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Gavekal Research
Long Chen
Aug 15th 2017
China’s Slow Exit From Reflation
China’s first monthly data for the second half of 2017 showed growth momentum softening. While reflation peaked in the first half of 2017, the story is still that the exit from reflation will be very slow and gradual. Economic policy will be largely on hold in this period: tightening has peaked, but the switch to easing is still a long way away.
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Gavekal Dragonomics
Rosealea Yao
Jul 05th 2017
Government Becomes A Home Buyer
It’s no secret that managing the housing market is a core part of China’s economic policy. But as Rosealea explains in this piece, government’s role in supporting housing sales is now even greater than most realize. The government is buying millions of unsold housing units directly from developers, and the scale of the program is only increasing.
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Gavekal Dragonomics
Rosealea Yao
Jun 20th 2017
The Central Pillar For Housing Sales
China’s housing market is proving quite resilient this year, with sales growth perking up in May. In this piece, Rosealea argues the current sales recovery is broad-based: growth is strong in both central and coastal provinces. While restrictions on speculative purchases are spreading to some smaller cities, this should have only a moderate impact.
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Gavekal Research
Louis Gave
Jun 06th 2017
Figuring Out Where The Ball Will Be
Rugby players fall into one of two categories: the forwards, who typically go where the ball is (and in the process put their heads in places most sane people wouldn’t put their feet), and the backs, who try to go where the ball will be, which enables them to look good and keep their kit clean, but earns them the scorn of the forwards. Peter FitzSimons, the first Aussie to play for a French club (Brive), once remarked: “Come the revolution, the...
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Gavekal Dragonomics
Rosealea Yao
May 01st 2017
How Long Can The Construction Rebound Last?
Chinese growth prospects look quite good in 2017, thanks to the recovery in construction, but how long can it last? In this piece, Rosealea unpacks the inventory dynamics behind the rebound. Given the strong start to 2017, it now looks like low inventories can support growth in construction not just in 2017, but also well into 2018.
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Gavekal Dragonomics
Yanzhong Huang, Gordon Liu, Joshua Kurtzig, Nina Wang, Cameron Wilson
Mar 15th 2017
CEQ: Healthcare—Crisis Or Opportunity?
China’s growing economy has brought its people longer lives, but also a new set of health problems. Though the government is trying to improve coverage, change is happening slowly. So there is a growing opportunity for private companies to fill the gap. This issue of China Economic Quarterly investigates the nation’s health problems, and solutions.
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Gavekal Research
Tom Holland
Mar 06th 2017
On Borrowed Time In Hong Kong
Last month, home prices in Hong Kong’s secondary market climbed to a record high, up more than 150% from the depths of the financial crisis. At the same time, Hong Kong’s stock market has been among the world’s strongest major markets so far this year, comfortably outperforming the S&P 500. The buoyancy of Hong Kong assets owes more than a little to investor enthusiasm for the global reflation trade, and to inflows of Chinese money. But more...
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Gavekal Dragonomics
Rosealea Yao
Feb 03rd 2017
Is It Finally Time For The Property Tax?
After more than a decade of debate, could China finally be ready to start imposing a property tax? In this piece, Rosealea argues that political will and technical preparations point to progress toward a tax in 2017. While some fear the impact on prices, the gradual rollout of a narrowly focused tax should be mostly a non-event for markets.
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Gavekal Dragonomics
Ernan Cui
Feb 01st 2017
The Lost Promise Of Urbanization
China’s government has been ramping up its focus on urbanization and rural land issues, promoting new policies as breakthroughs that will keep driving growth for decades to come. But for all the rhetoric, the new policies are not fundamentally liberalizing. And the incentives they create could slow rather than accelerate rural-urban migration.
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Gavekal Research
Louis Gave
Jan 26th 2017
Drawing Meaning From 2016, And A Roadmap For 2017
Having experienced a rough 2016, the temptation for most investors is to clean the slate and start again. Unfortunately, life in financial markets does not allow for such neat endings. In one of his biggest reports in years, Louis argues that after such a complex and tumultuous year, it is essential for investors to draw a breath and derive some understanding of what just happened. Only then should they try to sketch out future scenarios.
