Gavekal Dragonomics

China’s pivot to economic stimulus was led by the central bank, but most pundits have been dismissive: monetary policy doesn’t matter, they said, what matters is whether there is going to be a big fiscal stimulus. In this piece, Andrew asks: what if the current obsession with a massive fiscal package is wrong, and the real problem is with monetary policy? What if China’s economy needs not another injection of debt-financed public spending, but simply for lower interest rates to work?

This week, a set of high-level announcements and media leaks indicated China’s government is finally trying to get ahead of expectations—and that means a big shift for financial markets. Andrew and Wei argue that although there are meaningful implications for immediate growth, the government must continue to deliver on their promises to sustain the recent rally in Chinese assets.

The People’s Bank of China kept its policy rates unchanged on Friday, defying market expectations of a cut. Wei argues that the central bank's renewed caution casts doubt on its attempts to enforce yield-curve control in government bond markets.

China's Communist Party is gearing up to hold its Third Plenum later this month, an event where top leader Xi Jinping will have a platform to articulate and possibly revise his vision for the economy. With domestic consumers in the doldrums, and trade tensions escalating, is a course correction for China coming? In this webinar our team of China experts explained what to expect, and not to expect, from this high-level conclave.

China’s long-running drive to reduce its reliance on foreign technology is entering a new phase, as Tilly explains in this piece. Though most of the documents relating to this localization drive remain secret, the political signals to companies and local governments are increasingly quite clear: domestic suppliers are preferred.

Today, pressure from China's excess capacity is on high technology, most prominently semiconductors. China has been investing in new semiconductor fabs to increase self-sufficiency and relieve chip shortages. All that new capacity is now starting to come to market, at a time when the world could have difficulty absorbing the extra supply.

The continued decline in China’s property sales and prices, now a full three years old, is starting to hurt even the strongest real-estate firms: state-owned developers. Xiaoxi argues that their worsening finances makes it harder to resolve the delays of housing sold in advance and restore household confidence in the presales system, increasing the downside risks ahead.

How much longer does China’s property crisis have to run? The collapse in housing sales, prices and construction activity has now run for three full years. In this piece, Andrew and Xiaoxi explore the cross-country data on housing busts to assess whether the crisis is still in its early innings, or getting closer to winding down.

While policymakers announced a package of property-support measures in May, implementation has been slow and real-estate indicators have not improved. Xiaoxi argues that the initiatives have several problems, but the fundamental issue is that officials are probably holding off on more aggressive support because they think sales are near a bottom—and they may be correct.

A range of recent developments suggests that the world economy is moving into a period of higher nominal growth and persistent price pressures. China looks to be embracing a more concerted fiscal stimulus and, given the platforms of both presidential candidates, the United States is likely to stay in expansionary mode. Our panel assessed this situation and suggested investing strategies.

Chinese authorities have rolled out a raft of measures aimed at supporting the beaten-down domestic property and equity markets. This support package won’t miraculously revive China’s depressed consumer confidence overnight, but it does mean that China is set to adopt a reflationary policy stance. Our panel discussed what this shift means for growth, currencies, financial assets and commodities.

The summer’s hopes for a course correction in China have come and gone. Growth remains uninspiring but the government is sticking to its formula of conservative macro policy and aggressive industrial policy. Markets have judged this harshly, with domestic equities and bond yields testing new lows. In this webinar, our China team will assess the current economic trajectory and policy choices, and what they mean for markets and global growth.