At Wednesday's webinar, Andrew Batson, Ernan Cui, Thomas Gatley and Wei He discussed how China is recovering from the lockdown imposed to deal with the Covid-19 outbreak, and the outlook for the economy.
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Gavekal Dragonomics
March 26, 2020
Webinar: China's Recovery From Covid-19 Lockdown
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Gavekal Dragonomics
March 25, 2020
The Coming Collapse Of Exports
As other economies shut down to contain their outbreaks, China’s hopes of a V-shaped growth rebound are evaporating. Thomas explains how the ensuing collapse in Chinese exports could result in a 4-8pp drop in GDP growth for Q2, offsetting any domestic recovery and pressuring policymakers to ramp up economic assistance.
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Gavekal Dragonomics
March 24, 2020
The Great Fiscal Role Reversal
In the global financial crisis of 2008, China defied economic orthodoxy with its huge debt-financed stimulus. In the coronavirus crisis of 2020, by contrast, it is the US, UK and other Western countries that are throwing the fiscal rulebook out the window. In this piece, Andrew explains what’s behind this surprising role reversal.
The coronavirus outbreak
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Gavekal Dragonomics
March 17, 2020
Terrible But True
Given the extent of China’s coronavirus lockdown, it’s not surprising to see double-digit declines in economic indicators. The real surprise is that the statistics bureau did not fudge the data, as analysts expected it would, and printed numbers bad enough to be plausible.
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Gavekal Dragonomics
March 6, 2020
Getting Serious About Biosecurity
China’s government is rethinking its approach to biosecurity in order to reduce the odds of future outbreaks of infectious disease. In this piece, Lance explains what treating biosecurity as a part of national security will mean for regulation, public health and the biotechnology sector.
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Gavekal Dragonomics
March 3, 2020
A Month Of Lost Wages
As the rise in new cases of Covid-19 in China has slowed, provinces are easing their drastic restrictions on movement and businesses are reopening. But the extended shutdown has already imposed great costs on migrant workers. Ernan estimates lost wages will be 3-4% of annual household income, though with a smaller impact on total consumption.
Policy and the cycle
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Gavekal Dragonomics
March 20, 2020
Local Governments Will Lead On Property
Even as China’s property market has experienced an unprecedented decline, central government policymakers have kept a tight leash on official support. However, given growing signs of a lasting disruption to the sector, Rosealea believes that Beijing will tolerate more ambitious municipal efforts to keep local markets afloat.
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Gavekal Dragonomics
March 18, 2020
Deposit Rates Are Back On The Agenda
The People’s Bank of China has failed to join other central banks in the recent wave of rate cuts. But with the coronavirus now threatening a substantial hit to global demand, the PBOC is going to need to do more. In this piece, Wei argues that a cut in the benchmark deposit rate—a tool that has not been used in four years—is on the way soon.
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Gavekal Dragonomics
March 16, 2020
From The Supply Side To The Demand Side
As China gets back to work, the biggest problem facing the economy is no longer restrictions imposed on the supply side, but the near-certain prospect of a major shock in global demand. Andrew argues that this shift will cajole Chinese policymakers, who have so far kept a conservative approach, into stepping up their growth support measures.
Trade war
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Gavekal Dragonomics
March 10, 2020
Tech War, Meet Trade Deal
Plans enacted by US national security hawks to toughen sanctions on Huawei and other Chinese tech firms have run into stiff resistance from both American tech firms and President Trump himself. Dan reports that, amidst this stalemate, both factions are mobilizing for a protracted fight over the fate of restrictions on exports to China.
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Gavekal Dragonomics
January 30, 2020
Huawei Comes Out Ahead, For Now
American attempts to kneecap Huawei have run into several setbacks. Internationally, Europe is pushing back on demands to exclude Huawei from 5G networks; domestically, further sanctions have been stymied by bureaucratic infighting. Dan reports that the war is hardly over, and we are likely to see broader rules limiting Chinese access to US tech.
