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Gavekal Research
Tom Miller
Jun 12th 2014
A Chinese Bretton Woods?
Even as it plants offshore oil rigs and rams foreign vessels in disputed waters, China is wooing its neighbors with infrastructure investment. Its next step is to create new multilateral banks whose twin goals are to allay fears about Chinese expansionism and to provide an alternative to the US-dominated system of development finance.
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Gavekal Research
Long Chen
Jun 10th 2014
The Risks Of Selective Easing
The Chinese government is finally getting worried about the economy. Following a series of inspection tours, Premier Li Keqiang has clearly signaled that he doesn’t want growth to slow much from the current rate. The State Council has asked the People’s Bank of China (PBOC) and various ministries to take supportive measures. The central bank is complying, reluctantly, but the risk is that its minimalist moves both fail to support growth and...
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Gavekal Dragonomics
Thomas Gatley
Jun 10th 2014
The Capital Spending Crunch Continues
For an economy so reliant on investment, China suffers from a strange dearth of accurate and timely ways to gauge businesses’ capital spending. The most common reference—monthly data on fixed-asset investment—has been painting a bizarrely rosy picture, with nominal growth steady around 20% for years. In reality, investment has slowed very sharply since the big stimulus of 2009, as it takes only a glance at the current suffering of the heavy...
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Gavekal Research
Thomas Gatley
Jun 09th 2014
5C China: Squeezing Shadow Credit Is A Risky Business
Last week the central authorities launched an investigation into a trading company in the port city of Qingdao, which supposedly pledged stocks of aluminum and copper multiple times to secure foreign currency bank loans. The immediate impact was a 5% fall in the copper price, which historically derived some support from the metal’s use as collateral in Chinese financing deals.
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Gavekal Research
Louis Gave
Jun 05th 2014
Overcoming The Macro Breakdown
The financial crisis of 2008-2009 heralded a golden age for macro investors. As the wholesale market crash rendered the relative value judgments of stock pickers irrelevant, macro investors enjoyed a boom time—especially ones who had had the foresight to short US housing, global financials, or eurozone peripheral debt. Now, as the crisis recedes further into the rear view mirror, macro investors are struggling to adapt to a world in which...
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Gavekal Research
Pierre Gave
Jun 04th 2014
Growth & Markets Monthly (June 2014)
Having watched our growth indicators soften over recent months, we are now witnessing a momentum shift since our economic activity indicators have perked up markedly. Moreover, the velocity of money has risen rapidly, while our price indicators continue to show lessening deflationary pressure. Hence, it was not surprising to see that bonds are getting more expensive. Unfortunately, equities are not cheap, and this makes it a challenging...
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Gavekal Dragonomics
Research Team
Jun 03rd 2014
CEQ: Investment Abroad — The Dragon Steps Out
China is now the world's third biggest source of outward direct investment, and the things it is buying are rapidly changing. Gone are the days when Chinese outward investment was all about state-owned enterprises buying oil wells and iron ore mines. There are still plenty of state-driven resource deals, but 40% of Chinese direct investment is now conducted by private firms, who are mainly interested in consumer, technology and service...
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Gavekal Dragonomics
Arthur Kroeber
Jun 02nd 2014
How Much Pain For How Much Gain In China?
Xi Jinping and his colleagues have been running China for a year, and they face a crucial set of decisions. They have reined in runaway credit growth and intimidated opponents of structural reforms with an anti-corruption drive of remarkable ferocity. Now the economy is growing at its most sluggish pace in 15 years, and a further slowdown is certain. How much more economic pain are the leaders willing to endure, and how much structural gain can...
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Gavekal Dragonomics
Research Team
Jun 01st 2014
CEQ Q2 2014
Growth in 2014 will slow more than policymakers anticipated. It is almost certain that the 7.5% real GDP growth target will not be met, and a fall below 7% ispossible. The slowdown is led by property investment; consumption and exports are holding up well and the labor marketis still tight.
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Gavekal Dragonomics
Arthur Kroeber, Research Team
Jun 01st 2014
CEQ Q2 2014 - A Portrait Of China's Gilded Age
Age of Ambition: Chasing Fortune, Truth and Faith in the New China, by Evan Osnos (Farrar, Straus and Giroux, 2014)
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Gavekal Dragonomics
Research Team
Jun 01st 2014
CEQ Q2 2014 - One-Child Policy, Foreign Companies
Relaxing The One-Child Policy: Too Late, Too Little
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Gavekal Dragonomics
Research Team, Long Chen
Jun 01st 2014
CEQ Q2 2014 - The Winding Road To Interest Rate Liberalization
Bank deposit rates are among the last major controlled prices in China. To keep the economy humming, they need to be deregulated. This will require deposit insurance, a new policy interest rate—and a plan to avert financial crisis.
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Gavekal Dragonomics
Tom Miller, Research Team
Jun 01st 2014
CEQ Q2 2014 - China's Expanding Empire In Laos
China’s economic influence in Southeast Asia is rising, and smaller countries in the region must figure out how to extract maximum benefit without becoming vassal states.
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Gavekal Dragonomics
Research Team
Jun 01st 2014
CEQ Q2 2014 - Aid To Africa: Helpful Or Harmful?
Critics have long argued that Chinese aid to Africa is self-interested and perhaps even harmful for African states. A close study of the data suggests the truth is much more complicated.
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Gavekal Dragonomics
Research Team
Jun 01st 2014
CEQ Q2 2014 - America, Land Of Opportunity
China’s outward direct investment is rising rapidly, and the United States is getting a bigger share of those flows—US$14 bn last year. But unless China opens its own doors wider to foreign investment, a political backlash could emerge.
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Gavekal Dragonomics
Arthur Kroeber, Research Team
Jun 01st 2014
CEQ Q2 2014 - How Much Pain For How Much Gain
Economic growth is slowing, structural reform has only just begun, and a severe anti-corruption campaign is sowing fear and uncertainty.
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Gavekal Dragonomics
Tom Miller, Research Team
Jun 01st 2014
CEQ Q2 2014 - More Deals, More Players
The face of China’s outward investment is changing: state-owned firms still pour plenty of money into big-ticket resource deals, but private firms are rapidly catching up, investing in consumer goods, technology and services. And developed countries, not emerging markets, are the big beneficiaries.
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Gavekal Dragonomics
Erica Downs
Jun 01st 2014
CEQ Q2 2014 - Whatever Became Of China, Inc.?
Some used to worry that “China, Inc.”—Chinese resource companies, state-owned banks and government agencies working in concert—would “lock up” energy and mineral resources around the world. Those fears proved misplaced, thanks to miscues by Chinese firms and changing market conditions.
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Gavekal Dragonomics
Wang Feng
Jun 01st 2014
Rethinking The One-Child Policy: Too Little, Too Late
Relaxing the one-child policy has emerged as the most concrete and popular policy change following the Third Plenum meeting in November 2013. Yet the initial public reaction has been lukewarm, and there is no chance of a new baby boom. The policy change both came too late and was too little to change the nation’s demographic trajectory.
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Gavekal Research
Andrew Batson
May 30th 2014
China Becomes A Willing Seller
Tea-leaf reading is all the rage in Beijing again. With a deepening correction in the housing market promising to significantly drag on China’s growth this year, every utterance of the political leadership is being parsed for clues as to how and when the government might respond. The tone does seem to be changing: Premier Li Keqiang this week has repeated his usual bromides on “fine-tuning” policy as necessary, but without his previous emphasis...
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