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Gavekal Dragonomics
Andrew Batson
Feb 23rd 2021
To Hold Back The Tide Of De-Industrialization
China’s government is focusing on a new economic metric: the manufacturing share of GDP, which looks to feature in the next five-year plan. Rather than accept de-industrialization, it wants “stability” in manufacturing. In this piece, Andrew explains why China is worried about the fall in the manufacturing share, and whether it can be stopped.
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Gavekal Dragonomics
Rosealea Yao
Feb 10th 2021
Propping Up Property Sales
Housing sales growth is holding up well despite financial tightening and hawkish policymaker rhetoric. In this report, Rosealea explains why regulators are pressuring developers to cut prices, while increased household savings means more families can take advantage of these discounts. 2021 will therefore likely be a strong year for housing sales.
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Gavekal Research
Anatole Kaletsky
Jan 22nd 2021
Risks In The Biden Era
In December, Anatole outlined 10 disparate risks that could derail the bull market in 2021. That was before the Democrats won full control of the US government, paving the way for approval of Joe Biden’s new super-size stimulus package. In light of the developments over the last month, Anatole reassesses his 10 risks.
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Gavekal Dragonomics
Dragonomics Team
Jan 18th 2021
A Two-Speed Recovery
China’s Q4 GDP growth surpassed pre-Covid rates, with housing and manufacturing leading while services lagged and infrastructure investment slowed. In early 2021, this divergence is likely to continue as consumers stay home for the Chinese New Year and poor credit growth drags on infrastructure investment.
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Gavekal Dragonomics
Rosealea Yao
Jan 13th 2021
New Ceilings For Property Financing
China’s policymakers are expanding their restrictions on bank financing of the property sector, imposing limits on mortgage lending in addition to curbs on borrowing by developers. In this report, Rosealea explains why the new regulations do not shift her expectations of flat property sales and a modest decline in construction activity in 2021.
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Gavekal Research
Simon Pritchard
Jan 13th 2021
The Squeeze Of Old Hong Kong
Last Wednesday Hong Kong police arrested scores of pro-democracy activists for joining forces to try and win a local parliamentary election and thereafter block government legislation. The use of a tough new national security law to suppress routine political organization threatens more international opprobrium that will further cut the city off from the Anglosphere.
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Gavekal Research
Louis Gave
Jan 04th 2021
Gravity Or Liquidity? Which Will Win In 2021?
In hindsight, 2020 showed that if three conditions are met, a stock can break free from the earth’s gravity, and lift off for destinations only sci-fi writers could have imagined. Consequently, one of the most important questions for investors in 2021 is whether such inter-galactic travel can continue. Or will the coming year instead see a shift in investor behavior, with gravity once again exerting its downward pull?
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Gavekal Research
Anatole Kaletsky
Dec 22nd 2020
Goldilocks And The 10 Bears Of 2021
In recent years Anatole has written a series of articles describing 10 key risks for investors. He readily accepts that this year’s exercise was rendered redundant by the emergence of Covid-19 in January. Next year, however, he believes that a greater range of factors could weigh on markets and in this piece assesses them one by one.
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Gavekal Dragonomics
Rosealea Yao
Dec 18th 2020
A Looming Correction For Iron Ore
Iron ore prices hit an eight year high in early December in response to a tight steel market. Rosealea writes that this uptick in steel demand, likely due to China’s strong steel-intensive export figures, is unsustainable and should subside in the new year—resulting in a correction for iron ore prices in the coming months.
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Gavekal Dragonomics
Dragonomics Team
Dec 15th 2020
Credit Has Peaked, Growth Has Not
China’s economic momentum continued to accelerate in November despite an October peak in credit growth, with exports and manufacturing investment taking the lead while more policy-dependent sectors plateaued. In this piece, the Dragonomics team explains why China is likely to maintain its strong economic growth through 1Q21.
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Gavekal Dragonomics
Rosealea Yao
Dec 08th 2020
A New Reality For Commercial Property
Vacancy rates for office and retail space are picking up sharply this year despite a broad return to normality in China. In this report, Rosealea argues that Covid-19 accelerated an ongoing shift towards at-home work and entertainment. Developers must now grapple with the new reality that demand is unlikely to ever return to pre-Covid levels.
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Gavekal Dragonomics
Dragonomics Team
Nov 16th 2020
Full Steam Ahead
Economic data released on Monday showed China’s continued economic normalization, with property sales and infrastructure investment outperforming expectations, industrial activity staying strong and the consumer recovery picking up. In this Quick Take, the Dragonomics team outlines why this environment is favorable for bonds and risky for equities.
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Gavekal Dragonomics
Rosealea Yao
Oct 08th 2020
The Phantom Mechanism
In late July, Beijing declared that a trial “long-term mechanism” for regulating real estate had achieved “significant results” despite having never been properly defined. Rosealea posits that the mechanism is a combination of smaller reforms implemented in recent years, concluding that major policy changes are therefore unlikely for now.
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Gavekal Dragonomics
Rosealea Yao
Sep 30th 2020
The Evergrande Effect
After a turbulent several days, on Tuesday China Evergrande Group averted a cash crunch that would have reverberated throughout China’s financial markets. In this Quick Take, Rosealea explains why Evergrande’s liquidity troubles are emblematic of the wider issues facing developers following China’s ongoing financing squeeze.
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Gavekal Research
Tom Miller
Sep 29th 2020
China’s Belt And Road Looks To Bounce Back
Even before the pandemic, it had become a common refrain to write off the Belt and Road Initiative. After foreign loans and construction peaked in 2017, China’s global infrastructure powerplay lost momentum. US-led criticism of Beijing’s “debt trap diplomacy” spread anxiety, forcing Xi Jinping to pledge reform. Then, when Covid struck, hundreds of BRI projects ground to a halt. However, Tom argues that it is too soon to dismiss the initiative:...
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Gavekal Dragonomics
Thomas Gatley, Rosealea Yao, Wei He
Sep 15th 2020
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.
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Gavekal Dragonomics
Rosealea Yao
Sep 11th 2020
Red Lines For Real Estate
China’s central bank and housing ministry are putting together new restrictions on the leverage of major real-estate developers by drawing three “red lines” for the firms. In this report, Rosealea explains why regulators are targeting individual developers, as well as why she feels these red lines will have limited macro impact.
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Gavekal Dragonomics
Wei He
Aug 31st 2020
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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Gavekal Dragonomics
Gilliam Collinsworth Hamilton
Aug 25th 2020
Understanding Dual Circulation
Top leader Xi Jinping is now promoting a new slogan—dubbed “dual circulation”—to manage China's significant dependencies on the global economy. In this report, Gilliam explains how this does not mean the country is turning inward, but rather trying to gain more control over its long-term growth without losing its role as an international hub.
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Gavekal Dragonomics
Thomas Gatley, Rosealea Yao, Wei He
Aug 14th 2020
Another Leg Up For Growth
After plateauing in Q2, China’s economic activity is stepping up in Q3, powered by demand in housing, infrastructure and exports, and a lessening drag in consumer services. In this Quick Take, Thomas, Rosealea and Wei explain how these factors will assist the country as it continues down its path back to economic normalcy.
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