven volatility in prices will continue even as the cycle turns down.

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    Gavekal Research

    Equities Decouple From The Renminbi

    The renminbi fell to a six-year low of CNY6.78 to the US dollar this week, capping a -3% fall since June. In recent years, similar moves sparked turmoil in stock markets at home and abroad. Yet this time investors have largely ignored it and both A-share and H-share indexes have ripped higher. Why is a weak renminbi no longer a risk-off event?

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    Gavekal Dragonomics

    Household Debt: How Fast Can It Grow?

    Discussions about China’s debt usually focus on corporate and local government borrowing, but households have also become more important. The level of household debt is no longer low, and since 2015 it has become the major driver of credit growth. In this piece, Chen Long investigates the limits to China’s new embrace of household leverage.

    2
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    Gavekal Research

    Safety First In EMs

    After a steady rise in emerging market inflows over the last seven months, tighter US financial conditions have led to an abrupt reversal. On the back of inflation concerns and a stronger US dollar, the seven day moving average of daily portfolio flows to EMs, as of last Monday, had fallen to its lowest level since the renminbi-induced sell-off 14 months ago. EMs are vulnerable to an externally-induced pull-back, for even if key central banks...

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    Gavekal Dragonomics

    Andrew Batson: What Next For Chinese Growth?

    Chinese policymakers are set on maintaining economic stability ahead of a crucial Communist Party meeting next year—but while that means stabilizing growth it also means pushing back against a property bubble. In this video interview, Andrew assesses the tactical trade-offs that must be made in support of the strategy of stability.

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    Gavekal Dragonomics

    The Three Pillars Of Stability

    China has now delivered real GDP growth of 6.7% three quarters in a row—a stability that is uncanny even by its standards. Such stability is even more prized than usual by the government, now preoccupied with next year’s Communist Party Congress. In this piece Andrew assesses how much longer the three pillars supporting this stability can hold up.

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    Gavekal Dragonomics

    The Equality Engine Is Stalling

    For all its leaders’ talk of a “new normal,” China has not weaned itself off the “old normal” of housing and investment-led growth. That model was in fact a powerful engine for reducing regional inequality, so it has much political support. The engine has now stalled—but rather than swap in a new one, the government keeps revving the old one.

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    Gavekal Dragonomics

    Housing & Construction Review 2016

    In the latest edition of our annual overview of housing and construction in China, Rosealea summarizes the short- and long-term outlook for these key economic drivers. This concise chartbook provides 2017 forecasts for major indicators, and covers topics such as changes in housing policy, structural trends in demand, and the state of inventories.

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    Gavekal Dragonomics

    The Foreign Debt Drawdown Stops

    One of the big drivers of recent capital outflows—Chinese companies paying down foreign-currency debt—seems to have stopped, or at least paused, in the second quarter. While China still has net capital outflows, the scale is manageable given the still-high level of reserves, giving the central bank space to pursue its preferred currency policy.

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    Gavekal Dragonomics

    Is Internet Growth Really Slowing Down?

    Often overlooked in the hype around China’s internet boom is the downturn in some key indicators: growth in internet users and in online retail has slowed. How to reconcile this with an apparently thriving internet economy—can the internet’s growth really be slowing down? The answer is yes, and no; it’s how the internet is growing that’s changing.

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    Gavekal Research

    Singapore Seminar—September 2016

    Audio and video from the latest Gavekal seminar in Singapore is available here. Louis Gave explains why financial markets have recently behaved predictably, and why that is about to change. Andrew Batson explains why Chinese policy making is in a holding pattern until next year's party congress is settled. Udith Sikand explains why this year's emerging market outperformance is likely to continue, as bonds and especially equities have...

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    Gavekal Dragonomics

    The Holding Pattern

    Market worries about China have gone very quiet lately—and this is no accident. In this presentation, Andrew argues that China is in a holding pattern of steady growth and cautious policy ahead of the 2017 Party Congress. While China probably won’t be forced out of the holding pattern, financial stress and structural problems continue to build.

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    Gavekal Dragonomics

    The Big Fish Eat The Little Fish

    China’s housing sales may have plateaued, but the largest real-estate companies still have plenty of room to grow by consolidating an enormous and fragmented market. A multiyear boom in M&A has strengthened the market position of the largest developers, who are still easily raising huge sums from capital markets that can fund future deals.

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