Chinese growth beats forecasts but looks set to slow

Chinese growth once again surpassed expectations in the second quarter, growing 6.9% year-on-year (y/y), unchanged from the first quarter. This should ease fears over the ongoing credit tightening in China, though we still expect a growth impact to come through in the second half of this year. Manufacturing growth accelerates A key contributor to the … Continue reading “Chinese growth beats forecasts but looks set to slow”

A-Shares: All Quiet on the Eastern Front

Two years ago this month (June) China’s A-shares (shares that trade on the Shanghai and Shenzhen stock exchanges) reached their highest level since the global financial crisis, after rocketing almost 80 per cent in six months. The market then slumped more than 43 per cent over the subsequent 11 weeks. Shares of companies that are … Continue reading “A-Shares: All Quiet on the Eastern Front”

China: policy support offsetting structural headwinds

Despite concerns that China’s economy was undergoing a ‘hard landing’ in January 2016, fiscal, monetary and other government policy stimulus ensured that it was growing slightly faster at the end of the year than it had been at the start. Nevertheless, with the country in the middle of a structural transition from investment towards consumption, … Continue reading “China: policy support offsetting structural headwinds”

Should investors worry about Syria and North Korea?

The aircraft carrier USS Vinson is being sent close to North Korea with a ballistic missile cruiser and two ballistic missile destroyers in attendance. The Korean peninsula sits uneasily between China and Japan, adjacent to Beijing and Tokyo.   As President Xi of China and President Trump sat down to dinner last week, two different … Continue reading “Should investors worry about Syria and North Korea?”

Change from China?

There was little fuss when China overtook the US as the world’s largest economy, as measured using figures corrected for relative purchasing power.   There was more concern in the US as China asserted itself by claiming the nine dash line from Taiwan round to the Paracel islands, seeking control over a series of islands … Continue reading “Change from China?”

Why all investors should care about China

Isabelle Mateos y Lago, Global Macro Investment Strategist at BlackRock, puts China in context, showing how important it has become for the global economy. China’s debt-driven growth model is starting to reach its limits. Yet the country is also transitioning into a high-tech, more consumer-driven economy. How this economic evolution plays out will have major … Continue reading “Why all investors should care about China”

Living with Mr Trump

Stock markets have been in love with Mr Trump the great reflator. They look forward to his promised tax cuts for individuals and companies. They want his increased spending on infrastructure. They also quite admire the way he persuades big corporations to put America first and invest more of their corporate cash. They do not … Continue reading “Living with Mr Trump”

The world economy shrugs off uncertainty… for now

Concerns about the impact of Brexit and President Donald Trump’s populist policies on growth have been swept aside and growth forecasts are now likely to be upgraded.   Now the real business begins: Donald Trump has taken office and has started to “rebuild” America. Although we remain sceptical on the ability of the new administration to … Continue reading “The world economy shrugs off uncertainty… for now”

Has China borrowed too much?

The worriers are back warning us that China has borrowed too much. If China was assessed by the same standards as the advanced world, they would be taking a different view. In China, state debt is only around 40% of GDP, compared to six times that amount in neighbouring Japan. The hostile commentators look at … Continue reading “Has China borrowed too much?”

Stable growth for China as long term costs mount

Chinese GDP growth was in line with expectations but is there a slowdown ahead? Chinese third quarter GDP grew 6.7% year-on-year, in line with expectations, and unchanged from the second quarter. A breakdown of the data reveals an acceleration in primary industry and a smaller increase in the tertiary, or services, sector. Manufacturing managed stable … Continue reading “Stable growth for China as long term costs mount”

The Chinese liquidity trap

It is not just in developed markets that corporates are finding little productive use for easy money. Monetary easing in China, too, is having little apparent impact on the real economy. The M1-M21 gap in China, shown in the chart below, has historically functioned well as an indicator of GDP growth. Typically, if M1 growth … Continue reading “The Chinese liquidity trap”

A bull in the China shop?

The Chinese stock market has been making some upward progress this year after the dramatic boom and bust cycle it went through in 2015. The authorities had a plan to involve more Chinese people in the stock market, and to gradually open Chinese shares to more foreign capital and influence. Unfortunately for them, individual investors … Continue reading “A bull in the China shop?”

China outperforms, but is this economy a one-trick pony?

Chinese GDP growth was better than expected in the second quarter, but appears overly reliant on one engine of growth: fiscal stimulus. Chinese GDP growth was unchanged in the second quarter of the year, at 6.7% year-on-year, though it accelerated in quarter-on-quarter terms to 1.8%, from 1.2% previously. The reading, along with other activity data … Continue reading “China outperforms, but is this economy a one-trick pony?”