Gavekal Research
October 14, 2019
On Friday, US President Donald Trump announced “Phase One” of a long-awaited trade deal with China. The top Chinese negotiator did not go that far, saying only that “we have made substantial progress in many fields.” In essence, what happened was a cease-fire, with the US agreeing to cancel its planned October 15 tariff hike in exchange for China resuming purchases of US agricultural goods.
Gavekal Dragonomics
October 10, 2019
The first wave of Chinese bank failures will not be the last. Over the summer, three smaller Chinese banks had to receive official assistance to continue operating. The problems that brought down those banks were not isolated issues, and there are other smaller banks still at risk. This report identifies the most troubled institutions.
Gavekal Dragonomics
October 8, 2019
China is still signing up more countries for its Belt and Road Initiative, but money for Xi Jinping’s signature foreign policy is getting tighter. Growth in China’s overseas lending has ground to a halt, and overseas construction projects are declining. In this piece, Tom explains why a slimmer Belt and Road has become an economic necessity.
Gavekal Dragonomics
September 19, 2019
Markets are now primed for China’s central bank to lower the policy rate in the new loan-pricing system it unveiled in August. In this piece, Andrew explains how these rate cuts will work, why they are different from the rate cuts of the past, and why these moves will not mean any change in the central bank’s current strategy of “selective easing.”
Gavekal Dragonomics
September 17, 2019
The poor economic indicators for August make it obvious why China’s government got ahead of the data release and signal renewed support for growth in early September. That means more incremental policy measures are coming, which will help sentiment. And the drag on growth from the auto sector should also reverse toward the end of 2019.
Gavekal Research
September 6, 2019
As prospects for a quick resolution of the US-China trade conflict fade, and the data continue to soften, expectations for Chinese growth are getting marked down. As if on cue, the government has sent signals of more decisive policy support for growth.
Gavekal Dragonomics
September 4, 2019
Could Taiwan be a winner in the US-China trade war? As Dan reports in this piece, US tariffs have succeeded in getting major contract manufacturers of electronics to shift jobs out of China, some of which are going to Taiwan. But this trend is not enough to end Taiwan’s dependence on Chinese growth, or its vulnerability to Chinese competition.
Gavekal Dragonomics
August 13, 2019
The outcome of US-China trade talks is uncertain, but one thing is clear. Chinese companies, their customers and suppliers, faced increased risks of US American sanctions. Hardliners in the US national security establishment are pressing ahead with an “all-of-government” strategy to constrain China’s technological and financial clout.
Gavekal Research
August 6, 2019
Monday’s actions on the Chinese currency—Beijing’s decision to let the renminbi’s exchange rate weaken past CNY7.00 to the US dollar, and Washington’s decision to label China a currency manipulator—signal that the US and China are close to throwing in the towel on a trade deal. Trade war escalation should now be the base case.
Gavekal Dragonomics
August 20, 2019
After a brief respite earlier in the year, China’s private sector is once again facing a credit squeeze. The PBOC’s announcement over the weekend of a change in the calculation methodology for the loan prime rate is likely to lower the cost of corporate loans, but it does not make it any easier for private firms to get finance.
Gavekal Dragonomics
July 17, 2019
The takeover of Baoshang Bank in May was China’s biggest bank failure in at least a decade. But the People’s Bank of China managed the ensuing market jitters well, once again proving itself to be an effective financial firefighter. Still, Baoshang’s failure does confirm that the era of rapid, unregulated growth for China’s smaller banks is over.
Gavekal Dragonomics
June 24, 2019
China’s policymakers are pushing banks to offer more financing to private-sector firms, trying to solve their liquidity squeeze. In this piece, Thomas inspects the data for the effects of that push, and finds that new credit is flowing mainly to the largest and smallest firms. The mass of medium-sized private firms are still in a tough spot.
Gavekal Dragonomics
September 24, 2019
China’s government has launched a new program to renovate older residential compounds, which some are touting as a massive new investment stimulus. As Rosealea explains in this piece, such hopes are misplaced. But the new spending will help cushion the impact of the cutbacks of the subsidies delivered through the slum redevelopment program.
Gavekal Dragonomics
July 31, 2019
The world’s major economies are seemingly united on the need for a fresh round of stimulus—except for China. And hopes for a more aggressive approach were dashed by the latest Politburo meeting, which declared that China would not boost the housing market to revive growth. In this piece, Andrew explains what’s behind China’s policy stance.
Gavekal Dragonomics
July 3, 2019
Housing policy in China has taken a cautious turn, with policymakers more concerned about potential overheating in prices than worried about a downturn in sales and construction. In this piece, Rosealea explains how this shift is playing out through cuts in housing subsidies and changes to local policies, and evaluates the risks to the market.
Gavekal Dragonomics
September 12, 2019
The Trump administration has shown the world that it is willing and able to inflict severe pain on China’s top technology firms. But can the US really squeeze China hard enough to cut it off from global R&D, or stop all advances by Chinese companies?
