Gavekal Dragonomics

China’s central bank is once again erring on the side of caution. It is on track to reduce rates by much less in 2025 than first expected—expectations that the PBOC itself created with a formal shift in its monetary-policy stance. This is a frequent pattern for the PBOC, which typically moves rates much less than other central banks. In this piece, Wei argues that the PBOC’s ingrained caution is less a philosophical choice than an institutional constraint, stemming from its lack of independence and multiple mandates.

Unless something changes radically in the next few days, China is facing a major growth shock from the US imposition of massive tariffs. The question now is how China’s government will respond to intensifying growth fears. Wei argues that the first step should be an easing of monetary policy, and possibly more direct intervention from the central bank in financial markets.

The People’s Bank of China has been busy over the past year as its new governor, Pan Gongsheng, has overseen multiple interventions in financial markets and attempted risky policy changes. Wei argues that Pan’s aggressive policymaking style, along with a green light from top policymakers for more easing, means the chances of a large interest-rate cut are rising.

In Gavekal’s London conference last week, partners and analysts covered a wide range of topics across five panels: China and emerging markets; the potential end of US exceptionalism; a fireside chat with Charles Gave; trade and technology wars; and investment strategy.

Dan Wang, who was Gavekal's technology analyst for six years, has just published an important book, Breakneck: China's Quest to Engineer the Future. He joins Gavekal head of research Arthur Kroeber in a conversation about China's technological progress and competition with the US, and argues that the engineering mindset of China's government is why the country has become the world's undisputed manufacturing superpower.

In this edition of Gavekal Technologies Briefing, we examine several facets of the US-China tech competition: the elusive TikTok deal, the threats to biotech, the different profit models for AI developers, and China’s massive advantage in battery chemistry.

China’s property market has been in a funk for four years now, and hopes for government intervention have consistently disappointed. Xiaoxi argues that this week’s Central Urban Work Conference showed no urgency for a major change, instead signaling acceptance of a slow- or no-growth future for the property sector. Nonetheless, policymakers will probably need to introduce some measures in coming months to prevent the housing downturn from getting even worse.

China’s housing sales have broadly stabilized for almost a year now. Does that mean the worst is now over for developer finances? Xiaoxi argues that for private-sector developers, which have suffered the most, probably not quite yet. But for state-owned developers, some financial stabilization is now in sight.

China’s new-housing sales have stabilized, and policymakers have vowed to cut interest rates. Does this combination mean a meaningful rebound is ahead? Xiaoxi argues that the answer is probably not, as the relentless shift in demand towards the secondary market means rate cuts might mostly just boost sales of existing units.

China's equity markets have gone on a renewed tear since July—just when its economic data started to soften. The disconnect between macro and markets has only widened since then, with local traders getting more excited and economists more concerned. Our China team assessed the changing landscape.

Dan Wang, who was Gavekal's technology analyst for six years, has just published an important book, Breakneck: China's Quest to Engineer the Future. He joins Gavekal head of research Arthur Kroeber in a conversation about China's technological progress and competition with the US, and argues that the engineering mindset of China's government is why the country has become the world's undisputed manufacturing superpower.

The global inflationary boom for the moment remains well set, with both monetary and fiscal settings in most economies remaining loose to very loose. The result is that equity markets continue to trend higher but in an increasingly differentiated pattern. At the same time, the fundamentals for OECD bonds remain terrible and investors are thus engaged in a desperate search for solid stores of value. Our panel reviewed the macro situation and explored viable asset allocation strategies.