E.g., 17-04-2021
E.g., 17-04-2021
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    Gavekal Research

    The Huarong Haircut

    In the last two weeks, the bonds of Huarong Asset Management have slumped -30% or more in price in the offshore market, as investors fear either a default or a vicious restructuring which will force them to take painful losses. Wei and Xiaoxi assess the fine political line that China’s authorities must walk to assess the likely extent of the eventual haircut.

    0
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    Gavekal Dragonomics

    The Fall And Rise Of Bond Inflows

    Foreign investors’ holdings of Chinese onshore bonds declined by RMB9bn in March, after rising RMB89.5bn in February. In this Quick Take, Wei explains how narrowing yield spreads and the decline of the renminbi against the dollar led to this sharp reversal, and what comes next for Chinese bond inflows.

    0
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    Gavekal Dragonomics

    What To Do About Capital Inflows

    The surge of foreign interest in China’s bond market has created a novel economic problem for its policymakers: managing sizable inflows of portfolio capital which are pushing up its currency. In this piece, Wei explains how China has tried to encourage capital outflows to balance those inflows, and why that is becoming less necessary.

    4
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    Gavekal Dragonomics

    The New Normal For Infrastructure

    Officially, the normalization of China’s fiscal policy will be moderate in 2021: the government budget will narrow to 3.2% of GDP from 3.7%. But public-works spending is China’s true fiscal policy, and tighter financing does not bode well. Infrastructure investment is likely headed for a fourth year of negligible growth, and could even decline.

    2
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    Gavekal Dragonomics

    The Next Steps On Hidden Local Debt

    In 2021, China’s central government is gearing up to once again tackle the hidden debts of local authorities, toughening its stance after a couple of lax years. As Wei explains in this piece, the solution is likely to be a mixed one, combining limits on new borrowing, partial bailouts of some debt, and a lot of kicking the can down the road.

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    Gavekal Dragonomics

    Explaining The Interbank Spike

    Short-term interbank rates surged to their highest levels in more than two years on Thursday after a surprising move by the central bank to drain liquidity from the market. In this Quick Take, Wei explains why this liquidity tightening does not signal a change in monetary policy, and why rates should return to normal over the coming weeks.

    0
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    Gavekal Dragonomics

    Webinar: The Outlook For China In 2021

    China enters 2021 having achieved a world-leading recovery, but now faces a tricky balancing act to secure its economic trajectory. Ernan, Rosealea and Wei discuss how the authorities are responding to the rebound in Covid cases, what their strategy is for a frothy property market, and how they will balance growth with financial stability.

    0
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    Gavekal Dragonomics

    Not As Hawkish As Feared

    The People's Bank of China is one of the world’s most hawkish central banks—but just how hawkish will it be in 2021? Bond market investors worry that the PBOC, eager to normalize policy, will be pushed into hiking rates by higher inflation. In this piece, Wei argues those worries are misplaced, and that bond yields have more room to fall.

    0
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    Gavekal Dragonomics

    The Renminbi Races Out Of The Starting Gate

    The renminbi gained 1% against the US dollar in the first two trading days of 2021, leading China’s central bank to signal a pushback against appreciation by tweaking foreign-lending limits. In this Quick Take, Wei explains that such moves are likely to slow than stop the currency’s gains, as fundamentals still favor the renminbi.

    0
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    Gavekal Dragonomics

    The Road To Policy Normalization

    China’s economy is almost back to normal after Covid-19, and that means economic policy will also normalize: the question is not whether, but how. In this piece, Wei argues that the most likely policy settings for 2021 will be somewhat tighter fiscal policy and a deceleration in total credit growth, but no increase in policy interest rates.

    2
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    Gavekal Dragonomics

    Webinar: China And The World Economy In 2021

    Arthur Kroeber and Dan Wang sketched out the likely course of the US-China rivalry under the new Biden administration; He Wei and Thomas Gatley analyzed key developments in China's economy and markets, and Gavekal CEO Louis Gave presented his views on the forces shaping global markets.

    0
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    Gavekal Dragonomics

    Eroding The Implicit Guarantee

    China’s financial regulators recently stepped in to calm a corporate bond market roiled by the unexpected default of a local state-owned enterprise. In this report, Wei argues that this reassurance does not translate to a reassertion of the implicit sovereign guarantee for local SOE debts; in fact, more local SOE defaults look likely for 2021.

    0
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    Gavekal Dragonomics

    The Second Wave Of Bond Inflows

    There was a record increase in foreign holdings of Chinese bonds in the second and third quarters of 2020, almost all of it from private-sector investors. In this report, Wei explains why foreign investors will likely continue to buy up Chinese bonds and why Chinese authorities appear relaxed about this second wave of inflows to the bond market.

    8
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    Gavekal Dragonomics

    Cracks Appear In Local Support For Bonds

    A missed debt payment last week by a local state-owned enterprise in Henan province has created turmoil in China's corporate bond market. In this report, Xiaoxi and Wei explain why the default undermined one of the market's fundamental supports and why investors are now likely to be more discerning between provinces.

    7
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    Gavekal Research

    Webinar: China After The Recovery

    Having gone into lockdown first, China was also the first economy to emerge, and has since enjoyed a rapid rebound in industrial production and exports, reflected in financial markets. But now that the economy is back to “normal”, policymakers have returned to a conservative stance which focuses on financial stability.

    0
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    Gavekal Research

    Strategy Monthly: Chinese Assets After The Recovery

    China was the first economy into lockdown, and the first to emerge, enjoying a rapid rebound in industrial production and exports. Uniquely among major economies, China has already regained and exceeded pre-Covid levels of output. The speed and strength of this early recovery was reflected in financial markets, with equities rallying hard, bonds selling off, and the renminbi appreciating on heightened capital inflows.

    0
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    Gavekal Research

    Flows Favor The Renminbi

    China’s renminbi has been appreciating in recent months, driven by heavy inflows into the onshore bond market and declining concerns about US-China tensions. The biggest risk to continued renminbi strength is the possibility that an election victory for Donald Trump sparks fears of a renewed US-China tariff war.

    0
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    Gavekal Dragonomics

    Risks To The Consumer Recovery

    Consumer spending in China looks to be firmly on a recovering track, with Covid-19 under control and the job market improving. But the shock to household income in the first half of 2020 could still linger over spending for a while. In this piece, Wei explains what could keep consumption from quickly regaining previous growth rates.

    0
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    Gavekal Dragonomics

    A Booming Recovery

    China’s economic recovery continues to boom ahead, with retail sales turning positive and exports continuing to outperform. In this Quick Take, Thomas, Rosealea and Wei explain why this momentum is likely to continue for several more months but might dampen towards the end of the year as credit tightens and the property market is reined in.

    7
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    Gavekal Dragonomics

    The Experiment With Sectoral Monetary Policy

    Central banks usually concern themselves with the economy in the aggregate. The People’s Bank of China is now experimenting with a disaggregated approach, minimizing changes in overall policy and instead directing the flow of credit to specific sectors. In this piece, Wei considers whether this experiment can work, and where rates are headed.

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