Gavekal Dragonomics
July 18, 2019
The future of Huawei, China’s most successful electronics manufacturer, has looked bleak ever since the US put it on an export blacklist in May. But with the Trump administration proving willing to soften its export controls, and companies being able to find loopholes in them, it now looks like Huawei has a decent chance to survive.
Gavekal Dragonomics
June 17, 2019
It is easy to forget that the US trade war with China is founded on the issue of intellectual property—and to miss the fact that, despite the breakdown in trade talks, China is pushing through many legal changes to improve IP protection. But as Dan explains, while the technical improvements are real, so is political pressure on the legal system.
Gavekal Dragonomics
August 21, 2019
With exports and domestic investment both weakening, China’s government hopes that consumer spending will support growth. The bad news is that all indicators of consumer spending are still softening. With a deteriorating job market weighing on household income Chinese consumer spending is set to weaken further over the coming quarters.
Gavekal Dragonomics
July 9, 2019
China’s auto market is still locked in the worst downturn in its history. In this report, Ernan explains how the government’s rushed transition to new vehicle-emissions standards worsened that downturn, and why it hasn’t reversed course. Though an end-year recovery for auto sales is still likely, 2019 will be a second bad year for the industry.
Gavekal Dragonomics
June 11, 2019
The boom in China’s outbound tourism could go down as another casualty of the trade war. As Ernan explains in this piece, the combination of a weakening currency and rising political tensions is becoming a major drag on international travel by Chinese—just as the structural factors driving outbound tourism growth are shifting into a lower gear.
Gavekal Research
July 22, 2019
Trading on the world's newest stock market board got off to a predictably volatile start on Monday, when Shanghai's STAR market opened for business. But while that was entirely foreseeable, the reaction of regulators will be less predictable, and will send important signals on the long-term liberalization of China’s stock markets.
Gavekal Dragonomics
June 5, 2019
Chinese listed companies have lately suffered more than their fair share of shocks to earnings. In this piece, Thomas explains the financial and accounting problems that have squeezed profits in recent quarters. But he argues that, even with the trade war, 2019 is likely to be a normal profits downcycle rather than a disastrous one.
Gavekal Research
April 30, 2019
China’s equity bull market has lost steam in the last 10 days after the Politburo adopted a less supportive tone following stronger than expected economic data in March. Even before the announcement, market ebullience had moderated.
Gavekal Dragonomics
September 10, 2019
The African swine fever crisis in China is reaching a new stage as prices for pigs and pork spiral upward at an unprecedented pace. The government is responding with a combination of subsidies for pork farms, as well as rationing and price caps. But this is a short-term strategy that will not contain the ASF epidemic and could even worsen it.
Gavekal Dragonomics
August 5, 2019
China’s government is once again going after pollution from the steel industry, raising the risk of more policy-induced spikes in steel prices. While forced shutdowns to ensure blue skies are on the way, Rosealea argues that the bigger risk to steel prices is on the downside, due to weakening construction activity and cautious housing policy.
Gavekal Dragonomics
April 16, 2019
The world’s deadliest pig disease is now established in the world’s largest pork market. The spread of African swine fever in China has been more severe than the government has admitted, and as a result pork prices are spiking and imports are surging. But as Ernan argues in this report, the impact of this epidemic is still only in its early stages.
Gavekal Dragonomics
July 11, 2019
The new enthusiasm of some European countries for China’s infrastructure-building Belt and Road Initiative has raised alarm across the continent. Brussels fears China is buying influence in Europe’s periphery, sowing disunity and threatening democracy. Our latest in-depth DeepChina report explains the real story of China’s influence on Europe.
Gavekal Dragonomics
December 4, 2018
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.
Gavekal Dragonomics
August 8, 2018
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.
Gavekal Dragonomics
August 29, 2019
Whatever happens next in the US-China trade conflict, it’s clear that ties between the two nations have undergone a fundamental reset. Some “decoupling” will definitely occur as a result, and indeed has already begun. In this chartbook, Andrew and Lance explore how US-China decoupling could play out in flows of goods, money, people and ideas.
Gavekal Dragonomics
November 19, 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.
Gavekal Dragonomics
October 3, 2018
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.
Gavekal Research
September 20, 2019
Washington views China as a strategic competitor, and the White House has promised a “whole of government” effort to constrain China’s development of key advanced technologies. Dan examines the three ways in which the US is making life difficult for Chinese tech companies, and explores other weapons the US could deploy should the tech war escalate.
Gavekal Dragonomics
June 28, 2019
Chinese equity markets are up around 26% for the year. Yet there has been no recovery in earnings growth, and the trade war and shaky domestic economic momentum continue to loom. The reason for the market optimism is expectations of supportive government policies, whether or not those expectations are valid.
Gavekal Research
May 29, 2019
In yesterday's special Gavekal Research Conference call Gavekal's Arthur Kroeber and Dan Wang, along with Fathom China's Matt Forney, considered what the breakdown of the US-China trade talks means for the trajectory of the trade war, and what the blacklisting of Huawei means for the tech cold war.