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Gavekal Dragonomics
Arthur Kroeber, Research Team
Nov 30th 2014
CEQ Q4 2014 - End Of The Golden Age
Xi Jinping’s reforms are clearly designed to benefit Chinese firms at the expense of their foreign competitors. Even so, foreign investment keeps pouring in.
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Gavekal Dragonomics
Andrew Batson, Research Team
Nov 30th 2014
CEQ Q4 2014 - The Not So Grand Plan For Fixing State Enterprises
China has launched a new round of state-owned enterprise reform, a welcome move after a decade of stasis. So far this reform is less a coherent plan than a collection of initiatives by officials and executives.
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Gavekal Dragonomics
Research Team
Nov 30th 2014
CEQ Q4 2014 - Squaring The Circle: How The Reforms Can Work
China could keep economic growth running at 7% or morewith the right policy package. Xi Jinping’s blueprint gets fiscal reform right,but falls short in other areas.
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Gavekal Dragonomics
Arthur Kroeber, Research Team
Nov 30th 2014
CEQ Q4 2014 - Our Country, Your Problem
Much commentary on China assumes that beneath its tough veneer the Party is fragile and walks on a knife-edge of popular discontent. Nothing could be further from the truth.
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Gavekal Research
Anatole Kaletsky
Nov 27th 2014
The Great Policy Convergence
Yesterday’s announcement that the European Central Bank is preparing to buy government bonds from the first quarter of next year is an event of historic importance. As the logical follow-up to Mario Draghi’s commitment to expand the ECB’s balance sheet by €1trn, yesterday’s statement by ECB vice-president Vitor Constâncio confirms beyond reasonable doubt that Europe is ready, at last, to implement full-blown quantitative easing, over-riding the...
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Gavekal Dragonomics
Rosealea Yao
Nov 27th 2014
Housing & Construction Review
Is the latest downturn in China’s housing market just another cyclical correction, or the bursting of an unsustainable bubble? To cut through the confusion surrounding this key part of the economy, it is crucial to understand the fundamentals. In this chartbook, our annual review of the housing and construction market, Rosealea explains our outlook for the long-term prospects for housing demand in China; explores the implication of changing...
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Gavekal Research
Research Team
Nov 26th 2014
Five Corners (26 November): Capital Spending In 2015
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Gavekal Research
Will Denyer, Tan Kai Xian
Nov 25th 2014
Global Central Banks Are Driving Appetite For US Cyclicals
The rebound in US equities since their mid-October trough has been impressive. After giving up almost all its year to date gains in just four weeks, the S&P 500 snapped back even more quickly, ending October at a new record high. Since then, it has extended its advance to notch up a YTD gain of 12%. Yet, until just a few days ago, the relative performance of sectors within the index indicated a degree of caution on the part of investors....
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Gavekal Research
Thomas Gatley
Nov 25th 2014
5C China: Rate Cuts Are No Cure For Weak Capex
As inflation has weakened in China since 2011, the real interest rates paid by corporate borrowers have risen steadily. At the same time demand growth has slowed across the board. Heavy industrial firms in particular—and most state-owned enterprises fall into that basket—operate in sectors suffering from overcapacity with scant top line growth and particularly acute deflationary pressure. It is little wonder then that few are keen to pay higher...
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Gavekal Research
Long Chen
Nov 24th 2014
China's Rate Cut: Diminished Returns
First the Bank of Japan, then the European Central Bank, now comes the People’s Bank of China. On Friday evening the PBOC cut its benchmark interest rates for the first time since July 2012. The direction of the move had long been foreseen, but the timing of the announcement came as a surprise. We had expected concerns over China’s high levels of domestic debt would enable the central bank to resist pressure to cut rates until the first quarter...
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Gavekal Dragonomics
Michael Meidan
Nov 20th 2014
The Great Normalization Of Chinese Oil Demand
China’s investment-heavy and energy-intensive model of economic growth has meant that it accounted for about two-thirds of global oil demand growth over the past decade. This frenzy of building, manufacturing and freight movement resulted in an extra 450,000 barrels of oil, on average, being consumed each day. But as China’s economy eases into a lower growth trajectory and energy-efficiency policies are toughened, oil demand growth could halve...
