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Gavekal Dragonomics
Rosealea Yao
Jan 11th 2022
Housing Demand Begins To Stabilize
Chinese policymakers are scaling back their crackdown on real estate, having signaled a pivot towards prioritizing stable growth. The change in rhetoric has had a visible effect on the housing market, with a particularly sharp pickup in sales volumes in late December. This should lead to a further sequential improvement in sales and prices in Q1.
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Gavekal Research
Louis Gave
Jan 06th 2022
SWOT Analysis For 2022
Despite a spate of exogenous shocks in 2021, currency markets largely remained placid, bonds barely sold off and the US equity market continued to scale new heights. This year, however, the global policy backdrop is shifting. Clearly, 2022 will be different from 2021. But how different? Louis analyzes the strengths, weaknesses, opportunities and threats in the new year.
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Gavekal Dragonomics
Dragonomics Team
Dec 15th 2021
A Welcome Reprieve For Property
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.
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Gavekal Research
Wei He
Dec 07th 2021
A Cautious Easing
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.
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Gavekal Dragonomics
Wei He, Xiaoxi Zhang
Nov 11th 2021
Mortgage Easing Begins
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.
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Gavekal Dragonomics
Arthur Kroeber, Rosealea Yao
Nov 09th 2021
A Conservative But Costly Plan
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.
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Gavekal Dragonomics
Rosealea Yao
Nov 03rd 2021
The Risks Of The Property Tax Transition
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.
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Gavekal Dragonomics
Xiaoxi Zhang, Wei He, Rosealea Yao
Oct 25th 2021
No Respite For Real Estate
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.
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Gavekal Dragonomics
Dragonomics Team
Oct 18th 2021
A Steady Slowdown
Chinese economic growth continued to slow in 3Q21 thanks to ongoing supply constraints and demand weakness. In this Quick Take, the Dragonomics team explains that while China’s poor September figures reflect supply-side constraints, of greater concern is the weakening demand side due to a deepening property downturn.
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Gavekal Dragonomics
Xiaoxi Zhang, Thomas Gatley, Ernan Cui
Oct 14th 2021
The Long Winter For Small Business
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.
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Gavekal Research
Louis Gave
Sep 29th 2021
Q&A: China’s Investibility
In the last few weeks, as China Evergrande’s financial troubles have deepened, Louis and Gavekal’s China team have fielded a spate of questions from clients about China’s investibility. In this paper, Louis offers a distillation of these conversations, presented in a question-and-answer format.
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Gavekal Research
Wei He
Sep 21st 2021
No Escape From The Evergrande Effect
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.
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Gavekal Dragonomics
Dragonomics Team
Sep 15th 2021
The Window Is Closing For Structural Reform
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.
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Gavekal Dragonomics
Rosealea Yao
Aug 24th 2021
Developers Feel The Squeeze
The steady drumbeat of tightening on China’s property developers is taking its toll on construction activity. In this report, Rosealea explains why this weakness in construction will not unduly worry policymakers and should even help them achieve their goal of reducing steel production. Developers will therefore continue to feel the squeeze.
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Gavekal Dragonomics
Dragonomics Team
Aug 16th 2021
A Bumpy Slowdown
Chinese economic data weakened across the board in July as disruptions caused by extreme weather exacerbated the country’s wider economic slowdown. In this report, the Dragonomics team explain why policymakers are expected to offer limited support in H2, support which will likely be insufficient to counteract the slowdown in exports and property.
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Gavekal Dragonomics
Rosealea Yao
Aug 05th 2021
Another Squeeze For Steelmakers
Steel futures are on the rise again after several provinces announced plans to cut production. This might sound familiar: prices spiked in April and May following similar announcements. Rosealea writes that this time is different, as slowing construction activity in 2H21 should lower steel demand, making production easier to control.
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Gavekal Research
Rosealea Yao
Jul 28th 2021
The Evergrande Drama Plays Out
Investor confidence in Evergrande Group, China’s second-largest property developer, has been pummeled in recent weeks. While Evergrande has managed to put out the latest round of fires, and a collapse is unlikely, Rosealea argues in this piece that market volatility for developers will probably continue as financial regulators keep on squeezing.
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Gavekal Dragonomics
Dragonomics Team
Jul 15th 2021
A Manageable Decline
Chinese economic data for June showed cyclical sectors beginning to decline from a strong peak, while consumption growth is still struggling to regain pre-Covid levels. In this Quick Take, the Dragonomics team explains why China seems on track for a manageable decline in H2.
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Gavekal Dragonomics
Rosealea Yao
Jul 06th 2021
Another Go At The Property Tax
After two years of silence, the Chinese government has signaled it is making a new effort to implement a residential property tax by expanding local trials. In this report, Rosealea explains why, against a better economic backdrop and with less organized opposition, the property tax is likely to stick this time around.
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Gavekal Dragonomics
Rosealea Yao
Jun 07th 2021
The Urbanization Surprise
China’s 2020 census revealed that urbanization has been faster over the past decade than official statistics showed. That means the fundamentals for housing demand are stronger than most had realized. As Rosealea argues in this piece, the census should drive an upward reassessment of long-term trends in China’s urbanization and commodity demand.
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