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Gavekal Research
Andrew Batson
Jan 23rd 2017
Is China Ready For A Trade Shock From Trump?
China reported an acceleration in its economic growth on Friday, just hours before Donald Trump was sworn in as US president. But growth could take a hit if Trump makes radical changes to tax and trade policy. And while China has plenty of weapons to fight a trade war, those measures are unlikely to completely offset a sudden shock to its exports.
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Gavekal Research
Research Team
Jan 06th 2017
The Gavekal Monthly: Our Top 12 Questions For 2017
For our first Monthly of the year, we depart from our normal format to offer our thoughts on the dozen most important questions investors must face this year. Not surprisingly, the issues that rose to the top were the impact of the new Trump administration's policies on the dollar and US bond yields, and whether the eurozone will spend the year tearing itself apart. Also,oil prices, the risk of financial implosion in China, and where to...
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Gavekal Dragonomics
Andrew Batson, Long Chen, Rosealea Yao, Thomas Gatley, Ernan Cui
Jan 04th 2017
Five Macro Questions For 2017
For our first China research piece of the new year, we offer a guide to the economic outlook in the form of short answers to some big questions: Will China be as boring as consensus forecast imply? Will the central bank hike interest rates? Will the housing market correct sharply? Will it be a good year for Chinese equities? Will the labor market hold up?
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Gavekal Research
Rosealea Yao
Dec 01st 2016
Making Sense Of The Housing-Commodity Nexus
Early sales data confirm that China’s property cycle took another step down in November. Yet no one seems to have told the commodity markets: even as property sales have cooled off, prices have heated up, with domestic futures for steel, copper, and coal jumping 20-40% in November. In this piece, Rosealea explains how to read these mixed signals.
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Gavekal Dragonomics
Thomas Gatley
Nov 30th 2016
Don't Blame The Property Speculators
Is a love of speculation sapping firms’ appetite for real investment? As Chinese companies slow spending on fixed assets, they are buying more investment properties—sparking concern about a “hollowing out” of the economy. Thomas says the blame is misplaced; property speculation is an effect not a cause of firms slowing capex as the economy cools.
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Gavekal Dragonomics
Rosealea Yao
Oct 31st 2016
The New Reality Of Housing Prices
The wild ride of Chinese housing prices is a sign of how the housing market has become more speculative and policy-driven as fundamental demand has peaked. Policies intended to help small cities have only made prices in the largest cities frothier. Rosealea thinks this policy-driven volatility in prices will continue even as the cycle turns down.
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Gavekal Dragonomics
Andrew Batson
Oct 13th 2016
The Equality Engine Is Stalling
For all its leaders’ talk of a “new normal,” China has not weaned itself off the “old normal” of housing and investment-led growth. That model was in fact a powerful engine for reducing regional inequality, so it has much political support. The engine has now stalled—but rather than swap in a new one, the government keeps revving the old one.
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Gavekal Dragonomics
Thomas Gatley
Sep 20th 2016
The Big Fish Eat The Little Fish
China’s housing sales may have plateaued, but the largest real-estate companies still have plenty of room to grow by consolidating an enormous and fragmented market. A multiyear boom in M&A has strengthened the market position of the largest developers, who are still easily raising huge sums from capital markets that can fund future deals.
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Gavekal Dragonomics
Rosealea Yao
Aug 12th 2016
Housing Takes A Breather; More Stress On The Way
July was a weak month for China’s economy, as investment, industrial production and retail sales all slowed. An important exception was the property market, where sales ticked up and buyer sentiment seems strong. Nonetheless, housing activity will continue to slow over the rest of the year, if at a gentler pace than the plunge in May and June.
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Gavekal Dragonomics
Rosealea Yao
Jun 08th 2016
The Housing Cycle Is Aging Rapidly
The latest up-cycle in China’s housing sales has probably reached its peak. Major cities saw a marked step-down in sales growth in May, and absent major new stimulus national data will follow suit. Housing sales are still on pace for full-year growth of over 10%, but will slow to single digits later in 2016, and 2017 will see a deeper correction.