Gavekal Dragonomics
January 19, 2022
The offshore bond market remains worried about the prospects for China’s property developers, who look unable to refinance a huge wave of bonds coming due. Regulators prefer to see this stress dealt with by M&A deals, but so far transactions are few. To deliver the “stability” they have promised, regulators will have to get more hands-on.
Gavekal Dragonomics
January 17, 2022
China’s Q4 economic data release was presaged by a policy rate cut by the People’s Bank of China as officials work to counteract the country’s mounting economic headwinds. The Dragonomics team believes that China will continue to face downside risks; policymakers are therefore likely to ramp up supportive measures accordingly in the coming months.
Gavekal Research
January 14, 2022
In the US and Europe, the new year has begun with a huge wave of workplace absenteeism due to surging omicron Covid cases. In China, policymakers are adopting a whack-a-mole approach to multiple Covid outbreaks, while other emerging economies are curtailing market opening measures. Our team outline their base case views for growth, inflation and markets in 2022.
Gavekal Dragonomics
December 15, 2021
Chinese economic data stabilized in November as exports strengthened and the deep declines in property showed signs of narrowing—a welcome respite from the sharp drops in September and October. Even so, the sector is stabilizing at a low level rather than rebounding to previous highs, underscoring the need for continued policy support.
Gavekal Research
December 7, 2021
China’s recent cut to its reserve-requirement ratio is another signal that policymakers are becoming more willing to ease policy to counter the sharp slowdown in growth. But will it be enough? Wei argues that, while positive for equities, the modest easing set to occur in 2022 will at best stabilize growth rather than drive a cyclical rebound.
Gavekal Dragonomics
November 30, 2021
With a downturn in property intensifying China’s economic slowdown, hopes are rising that a pickup in infrastructure investment will help stabilize growth in 2022. But as Wei argues in this piece, the property downturn is becoming a major drag on local-government finances, which will limit their ability to boost public works spending.
Gavekal Dragonomics
December 10, 2021
The People’s Bank of China raised its foreign-exchange reserve-requirement ratio for the second time this year, a clear signal to markets that it wants to cool down currency appreciation. Wei explains that that the central bank is less worried about speculative market action and more concerned that the renminbi is simply getting too strong.
Gavekal Dragonomics
November 29, 2021
The downturn in China’s property sector will be a strain on smaller banks, which are less well-capitalized and often more exposed to the real-estate sector than their larger counterparts. In this piece, Xiaoxi explains why regulators are likely to take a hands-off approach to the problem, tolerating bank closures and encouraging bank mergers.
Gavekal Dragonomics
November 11, 2021
China’s outstanding mortgage loans grew in October, confirming anecdotal reports that banks have been allowed or encouraged to pick up the pace of mortgage lending. Wei and Xiaoxi explain that while more relaxation measures are likely on the way for property developers, it’s too early to say that their financial conditions are improving.
Gavekal Dragonomics
December 8, 2021
The financial woes of China’s property developers are piling up and the government is offering only limited support. In this report, Xiaoxi explains why the tight regulations on developer fundraising will gradually force private firms to transfer assets to state-owned firms—which appears to be exactly what policymakers are hoping for.
Gavekal Dragonomics
November 3, 2021
China’s property market is heading into uncharted territory following a formal authorization for the government to carry out regional pilots of a property tax. The goals of such a tax are clear: reduce speculation and diversify local government revenues. However, Rosealea explains that the transition to this tax will be tricky and not without risk.
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
December 9, 2021
China is the largest market for wind power and the biggest producer of wind turbines. Yet turbines cannot easily be exported, and Chinese firms have found themselves mostly confined to the domestic market. In this report, Dan explains why China’s large presence in wind power development does not mean that it will be globally dominant.
Gavekal Dragonomics
December 2, 2021
China’s crackdown on internet companies is far from over. The government is pursuing a broader rectification of internet business practices, and regulators have been given tougher enforcement powers and broader reach. Ernan and Thomas explain that while this environment may not be terrible for all internet companies, it is still a risky one.
Gavekal Dragonomics
Tilly Zhang
November 23, 2021
China’s drive for semiconductor sovereignty is entering a new phase, with government and industry converging on a dual strategy to reduce vulnerability to US sanctions. First, create a domestic supply chain for mature chip technology; second, invest in new technologies that could offer a different path to competing with leading-edge products.
Gavekal Research
December 13, 2021
Chinese officials are signaling a shift in policy to counter downward pressure on growth, a move which Thomas and Wei believe will set the stage for a rally in onshore equities through 1Q22. The main risk is that policymakers under-deliver on their new rhetoric of stability. Meanwhile, the outlook for offshore Chinese equities is more mixed.
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 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
November 10, 2021
It’s now been a year since top leader Xi Jinping first laid out his new goal of achieving “common prosperity,” but how exactly that new slogan translates into government policy still remains rather unclear. As Andrew explains in this piece, that’s because common prosperity is ultimately more of a political campaign than a coherent policy agenda.
Gavekal Dragonomics
November 9, 2021
A major concern of negotiators and activists at this month’s global climate meetings is the size and credibility of China’s decarbonization commitment. However, as Arthur and Rosealea explain there are good reasons to believe that climate goals will play a large role in China’s policy mix in the coming decade—with large risks to economic growth.
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 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
January 14, 2022
In the US and Europe, the new year has begun with a huge wave of workplace absenteeism due to surging omicron Covid cases. In China, policymakers are adopting a whack-a-mole approach to multiple Covid outbreaks, while other emerging economies are curtailing market opening measures.
Gavekal Research
December 17, 2021
US efforts to slow the development of China’s domestic semiconductor industry through export bans on US-origin technology has duly stymied its leading chipmakers. As a result, Beijing is working hard to achieve some form of technological self-sufficiency. In this interview, Gavekal Fathom China’s Tilly Zhang outlines two prongs of the effort.
Gavekal Research
December 7, 2021
In our recent live-streamed seminar in Beijing, Anatole presented his case for why markets are right not to panic about high headline inflation numbers. Louis cast doubt on claims that this current bout of inflation is transitory. Arthur and members of the Dragonomics team presented on China's economy, policy goals and asset markets.
Gavekal Dragonomics
November 22, 2021
China’s strong consumer recovery was waylaid by renewed Covid restrictions in 2021, which has kept services like travel and tourism depressed. The zero-tolerance Covid policy is certain to continue through 2022, shaping the pattern of consumer spending. In her annual consumer review, Ernan explains the cyclical outlook and key structural trends.
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
December 16, 2021
China looks like a winner from the US withdrawal from Afghanistan, now free to tighten its grip on Central Asia. In this DeepChina report, Tom explains the complex reality of the latest round of the "great game." China is getting closer to Russia, skeptical of Afghanistan and Pakistan, and consolidating its economic hold on Turkmenistan.
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.