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Gavekal Dragonomics
Research Team
Jun 01st 2014
CEQ Q2 2014 - One-Child Policy, Foreign Companies
Relaxing The One-Child Policy: Too Late, Too Little
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Gavekal Dragonomics
Research Team, Long Chen
Jun 01st 2014
CEQ Q2 2014 - The Winding Road To Interest Rate Liberalization
Bank deposit rates are among the last major controlled prices in China. To keep the economy humming, they need to be deregulated. This will require deposit insurance, a new policy interest rate—and a plan to avert financial crisis.
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Gavekal Dragonomics
Tom Miller, Research Team
Jun 01st 2014
CEQ Q2 2014 - China's Expanding Empire In Laos
China’s economic influence in Southeast Asia is rising, and smaller countries in the region must figure out how to extract maximum benefit without becoming vassal states.
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Gavekal Dragonomics
Research Team
Jun 01st 2014
CEQ Q2 2014 - Aid To Africa: Helpful Or Harmful?
Critics have long argued that Chinese aid to Africa is self-interested and perhaps even harmful for African states. A close study of the data suggests the truth is much more complicated.
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Gavekal Dragonomics
Research Team
Jun 01st 2014
CEQ Q2 2014 - America, Land Of Opportunity
China’s outward direct investment is rising rapidly, and the United States is getting a bigger share of those flows—US$14 bn last year. But unless China opens its own doors wider to foreign investment, a political backlash could emerge.
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Gavekal Dragonomics
Arthur Kroeber, Research Team
Jun 01st 2014
CEQ Q2 2014 - How Much Pain For How Much Gain
Economic growth is slowing, structural reform has only just begun, and a severe anti-corruption campaign is sowing fear and uncertainty.
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Gavekal Dragonomics
Tom Miller, Research Team
Jun 01st 2014
CEQ Q2 2014 - More Deals, More Players
The face of China’s outward investment is changing: state-owned firms still pour plenty of money into big-ticket resource deals, but private firms are rapidly catching up, investing in consumer goods, technology and services. And developed countries, not emerging markets, are the big beneficiaries.
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Gavekal Dragonomics
Erica Downs
Jun 01st 2014
CEQ Q2 2014 - Whatever Became Of China, Inc.?
Some used to worry that “China, Inc.”—Chinese resource companies, state-owned banks and government agencies working in concert—would “lock up” energy and mineral resources around the world. Those fears proved misplaced, thanks to miscues by Chinese firms and changing market conditions.
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Gavekal Dragonomics
Wang Feng
Jun 01st 2014
Rethinking The One-Child Policy: Too Little, Too Late
Relaxing the one-child policy has emerged as the most concrete and popular policy change following the Third Plenum meeting in November 2013. Yet the initial public reaction has been lukewarm, and there is no chance of a new baby boom. The policy change both came too late and was too little to change the nation’s demographic trajectory.
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Gavekal Research
Andrew Batson
May 30th 2014
China Becomes A Willing Seller
Tea-leaf reading is all the rage in Beijing again. With a deepening correction in the housing market promising to significantly drag on China’s growth this year, every utterance of the political leadership is being parsed for clues as to how and when the government might respond. The tone does seem to be changing: Premier Li Keqiang this week has repeated his usual bromides on “fine-tuning” policy as necessary, but without his previous emphasis...
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Gavekal Research
Louis Gave
May 29th 2014
Drumroll To The ECB Meeting
Yesterday the yield on 10-year US treasury bonds broke downward through 2.5%, its floor ever since last summer’s ‘taper tantrum’. There were two main catalysts for the move. First, there was renewed weakness in the renminbi, as the offshore CNH set a new low for the year with US$-CNH rising to 6.27. Second, there was poor data from Germany and, especially, France, where the ranks of the unemployed continued to expand. Looking at the evolution of...
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Gavekal Research
Arthur Kroeber, Will Denyer, Joyce Poon, Tan Kai Xian, Nick Andrews, Long Chen
May 28th 2014
Five Corners (28 May 2014)
In the latest bi-weekly review of global economics and investment:
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Gavekal Research
Joyce Poon
May 27th 2014
The Earnings Expectations Paradox
When it comes to global equity investment, all markets are not equal. Over the last couple of years, investors have evolved distinctly different attitudes about how to discount trends in profit growth in each of the four major equity market regions.
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Gavekal Dragonomics
Research Team, Long Chen
May 27th 2014
Testing The Reformers’ Resolve
The outlook for China’s growth this year is deteriorating, thanks to a deepening correction in the property market. This will test the government’s stated desire to focus on structural reforms rather than once again stimulating growth. In this concise presentation, we summarize our current views on the economy and policy. Much depends on how extended the downturn in property is: with a contained cyclical correction, the government is unlikely to...
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Gavekal Research
Research Team
May 22nd 2014
A Grand Bargain
In the run up to this week’s meeting between Russian President Vladimir Putin and Chinese President Xi Jinping, expectations had run high that 20 years of discussions could be concluded with an agreement for Russia to pipe natural gas to China. Russia’s deputy energy minister even stated last week that a contract was “98% ready.” The long history of inconclusive China-Russia negotiations on the issue suggested that his was an overly optimistic...
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Gavekal Research
Arthur Kroeber
May 22nd 2014
5C Overview: Keeping China In Check
How much should we worry about China’s increasing assertiveness beyond its borders? Provocations continue to pile up in maritime Asia, most recently a spat over a Chinese oil rig in what Vietnam considers to be its waters. And last week’s Xi Jinping-Vladimir Putin summit in Shanghai, capped by the signing of a long-delayed US$400 bn gas pipeline deal, conjured the specter of a Sino-Russian concert enabling both countries to defy the United...
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Gavekal Research
Anatole Kaletsky
May 22nd 2014
A Grandmaster At Work
“Check-mate”. As Vladimir Putin signed Russia’s historic US$400bn gas-supply agreement with China, he must have felt the satisfaction of a chess grandmaster revealing the inexorable outcome of a complicated endgame. In theory, the next phase of the chess game between Russia and the West in Ukraine will only begin with the Ukrainian presidential election on Sunday, but Putin’s positioning of the pieces means the outcome is preordained, whoever...
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Gavekal Research
Long Chen
May 22nd 2014
5C China: A Dysfunctional Market, And Far Too Small
Last week, the Ministry of Finance gave permission for 10 local governments to issue bonds worth RMB109bn directly to the market. At first this looks like a breakthrough for fiscal reform. But it is too early to celebrate. The approved issuance is small, even compared with the RMB400bn quota in this year’s budget, and the initiative is beset by problems.
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Gavekal Dragonomics
Rosealea Yao, Thomas Gatley
May 21st 2014
The Culprits Behind The Housing Correction
With this year’s correction in the Chinese housing market spreading, the search for the villain of the piece is on. Most market analysts were primed to expect problems in the numerous small, isolated cities that have overbuilt housing and are swimming in excess inventories. Both our own research and much other analysis has shown that smaller cities have serious problems, thanks to an unhappy combination of weak population growth and government-...
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Gavekal Research
Charles Gave
May 20th 2014
A Supply-Sider’s View Of China
Let’s conduct a simplified thought experiment. Imagine a country where there are two types of capex: capital spending used for building infrastructure and capital spending deployed in favor of other private sector activity. By rights, money should go to those projects with the higher return on invested capital. The problem is that most returns from infrastructure accrue to third party users of the asset (so called “externalities”) and not to its...
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