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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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Gavekal Dragonomics
Rosealea Yao
Jul 29th 2020
Construction’s Surprising Resilience
After a robust recovery in construction following the Covid-19 lockdown, the big question now is whether this growth rate is sustainable. Using a rolling sum of construction starts, Rosealea posits that construction should slow only moderately in the second half, providing room for steel demand to continue growing for the rest of 2020.
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Gavekal Dragonomics
Rosealea Yao
Jul 22nd 2020
The Marginal Impact Of Housing Renovation
The State Council recently announced a nationwide target to renovate 39,000 antiquated residential compounds in 2020, improving accommodation for 7mn total households. In this Quick Take, Rosealea explains how the target will provide space for local governments to further tighten property policy without upsetting China’s economic recovery.
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Gavekal Dragonomics
Thomas Gatley, Rosealea Yao, Wei He, Xiaoxi Zhang
Jul 16th 2020
The Recovery Tapers Off
Although Q2 GDP growth rebounded strongly after Q1’s significant contraction, sequential growth slowed considerably into June. In this Quick Take, Thomas, Rosealea, Wei and Xiaoxi report on why despite this latest rebound it will be difficult for the country to maintain its upward momentum as it moves into Q3.
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Gavekal Research
Louis Gave
Jul 10th 2020
Have Equities Become A Bubble?
Two weeks ago, Louis proposed three possible explanations for the exceptional performance of equity markets in the second quarter, one of which was that investors have taken leave of their senses. In this, the second paper of a three-part series, Louis asks if equity markets are in a bubble. And if so—crucially—what sort of bubble is it?
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Gavekal Dragonomics
Thomas Gatley
Jul 01st 2020
The Uneven Rebound In Consumption
The recovery of consumption in China is coming, but it will be an uneven one. In this piece, Thomas explains how the combination of recent negative surprises on public-health restrictions with positive surprises on jobs and income will shape the trajectories of different consumption categories, from food to autos to electronics.
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Gavekal Dragonomics
Thomas Gatley, Rosealea Yao, Xiaoxi Zhang
Jun 15th 2020
The Beginnings Of A Plateau
China’s economic data for May continued April’s wider recovery; however, Thomas, Rosealea and Xiaoxi argue that this upward momentum is losing steam. Weak external demand, tapering industrial production and Beijing’s aversion to further monetary easing all support the idea that China’s post-Covid bounceback is starting to plateau.
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Gavekal Dragonomics
Rosealea Yao
Jun 10th 2020
The Property Balancing Act
Local governments are balancing between encouraging housing construction and containing excess housing inventory. Although they have struck a balance so far, Rosealea argues that the growing vacancies in lower-tier cities coupled with depressed household consumption render current policies unsustainable in the long run.
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Gavekal Dragonomics
Rosealea Yao
Jun 02nd 2020
A Property Rebound In May
Property sales are quickly recovering from their Covid-19 crash, with upward momentum that should continue for several months to come. However, Rosealea argues there are growing risks that China’s property market will start overheating, forcing policymakers to step in and leading to a downwards drift by July/August at the earliest.
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Gavekal Dragonomics
Thomas Gatley
May 15th 2020
April’s Fitful Recovery
China released economic data for April showing a continued recovery in industry and investment as well as a surprising recovery in exports. In this Quick Take, Thomas argues that with exports headed for a substantial decline, this upwards trajectory is likely to plateau in May.
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Gavekal Research
Louis Gave
Apr 29th 2020
The Kitsune Market (Part II)
Last week, Louis introduced the Kitsune, Japan’s mythical nine-tailed fox, and outlined four tail risks which could upend investment after Covid-19. Today he examines two more important tail risks: that the pandemic might not prove deflationary but inflationary, and the risk that the market’s “don’t fight the Fed” mentality could collapse under the weight of its own contradictions.
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Gavekal Research
Louis Gave
Apr 24th 2020
The Kitsune Market
The Kitsune, the mythical Japanese fox which portends a change of fortune, has nine tails. Inspired by the unnatural conditions in markets, Louis has identified nine tail risks which could upend the investment world over the short to medium term. In the first installment of a two-part series, he outlines four tail risks that investors should consider hedging against.
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Gavekal Dragonomics
Rosealea Yao
Apr 22nd 2020
Steel Prices Signal Stability
Steel prices have stabilized after falling around 10% from their peak, reflecting a relatively rapid recovery in construction activity from the Covid-19 lockdowns. In this piece, Rosealea argues that the steel market is signaling a stabilization in China’s domestic demand from improving housing sales and a boost to infrastructure spending.
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Gavekal Research
Louis Gave
Apr 09th 2020
New Concerns For A New World
We are in uncharted policy territory. Never before have we seen the kind of GDP contractions now being projected for most OECD countries, and never before have investors had to deal with such extremes of uncertainty. Against this backdrop, Louis attempts to answer 10 of the most burning questions posed by clients about the shape of the post-Covid-19 world.
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Gavekal Dragonomics
Andrew Batson
Apr 02nd 2020
Getting Out Of Lockdown
China is starting to get out of its strict Covid-19 lockdown, but its economy will not get fully back to normal until the outbreaks in other countries also get under control. In this piece, Andrew and the team dig into the data to piece together the economy’s trajectory for March and April: a narrowing decline rather than a fast rebound.
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Gavekal Research
Arthur Kroeber
Mar 26th 2020
How Long For The Costly Cure?
Is the cure worse than the disease? This question is already being asked about the economic lockdowns being imposed in response to Covid-19. It will be asked a lot more in the coming weeks as the economic pain gets worse. The short answer is that the cure is costly, but needed; and well-designed policies can enable a transition to a much lower-cost approach by mid-May if not earlier.
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