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Gavekal Research
January 16, 2020
A Tough Ask On Trade, Trouble Brewing On Tech
The story we’ve been telling for the past few months is that the conclusion of the US-China trade deal will reduce global macro risk in 2020, but tech-specific risk will still be an issue because of continued efforts by the US to constrain the rise of China’s technology sector and in particular Huawei.
The financial system
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Gavekal Dragonomics
March 23, 2020
Rural Banks On The Brink
The economic stress of the Covid-19 outbreak is all but certain to cause a rise in nonperforming loans. Even before the outbreak, China’s rural commercial banks—its smallest and most troubled lenders—were already short of capital and performing poorly. As Xiaoxi shows in this piece, another jump in bad loans will push more of them into distress.
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Gavekal Dragonomics
December 10, 2019
Why The Private Liquidity Crisis Isn't Over
The multi-year liquidity squeeze for Chinese private-sector firms continues, despite repeated promises from policymakers to resolve the issue. In this report, Thomas explains how Beijing’s tight grip on financial risk has stymied efforts to alleviate China’s beleaguered private sector—and why this lending crunch will persist through 2020.
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Gavekal Dragonomics
December 3, 2019
The Back Door Is Still Closed
A slew of new government policies has boosted market expectations for China’s infrastructure spending in 2020. But Rosealea counsels caution: while new measures have opened the “front door” of approved funding a bit wider, more important is that the “back door” of shadow financing remains firmly closed. A big rebound in public works is unlikely.
The property market
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Gavekal Dragonomics
February 12, 2020
The Lingering Impact On Property
While the 2003 SARS outbreak had only a transitory impact on China’s housing market, the 2020 coronavirus episode is proving to be much more serious. In this piece, Rosealea argues that the big hit to housing sales will leave developers short of cash and limit their ability to keep projects going. This points to a lingering drag on construction.
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Gavekal Dragonomics
January 8, 2020
The Mortgage Rate Reset
China’s central bank is moving forward with its interest-rate reforms, ordering mortgages to be reset based on the new loan prime rate. Rosealea explains that this shift will make monetary policy more transparent and effective by re-linking mortgage rates to official policy rates, but it does not herald a cycle of major cuts in mortgage rates.
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Gavekal Dragonomics
November 21, 2019
The Crackdown On Developer Financing
China’s financial regulators are squeezing funding for property developers in order to discourage land speculation and cool down property prices. In this piece, Rosealea argues the crackdown has been fairly successful, and does not pose a big risk to construction. Slightly easier demand-side policies will help offset tough supply-side restrictions.
Technology
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Gavekal Dragonomics
March 10, 2020
Tech War, Meet Trade Deal
Plans enacted by US national security hawks to toughen sanctions on Huawei and other Chinese tech firms have run into stiff resistance from both American tech firms and President Trump himself. Dan reports that, amidst this stalemate, both factions are mobilizing for a protracted fight over the fate of restrictions on exports to China.
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Gavekal Dragonomics
February 18, 2020
Kinks Appear In The Tech Supply Chain
Chinese electronics manufacturers are struggling to get their operations back to normal amidst the coronavirus outbreak. Dan outlines how this might lead to larger disruptions in the tightly scheduled mobile phone production cycle, and why smaller companies are more likely to postpone launching new products than their larger counterparts.
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Gavekal Dragonomics
December 5, 2019
The Pitfalls Of Beijing’s AI Strategy
The Chinese government has made artificial intelligence a national development priority and is dedicating huge resources to the task. Yet, as Lance explains in this report, the effort is suffering from mismanagement, wasteful provincial competition and difficulty retaining skilled workers.
Chinese equities
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Gavekal Research
March 5, 2020
Behind The A-Share Rebound
Although China is ground zero for the coronavirus outbreak, its onshore stock markets are the world’s best performing major markets so far this year by a considerable margin. For the most part this is due to mood-enhancing domestic policy support, which is likely to continue to counteract the catastrophic near term earnings outlook.