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Gavekal Research
Arthur Kroeber
Nov 18th 2014
Xi’s Long Game
Summit meetings of APEC, the Asia-Pacific economic cooperation talking shop, rarely produce much of interest beyond a funny group photo of 21 heads of state struggling to look comfortable in ersatz local dress of the host country. But last week’s summit in Beijing, the companion state visit of President Obama, and the subsequent G-20 summit in Australia produced a surprisingly substantial feast of positive news. The deal flow was a testament to...
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Gavekal Research
Joyce Poon
Nov 17th 2014
What If The Yen Falls Another 20%?
Japan’s woeful third quarter performance—the economy contracted at an annualized 1.6% rate, pushing the economy into a technical recession—has killed any remaining expectations that the government of Shinzo Abe will proceed with its original plan to raise the country’s sales tax for a second time next year to 10%. In the absence of further fiscal consolidation, this will leave the prime minister’s ‘Abenomics’ policy to revitalize Japan’s economy...
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Gavekal Dragonomics
Rosealea Yao
Nov 17th 2014
A Creditless Recovery For Housing?
The extended decline in China’s housing sales is finally showing clear signs of reaching a bottom. The latest data show the decline in national property sales narrowed sharply in October, with volumes dropping just 1.6% after a 10.3% fall in September. And the daily transaction figures reported by a number of major cities suggest market activity continued strengthening in November. This improvement is primarily a response to the favorable...
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Gavekal Research
Research Team
Nov 12th 2014
Five Corners (12 November): The Commodity Fallout
Overview: Louis Gave Considers the poor performance of gold mining stocks and wonders if energy companies are set to go the same way.
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Gavekal Research
Tom Miller
Nov 12th 2014
China's Geostrategic Ambition
Xi Jinping is making good on his promise to restore China’s position on the world stage. On Monday, China agreed to slash tariffs on high-tech imports, breaking almost 18 months of deadlock with the US over how to update the WTO’s Information Technology Agreement. In coming to terms, China showed it is willing to work with the US in support of multilateral trade frameworks. But China’s President Xi also used his chairmanship of this year’s Asia-...
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Gavekal Research
Thomas Gatley
Nov 10th 2014
Now That You Can, Should You Buy Shanghai?
After years of frustration, months of speculation and repeated assertions that ‘there is no firm timetable,’ the world’s biggest inaccessible stock market is finally opening up to foreign investment. From next Monday, the Shanghai-Hong Kong Stock Connect program will allow international investors to buy and sell around 560 of the largest A-shares listed in Shanghai directly through their Hong Kong broker, without all the hassle of complying with...
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Gavekal Research
Andrew Batson
Nov 09th 2014
5C China: Slower Oil Demand Is No Puzzle
Are plunging global oil prices sending a signal that something is amiss in the Chinese economy? China is now the world’s largest importer of crude oil, a mantle it recently took over from the US, so changes in its demand should certainly have an impact on the global market. We have heard from a number of investors that China’s weak demand for energy is hard to reconcile with real GDP growth that is still above 7%.
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Gavekal Dragonomics
Ernan Cui
Nov 05th 2014
Consumer Outlook & Thematic Review
As the investment boom of the past decade-plus unwinds, China is shifting to a more consumer-driven economy. So goes the conventional wisdom—but the actual dynamics of consumer spending remain relatively poorly understood. In this concise presentation, we outline both the key drivers of consumption in the aggregate, and a number of important growth themes in consumer spending. In macro terms, we find that the “rebalancing” toward consumption is...
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Gavekal Dragonomics
Long Chen
Nov 04th 2014
Lots Of Capital Flows, No Capital Flight
China may have a mostly closed capital account, but the size of capital flows across its borders are nonetheless very large. So is China now experiencing big capital inflows, or capital outflows? In fact, this question is surprisingly hard to answer, as we see very mixed signals in the latest data. The messy reality is that the scale of both capital inflows and outflows has increased, and both have become more volatile. China’s capital account...
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