Gavekal Dragonomics
October 26, 2021
Supply-side issues are dominating the headlines, but China’s real problem is now on the demand side. Growth momentum stalled in Q3 as a downturn took hold in the property sector, and policymakers are responding only cautiously. In our latest quarterly chartbook, the Dragonomics team explains the changing outlook for the economy and markets.
Gavekal Dragonomics
October 25, 2021
Troubled developer China Evergrande Group made an interest payment on a US dollar bond just before the 30-day grace period expired on October 23, narrowly avoiding a default. However, this does not mean the wave of developer defaults is over, or that the freeze in demand for developer debt has thawed.
Gavekal Dragonomics
October 21, 2021
For investors trying to buy the dip in Chinese equities, there is one reliable indicator—the government’s macroeconomic policy, as proxied by private-sector credit growth. In this report, Thomas outlines a robust decision rule for asset allocators: when credit growth is accelerating, buy equities; when it’s decelerating, buy government bonds.
Gavekal Dragonomics
October 14, 2021
China’s small businesses are having a rough 2021: business conditions have stagnated or deteriorated since the recovery in late 2020. There’s been much debate on the causes of their struggles, but the biggest culprits are the ripple effects from the government’s zero-tolerance Covid policy and its tightening of credit and real-estate policies.
Gavekal Dragonomics
September 15, 2021
China’s dismal August economic figures suggest that the “window of opportunity” identified by the Politburo in April, when officials hoped to take advantage of China’s post-Covid rebound to focus on longer-term structural priorities, is now closing. However, it is still too early to expect policymakers to shift gears into a supportive stance.
Gavekal Dragonomics
September 8, 2021
It’s been clear for a couple of months now that China has begun a monetary easing cycle. What has been less clear is what kind of easing cycle will happen under the central bank’s new “cross-cyclical” policy framework. The PBOC’s guidance indicates it could start cutting rates this year, but will try to keep credit growth next year roughly flat.
Gavekal Dragonomics
September 28, 2021
How much financial stress can China’s developers take? Thanks to strict financial regulation and slowing sales, every channel of financing for developers is now tightening simultaneously. In this piece, Xiaoxi explains how this puts pressure on policymakers to ease those financing restrictions, and why bank lending is the most likely beneficiary.
Gavekal Dragonomics
September 27, 2021
The southbound channel of the Bond Connect program linking mainland China and Hong Kong debt markets started trading on Friday. In this Quick Take, Wei explains that although outflows are unlikely to be large in the early stages, the program should eventually carry major flows and help grow Hong Kong’s offshore bond market.
Gavekal Research
September 21, 2021
Fears about the potential systemic risks posed by troubled property developer Evergrande reverberated through global financial markets on Monday. Unless China’s regulators seriously mismanage the situation, a systemic crisis in the country’s financial sector is not on the cards. Nevertheless, lenders will not be able to escape the costs.
Gavekal Dragonomics
October 12, 2021
As the US and Europe pursue more serious green agendas, they are wondering if they can wrest back production of solar power from China. The answer: probably not. China is not just the low-cost producer, but also the technological leader. In this piece, Dan explains why the global deployment of solar energy will depend heavily on China.
Gavekal Dragonomics
October 11, 2021
With the results in for China’s antitrust investigation of food-delivery giant Meituan, Ernan writes that the direction of China’s antitrust policy is now becoming increasingly evident, with clear guidance from regulators reducing uncertainty. However, platform profits should continue dwindling as their business models are chipped at by regulators.
Gavekal Dragonomics
September 23, 2021
China’s regulatory onslaught against companies like Ant Group, Didi Chuxing and Tencent has been widely referred to as a “tech crackdown.” In this piece, Dan argues that the government’s actions are less a sign that it has turned against tech than they are a rejection of the idea that the consumer internet is the peak of technological achievement.
Gavekal Dragonomics
October 7, 2021
China’s post-Covid property boom has unwound more rapidly than expected this year as the government’s tough policies drive developers into distress. In her annual chartbook, Rosealea explains the outlook for the rest of 2021 and 2022. Further declines in housing sales and construction will come, but policy adjustments can limit their magnitude.
Gavekal Dragonomics
September 29, 2021
Chinese property developer Evergrande announced that it will sell a portion of its minority stake in Shenjing Bank to a local state-owned enterprise in Liaoning province. In this Quick Take, Xiaoxi explains that while the deal wont save the firm, it exemplifies how local officials can work to soften the impact of Evergrande’s unwinding.
Gavekal Dragonomics
September 22, 2021
Over the past two months, iron ore prices have tumbled as China’s property market slows and local authorities expand restrictions on steel output. In this report, Rosealea explains why falling steel demand should cause prices to continue their decline, eventually settling at around levels of US$70-80/ton.
Gavekal Research
September 13, 2021
China’s offshore internet platform stocks saw fresh falls in Asia on Monday morning after reports that the Chinese authorities will break up Ant Group’s Alipay business. In recent weeks, some investors have been advocating a rotation to “safer” segments of China’s tech sector, such as hardware companies favored by policymakers.
