Gavekal Dragonomics

Rosealea Yao

Aug 12th 2016

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.

Gavekal Dragonomics

Rosealea Yao

May 27th 2016

The rebound in China’s housing sales early this year raises the obvious question of whether we were too quick to proclaim the peak in housing demand. Housing sales in 2016 are indeed on track to surpass 2013, but this is a stimulus-driven bounce. The long-term trend still points to a 10-20% decline in annual construction volume by 2025.

Gavekal Dragonomics

Rosealea Yao

Apr 25th 2016

Has China salvaged growth only by inflating a housing bubble? How much tolerance the government has for a surge in housing prices and mortgage debt is a crucial question for judging how long the new construction cycle can last. History suggests the price gains are now strong enough for the government to start cooling things down at the margin.

Gavekal Research

Andrew Batson

Apr 13th 2016

Over the past few months, sentiment towards China has shifted dramatically. Fears that China was a black hole at the heart of the global financial system have morphed into mild optimism, as growth indicators have stabilized. There remain plenty of longer-term problems, but muddling through rather than collapse is the likely scenario for 2016.

Gavekal Dragonomics

Rosealea Yao

Feb 29th 2016

China’s latest wave of supportive policies for the housing market won’t generate a huge bounce, but they do show the government is happy to use easy credit to keep housing sales going. Helping the market digest the oversupply of new housing is clearly a major priority. But the consequences will be rising household leverage and frothy prices.

Gavekal Dragonomics

Rosealea Yao

Nov 03rd 2015

One of the few recent bright spots in China’s economy has been the recovery in housing sales. Unfortunately, a number of indicators show that recovery losing steam: gains in sales and prices will slow in coming months. This turn in the cycle reinforces our view that construction activity will be weak in 2016, and that more rate cuts will come, says Rosealea.

Gavekal Dragonomics

Rosealea Yao

Oct 16th 2015

Given the huge role that real estate plays in China’s economy, we can’t expect growth to rebound much until construction recovers. In this piece we propose scenarios for how this could happen, focusing on the inventory cycle. We conclude that construction starts will decline again in 2016, with a cyclical rebound not arriving until 2017 or 2018.

Gavekal Dragonomics

Andrew Batson

Sep 14th 2015

China’s housing-driven industrial cycle is stuck in low gear, but has not worsened dramatically. What is getting worse are the parts of the economy that had been doing better earlier in the year: exports, consumer spending and finance. The result will be headline GDP growth that (finally) falls below 7% in the third quarter.

Gavekal Research

Louis Gave

Sep 08th 2015

If nothing else, yesterday’s announcement that China spent US$94bn of its foreign reserves in August to prevent the renminbi from falling against the US dollar should convince the doubters that China has no intention of being a mercantilist “currency warrior”. As a result, any bearish case against the renminbi should not rest on the government’s intentions—in spending its US$94bn, the People’s Bank of China has made it clear that it will hold a...