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Gavekal Research
Pierre Gave
Sep 02nd 2014
Growth & Markets Monthly (September 2014)
This month we note a slight deterioration in our global growth indicators, which probably mirrors the significant economic deceleration seen in Europe. On the risk side, markets do not appear stressed, although there has been a slight widening in the US corporate spread (albeit from very low levels). On the question of inflation vs deflation our indicators offer a mixed picture: on the one hand our diffusion index of US CPI components keeps...
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Gavekal Dragonomics
Research Team
Sep 01st 2014
CEQ Q3 2014
“Selective easing” of monetary policy temporarily boosted GDP growth. Premier Li Keqiang has shifted emphasis away from structural reform and toward supporting growth. Credit growth picked up in Q2 and fiscal spending accelerated, enabling GDP growth to rebound modestly to 7.5%. But the cyclical support is not enormous and growth will likely slow again in early 2015.
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Gavekal Dragonomics
Tom Miller, Research Team
Sep 01st 2014
CEQ Q3 2014 - Stirring Dragon, Nervous Neighbors
Asia’s Cauldron: The South China Sea and the End of a Stable Pacific by Robert D. Kaplan (Random House, 2014)
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Gavekal Dragonomics
Research Team
Sep 01st 2014
CEQ Q3 2014 - Food Security, China Corruption, Asia Pacific High Anxiety
A New Line On Food Security
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Gavekal Dragonomics
Tom Miller, Research Team
Sep 01st 2014
CEQ Q3 2014 - Beijing Eyes The Bay Of Bengal
China wants to build road and rail links from Yunnan all the way to Kolkata, thus securing a virtual western seacoast. Myanmar and India want the investment but are wary of the strategic implications.
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Gavekal Dragonomics
Research Team, Ernan Cui
Sep 01st 2014
CEQ Q3 2014 - Keeping The Dinner Table Healthy
After enduring milk powder laced with industrial chemicals and pork tainted with dangerous steroids, Chinese consumers are ramping up demand for imports and organics. Local firms are responding by consolidating markets and upgrading their technology, and the government is tightening food safety rules.
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Gavekal Dragonomics
Research Team
Sep 01st 2014
CEQ Q3 2014 - Bringing Back The Blue Sky Days
After Beijing’s infamous Airpocalypse, Premier Li Keqiang declared war on air pollution. Official data show surprising progress in the past year. To sustain this progress, the government must embrace more systematic and market-oriented approaches.
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Gavekal Dragonomics
Research Team
Sep 01st 2014
CEQ Q3 2014 - A Real War, More Ammo Required
China’s pollution problems may not be the worst in history, but they are bad enough. Progress in correcting them has been real but inconsistent. Loud commitments by the new leadership, and a tough new environmental law, offer hope of a faster clean-up.
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Gavekal Dragonomics
Arthur Kroeber, Research Team
Sep 01st 2014
CEQ Q3 2014 - Summertime, And The Jailin' Is Easy
Xi Jinping’s war on corruption is far more than just a cynical power-play. Will it work?
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Gavekal Research
Andrew Batson
Sep 01st 2014
5C China: Wage Growth Still Solid For Now
As China’s economic growth has downshifted over the past few years, one of the big surprises has been the absence of bad news from the job market. Wages are still rising at double digit rates, and employers still have trouble filling vacancies. The reason, as is now widely understood, is that the structural slowdown in investment growth is happening at the same time as a structural shift in the labor market. Changing demographics and the...
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Gavekal Research
Arthur Kroeber
Sep 01st 2014
5C Overview: Demography vs Technology
We have written a lot about two trends with big potential impacts on the balance of power between labor and capital. The first is demography, which since World War II has been a tailwind for growth, but is now turning into a headwind. Virtually every major economy faces a steep fall in its worker-to-retiree ratio, even the US which is often thought to be exempt from demographic destiny because of its relatively high birth rate and openness to...
