As is mandatory, we have a China panel at this year’s Finance Festival (née Camp Alphaville) on July 1. It’s currently slated for 1300 on the main stage.
The authoritative voices that are Michael Pettis, Anne Stevenson-Yang of JCap and the Economist’s Simon James Cox will be present on that stage and ready to field your questions concerning debt, reserves, the RMB, Xi who must always be named, entrenched elites, overcapacity, supply side reforms, the interbank market, WMPs, SOEs, defaults etc etc.
By way of a trailer, however, Pettis is out with two new pieces. Read more
For years the Chinese government accumulated claims on the rest of the world, with foreign reserves soaring almost continuously to a peak level of just under $4 trillion in 2014. Then things went into reverse:
There’s a wild new theory going around that China’s (new and old) stock market slide is less down to this kind of thing….
Speaking before the investigation [into Avic Heibao, a listed manufacturing subsidiary of Mr Lin's company Avic, by the securities regulator on suspicion of illegal and irregular share transactions] was revealed, Mr Lin cast his company’s actions as part of a heroic struggle against foreign aggression.
“This stock disaster was a premeditated plot, a well-prepared case of malicious short selling and part of a powerful, tumultuous economic war launched against China,” Mr Lin said in an interview with state media. “The war launched against [the Chinese stock market] is an attack on the five-starred red [Chinese national] flag.”
In an editorial he penned for a state-run nationalist newspaper, Mr Lin also blamed US plots for the problems in the Japanese economy in the early 1990s and for the 1997 Asian financial crisis.
… and more down to distortions in China’s own markets. Now, particularly, those distortions introduced by China’s powers-that-be while trying to put a floor under the slide and target a level of 4,500 for the index, using a raft of measures. Read more
The FT’s Martin Wolf led a stellar panel on the global economy and the outlook for commodities featuring China expert Michael Pettis, BP’s group chief economist, Spencer Dale (formerly chief economist at the Bank of England), and Goldman’s chairman of global natural resources Brett Olsher.
As one might expect there was a difference of opinion on the panel about China’s future growth path. Goldman’s Olsher said he was confident that China would be able to maintain 6.5 per cent to 7 per cent growth in the near term, whereas Pettis suggested that even 3-4 per cent should be considered a successful adjustment. Read more
A guest post by Simon Cox, Asia-Pacific Investment Strategist, BNY Mellon Investment Management
China’s weak inflation numbers, updated on February 10, underscore why the People’s Bank of China (PBOC) is now easing policy wholesale, after a long sequence of targeted tweaks. (It cut reserve requirements on February 5 less than three months after cutting benchmark interest rates in November.) But does monetary easing work in China the way it works elsewhere? Does it, indeed, work at all? Read more
This is literally the best analysis of the euro area’s problems we’ve ever read. You should take the time to closely read the whole thing yourself. We’ll wait.
Now that you’re back, we thought we could add some value by highlighting and expanding on what we believe to be Pettis’s most important insights. Read more
It may seem like an odd time to stress out about Japan running an overly aggressive current account surplus, which might in turn push Abenomics off the tracks, but since the fears over a deficit have been so well covered… Read more
We’ve all heard, many times, the story that China’s capital stock is nowhere near that of more advanced economies, therefore it will inevitably increase. And we can count on continued efforts to build roads, buildings, airports, and other infrastructure — just look at how the less-developed eastern provinces have been pouring money into new projects, the argument has gone, more recently. Or went.
We really hope it’s not necessary, here, to go into the weaknesses of that argument. Here are a few places to start, but it’s partly a causal problem — does growth cause increased capital stock or vice versa? What kind of growth are we talking about, anyway? Read more
The reactions to Chinese macro data tend to go something like this…
Beat: Bulls are okay with this. Bears say it’s unsustainable, usually because of inflationary risks, policy tightening risks, credit risks, or the imbalances. FT AV commenters say the numbers are made up anyway.
Miss: Bears are okay with. Bulls say not to worry as it means more stimulus/loosening will happen. FT AV commenters say the numbers are made up anyway. Read more
The mood at the World Economic Forum this week in Tianjin has been a study in contrasts — bullish foreigners and gloomy Chinese.
As the FT’s Jamil Anderlini reports: Read more
It seems that lately every time we come back from holidays look around, people are becoming ever more freaked out about China. Josh Brown has possibly the best headline of the latest lot. Josh’s shock and awe was prompted by a Barron’s cover story on China which we agree is a very good read, although it covers a lot of ground that’s already appeared here, among other places. Nomura’s 1-in-3 chance of a hard landing call, the economic imbalance, misallocation and over-capacity, property bubbles, Nicholas Lardy, unfavourable demographics, bad loans being rolled over, rising wages, capital outflows, and… you get the idea. Plus this eye-catching quote from Jim Chanos:
“I’m being conservative when I say that the coming bust in China‘s real-estate market will be a thousand times that of Dubai,”
Spain’s government has been left looking increasingly desperate/reckless/ineffective by its plans to rescue Bankia, as today’s FT describes:
Mr Rajoy and his government are facing growing domestic criticism over repeated errors of strategy and communication, which that have given an impression that Madrid has run out of ideas on how to handle its financial and economic crises. Read more
At the end of last year, The Economist predicted that Chinese GDP would surpass US GDP at market exchange rates in 2018. (Click table to enlarge)
There’s always a touch of frivolity in making predictions such as these. But the article itself was a short and interesting assessment of how the two economies compare by various measures, if perhaps a bit overenthusiastic. (We would certainly challenge the usefulness of Chinese patent numbers, for instance.) Read more
Answer according to your view on the very important question of China’s economy rebalancing towards a higher consumption-to-GDP ratio.
The debate isn’t really about whether China needs to or will inevitably rebalance, but whether it already has begun to do so. A note from Barclays Capital by Yiping Huang made the case that household consumption as a proportion of GDP is already beginning to rise. Read more
There is plenty of disappointment floating around concerning the big Chinese finance policy meeting which ended on Saturday. The general criticism is the lack of a signal of any concrete moves – but particularly, on interest rates for depositors.
Or as SocGen’s Wei Yao wrote: Read more
It’s taken a while but our second podcast, a discussion with Sal Arnuk about high frequency trading, is now live.
(You can find our first podcast with Michael Pettis, on the Chinese economic model, here.) Read more
Well, everyone needs a change sometimes.
We’ve written about so much bearish questioning on China that it wouldn’t be fair to ignore a couple of more upbeat comments from economists who are not the usual China bulls. Read more
The bearish-on-China is going all mainstream on us. Or at least, more prominent. For example, 12 per cent of economists in a Bloomberg survey last week believe the country’s growth will fall below 5 per cent.
Well, a more convincing rebuttal to this than a Chinese State Council official comes from Standard Chartered’s chief China economist Stephen Green. Read more
An exasperated Michael Pettis always makes for an enlightening Michael Pettis column.
This time he trains his eye on the possible implications of the recent announcements by China that this time it means what it says about diversifying its reserve holdings out of USD assets. Sure. Read more
We’re trying something new here at FT Alphaville, and like all our experiments we have no idea how this one will turn out.
We’ve started a podcast, which you’ll find below alongside a bio of our guest, a guide to the themes we explored, and links to which we refer. There’s also another audio file of outtakes with questions and answers that we couldn’t include in the podcast itself because of time constraints. Read more