Gavekal Dragonomics
August 3, 2021
The pace of financial decoupling between the US and China has quickened, with regulators in both countries tightening requirements for Chinese firms seeking to list in US markets. With the SEC likely to push ahead with the delisting of Chinese firms, Thomas writes that Chinese companies will rely on Hong Kong to access global capital.
Gavekal Research
July 29, 2021
Investors in China’s offshore-listed stocks have suffered multiple regulatory shocks. But with both onshore and Hong Kong equities now suffering, the crackdown is hitting domestic investors. Thomas explains why this will likely change the calculus for China’s policymakers, and why regulators are now likely to adopt a more constructive tone.
Gavekal Dragonomics
August 11, 2021
The rapid spread of the Delta variant across China is posing the biggest challenge yet to the government’s zero-tolerance policy toward Covid-19. In this report, Ernan explains why officials are confident in the policy and will likely keep it in place for the indefinite future—at the cost of depressed travel and consumer services.
Gavekal Dragonomics
June 24, 2021
One of the most dramatic shifts within the global consumer market since Covid-19 has been the sudden termination of Chinese overseas tourism. In this report, Ernan explains why Chinese tourists will likely decide to remain grounded even as other countries open their doors, leaving households with extra money to deploy at home.
Gavekal Dragonomics
May 25, 2021
China’s Covid-19 vaccination program has significantly accelerated in May, bringing it on track to reach its target of administering at least one dose to 40% of the population by end-June. In this report, Ernan explains why this achievement does not mean the country will be opening its borders or removing domestic precautions this year.
Gavekal Research
October 5, 2021
The Biden administration continues its crabwise efforts to craft a China strategy balancing national security and economic interests. The challenge is that Biden wants to maintain the basic stance established by Donald Trump—“strategic competition”—while satisfying a wider range of interest groups and setting more realistic policy targets.
Gavekal Research
June 17, 2021
US policy on China is now defined by an acute tension between national security and business interests. In this report, Arthur and Dan explain how the Biden administration is navigating this tension, one which will be a permanent feature of the global landscape over the next decade.
Gavekal Dragonomics
June 3, 2021
The US government’s criticism of China’s treatment of the Uyghur minority in Xinjiang, and China’s government’s tough response, is a very public test case for multinationals with China operations. They don’t want to take sides. But as Dan explains in this piece, foreign companies will, if forced to choose, move closer to the US position.
Gavekal Research
October 15, 2021
China’s leaders capitalized on the country’s post-Covid boom by pursuing reforms that further Xi Jinping’s political goals. This has resulted in hits to both economic growth and financial markets.
Gavekal Research
October 8, 2021
In our recent London seminar, Thomas Gatley addressed China's changed business environment and Tom Miller unpicked US-China geopolitical tensions. Charles Gave and Anatole resumed their dialogue about the future of the world economy in their first in-person sparring session since the pandemic started.
Gavekal Dragonomics
September 23, 2021
Markets have reacted violently to China Evergrande Group starting to default on US$300bn of obligations. The worry is that a disorderly failure causes a systemic crisis that dents Chinese growth and upends other emerging markets.
Gavekal Dragonomics
October 26, 2021
Supply-side issues are dominating the headlines, but China’s real problem is now on the demand side. Growth momentum stalled in Q3 as a downturn took hold in the property sector, and policymakers are responding only cautiously. In our latest quarterly chartbook, the Dragonomics team explains the changing outlook for the economy and markets.
Gavekal Dragonomics
October 7, 2021
China’s post-Covid property boom has unwound more rapidly than expected this year as the government’s tough policies drive developers into distress. In her annual chartbook, Rosealea explains the outlook for the rest of 2021 and 2022. Further declines in housing sales and construction will come, but policy adjustments can limit their magnitude.
Gavekal Dragonomics
September 9, 2021
Even by China’s high standards, 2021 has seen an extraordinary level of active government intervention in the economy. With foreign investors spooked and growth slowing, how much longer can it go on? In this chartbook, Andrew takes stock of the many aspects of the current policy activism and assesses the prospects for a course correction.
Gavekal Dragonomics
June 30, 2021
The expansion and opening of China’s onshore renminbi bond market is one of the biggest changes to the structure of global financial markets in recent years, one that investors are still grappling with. In this comprehensive 30-page DeepChina report, our analysts present a guide to the nature and functioning of this important market.
Gavekal Dragonomics
April 20, 2021
China is using the best-funded industrial policy in history to engineer greater self-reliance in semiconductors. Ambition and a big checkbook, however, do not guarantee success. In this DeepChina report, Dan argues that Chinese chip firms will increase their market share in some segments, but will not make it to the technological frontier.
Gavekal Dragonomics
Rogier Creemers
December 10, 2020
China’s social credit system is widely misunderstood as a totalitarian tool. The reality is that it is a relatively low-tech part of a sophisticated Communist Party strategy to use digital means to deliver both better governance and social control. In this 22-page DeepChina report, Rogier Creemers explains the truth behind the social credit myths.