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Gavekal Dragonomics
Andrew Batson
Sep 01st 2014
CEQ Q3 2014 - Small Business To The Rescue?
Premier Li Keqiang’s most successful economic reform so far is deregulation that has led to a surge in registrations of new private businesses. The next step will be to let these little companies become big ones.
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Gavekal Research
Thomas Gatley
Aug 28th 2014
China Avoids A Summer Soft Patch
Has China’s growth hit yet another soft patch? Growth disappointed early in 2014 as a property downturn led to severe pain in construction and heavy industry, prompting the government to ease up on fiscal and monetary policy. Better data in May and June seemed to show that looser policy had succeeded—until a suite of surprisingly weak readings in July raised the prospect that the mini-recovery had just been a mirage. Particularly concerning was...
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Gavekal Research
Louis Gave
Aug 21st 2014
The US Dollar Breaks Out
Is there a more consensus trade then being bullish on the US dollar? With a) the US economy outperforming those of Europe and Japan, with b) the Federal Reserve looking to withdraw some of the extra-ordinary stimulus that it has deployed in the past five years, just as the need for the European Central Bank, and possibly the Bank of Japan, to become a lot more aggressive becomes ever starker, with c) the Pentagon limiting its defense spending...
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Gavekal Research
Michael Komesaroff
Aug 21st 2014
Iron Ore’s Battle Of Attrition
Iron ore prices in China are down almost 30% this year, and have languished below US$100 a ton for three months—an unusually protracted downturn in a volatile market. Last year I argued that the iron ore price would stay around US$120 for the next three years, with a relatively high floor set by the rising production cost of Chinese ore, and the reluctance of global miners to invest in new supply capacity. Is this year’s price plunge a temporary...
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Gavekal Research
Charles Gave, François-Xavier Chauchat, Will Denyer, Joyce Poon, Udith Sikand, Long Chen
Aug 20th 2014
Five Corners (20 August): Velocity Of Money
In the latest bi-weekly review of global economics and investment we focus on the velocity of money and the credit cycle in the major economic regions: Overview: Charles Gave notes with concern the downturn in the Gavekal Velocity Indicator. US: Will Denyer looks where the US is in the credit cycle and argues it looks more like 2004 than 2007. Europe: François Chauchat argues that contrary to popular belief Europe’s long credit crunch is...
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Gavekal Research
Charles Gave
Aug 19th 2014
A Spectacular Eur-Asian Divergence
Financial markets are nothing if not a real time survey of real people playing with real money. Hence, no one can seriously doubt that markets contain a huge amount of highly pertinent information. The problem for the investor is how can this be profitably extracted?
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Gavekal Dragonomics
Thomas Gatley, Long Chen
Aug 18th 2014
The Mystery Of Provincial GDP
Among all the criticisms on the accuracy of Chinese statistics, the most famous and obvious one is that the sum of China’s provincial GDP is always substantially higher than the national figure released by the National Bureau of Statistics. This reflects the fact that GDP is the most important criterion used to evaluate local government officials, so they have a strong incentive to gussy up their numbers.
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Gavekal Dragonomics
Tom Miller
Aug 14th 2014
Beijing Eyes The Bay Of Bengal
Under President Xi Jinping, Beijing is pursuing a foreign policy with one grand aim: to restore China’s historical status as the dominant power in Asia. In the South China Sea, this shift towards a muscular, “proactive” diplomacy has intimidated and angered its neighbors (see Perilous Seas). Yet Beijing knows that it cannot simply bully its way to Asian domination: it must offer carrots as well as sticks. So along its southern and western...
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Gavekal Research
Long Chen
Aug 14th 2014
5C China: Uneasy Easing Undermines Market Reforms
How do you ease without easing? That is the conundrum China premier Li Keqiang has set for himself. After a disappointing round of July data made clear that economic recovery was still fragile, Li’s cabinet, the State Council, issued a document asking the People’s Bank of China (PBOC) and other ministries to “lower borrowing costs.” But it stopped short of signaling an interest-rate cut.
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