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Gavekal Dragonomics
January 23, 2020
A-shares Beyond Wuhan Volatility
Although the Wuhan coronavirus has the potential to whipsaw Chinese equities in the near term, it makes sense to assess the prospects for China’s A-share market this year should the current nervousness quickly abate.
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Gavekal Dragonomics
November 27, 2019
How To Get Comfortable With Chinese Equities
The inclusion of Chinese onshore equities in global indexes has catalyzed a wave of interest from global investors. But for foreign investors to really get comfortable with Chinese stocks, Thomas argues, they need to grasp the many issues not addressed by index inclusion such as volatility, leverage, regulatory risk and corporate governance.
The commodity landscape
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Gavekal Dragonomics
February 28, 2020
The Worst Is Yet To Come For Steel
Steelmakers have continued production despite a precipitous drop in demand, resulting in a short-term inventory glut. As Rosealea explains, this will lead to continued downward pressure on steel prices, at least until the construction sector recovers from the coronavirus crisis and drives demand back up to meet supply.
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Gavekal Dragonomics
September 10, 2019
The Next Stage Of The Pork Crisis
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.
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Gavekal Dragonomics
August 5, 2019
The Risks To Steel Prices
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.
DeepChina
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Gavekal Dragonomics
July 11, 2019
Beijing's Backdoor Into Europe
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.
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Gavekal Dragonomics
April 2, 2019
A User's Guide To The Chinese Stock Market
China’s onshore equity markets are now large and accessible enough that they can no longer be ignored by foreign investors—but idiosyncratic enough that they are hard to understand. This in-depth DeepChina report explains the fundamentals: What is there to invest in? Who owns the market? How can foreigners invest? How is the market regulated?
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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.
Chartbooks: The big picture in pictures
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Gavekal Dragonomics
November 25, 2019
The Chinese Consumer In 2019
In her annual review of the Chinese consumer, Ernan analyzes the trajectory of household spending and unearths thematic opportunities in consumer markets. After 2019’s slowdown, consumption should stabilize in 2020 as the labor market improves. Luxury goods and cosmetics are booming, but overseas tourism and traditional retail are weaker.
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Gavekal Dragonomics
October 30, 2019
Housing & Construction Review 2019
China’s property market has held up surprisingly well in 2019, but will that strength last? In her annual chartbook, Rosealea examines key market trends and explains the outlook for 2020. Flexible policy can probably continue to avoid a deep decline in housing sales, but construction activity and materials demand are almost certain to slow.
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Gavekal Dragonomics
October 3, 2019
The China Inc. Annual Report 2019
In the latest edition of his annual chartbook, Thomas outlines the fundamentals of China’s corporate sector. The latest downcycle in sales and profits was less severe than previous episodes, but private firms are still suffering from financial strains. The anemic bounce in credit growth points to little recovery in profits or capex in 2020.
Latest multimedia
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Gavekal Dragonomics
March 26, 2020
Webinar: China's Recovery From Covid-19 Lockdown
At Wednesday's webinar, Andrew Batson, Ernan Cui, Thomas Gatley and Wei He discussed how China is recovering from the lockdown imposed to deal with the Covid-19 outbreak, and the outlook for the economy.
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Gavekal Research
March 20, 2020
Webinar: Covid-19, Markets And The Economy
At Thursday’s webinar, Arthur Kroeber, Louis-Vincent Gave, Anatole Kaletsky and Andrew Batson discussed the Covid-19 outbreak and the consequences for financial markets and the economy.
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Gavekal Research
March 6, 2020
Audio & Transcript — Gavekal Research Call March 2020
In Thursday’s conference call, Louis-Vincent Gave, Andrew Batson and Cedric Gemehl discussed the policy and market reactions to the Covid-19 outbreak.