Category Archive: 5.) China

Main Author Michael Pettis
Michael Pettis
Wall Street veteran, merchant banker, equities trader, economist, finance professor, entrepreneur — iconoclast — Michael Pettis is a unique individual living and working in China, at the heart of the world’s most exciting and vibrant economy. Having learned firsthand how markets operate during his years on Wall Street, Michael has taken his knowledge and insight and applied them to the Asian financial markets as an expert analyst, commentator, and participant. His work and research focuses on monetary policy, trade policy, and the development of the banking and financial markets in China.
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China’s Exports Are Interesting, But It’s Their Imports Where Reflation Lives or Dies

2018-04-19

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2018-04-19

China Exports, Jan 2008 - 2018
Last month Chinese trade statistics left us with several key questions. Export growth was a clear outlier, with outbound trade rising nearly 45% year-over-year in February 2018. There were the usual Golden Week distortions to consider, made more disruptive by the timing of it this year as different from last year. And then we have to consider possible effects of tariffs and restrictions at the start of what is called a trade war (but isn’t really,...

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Just A Few More Pips

2018-03-25

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2018-03-25

Hong Kong HKD, Jul 2014 - Mar 2018
On Page 1, Chapter 1 of the Central Banker Crisis Handbook it states very clearly, “do not make it worse.” It’s something like the Hippocratic oath where monetary authorities must first assess what their actions might do to an already fragile system. It’s why they take great pains to try and maintain composure, appearing calm and orderly while conflagration rages all around. The last thing you want to do is confirm the run.

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The Boom Reality of Uncle He’s Globally Synchronized L

2018-03-21

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2018-03-21

China GDP, Apr 1993 - Mar 2018
Top Chinese leadership is taking further shape. With Xi Jinping’s continuing consolidation of power going on right this minute, most of the changes aren’t really changes, at least not internally. To the West, and to the mainstream, what the Chinese are doing seems odd, if not more than a little off. Unlike in the West, however, there is determined purpose that is in many ways right out in the open. Many here had been expecting that outgoing PBOC...

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China’s Questionable Start to 2018

2018-03-16

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2018-03-16

China Industrial Production, Feb 1999 - 2018
The Chinese government reported estimates for Industrial Production, Retail Sales, and Fixed Asset Investment (FAI) for both January and February 2018. The National Bureau of Statistics prepares and calculates China’s major economic statistics in this manner at the beginning of each year due to the difficulties created by calendar effects (New Year Golden Week).

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China Prices Include Lots of Base Effect, Still Undershoots

2018-03-13

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2018-03-13

China Price Stability, Feb 1996 - 2018
By far, the easiest to answer for today’s inflation/boom trifecta is China’s CPI. At 2.9% in February 2018, that’s the closest it has come to the government’s definition of price stability (3%) since October 2013. That, in the mainstream, demands the description “hot” if not “sizzling” even though it still undershoots. The primary reason behind the seeming acceleration was a more intense move in food prices.

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China Exports: Trump Tariffs, Booming Growth, or Tainted Trade?

2018-03-11

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2018-03-11

China Exports, Jan 2008 - Jan 2018
China’s General Administration of Customs reported that Chinese exports to all other countries were in February 2018 an incredible 44.5% more than they were in February 2017. Such a massive growth rate coming now has served to intensify the economic boom narrative.

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China: February PMIs point to deceleration in industrial activity

2018-03-05

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2018-03-05

China’s official manufacturing Purchasing Manager Index (PMI) for February, compiled by the National Bureau of Statistics of China and the China Federation of Logistics and Purchasing, came in at 50.3, down from 51.3 in January and 51.6 in December 2017. This is the lowest reading of this gauge since October 2016. The Markit PMI (also known as the Caixin PMI), however, edged up slightly to 51.6 in February from 51.5 in the previous month

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Data Distortions One Way Or Another

2018-03-04

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2018-03-04

China Manufacturing PMI, Feb 2007 - 2018
Back in October, we noted the likely coming of two important distortions in global economic data. The first was here at home in the form of Mother Nature. The other was over in China where Communist officials were gathering as they always do in their five-year intervals. That meant, potentially. In the US our economic data for a few months at least will be on shaky ground due to the lingering economic impacts of severe hurricanes.

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China: Inflation? Not Even Reflation

2018-02-16

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2018-02-16

China Price Stability, Jan 1997 - 2018
The conventional interpretation of “reflation” in the second half of 2016 was that it was simply the opening act, the first step in the long-awaiting global recovery. That is what reflation technically means as distinct from recovery; something falls off, and to get back on track first there has to be acceleration to make up that lost difference.

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China: CNY, Not Imports

2018-02-11

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2018-02-11

China Imports, Jan 2011 - 2018
In February 2013, the Chinese Golden Week fell late in the calendar. The year before, 2012, New Year was January 23rd, meaning that the entire Spring festival holiday was taken with the month of January. The following year, China’s New Year was placed on February 10, with the Golden Week taking up the entire middle month of February.

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China: PMIs suggest moderation in momentum in Q1

2018-02-02

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2018-02-02

Chinese official and Caixin manufacturing PMI, 2011 - 2018
China’s official manufacturing purchasing manager index (PMI) came in at 51.3 in January, down slightly from December (51.6). The Markit PMI (also known as the Caixin PMI) stayed at 51.5, the same as in the previous month (Chart 1). The official non - manufacturing PMI rose slightly to 55.0 in January from 44.8 the previous month.

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China: 2018 GDP forecast revised up

2018-01-27

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2018-01-27

The Chinese economy ended 2017 on a strong note. In Q4 2017, China’s GDP amounted to Rmb23.4 trillion (about USD3.7 trillion), rising 1.6% over the previous quarter and 6.8% year-over-year (y-o-y) in real terms. Full-year GDP came in at Rmb82.7 trillion (about USD12.9 trillion), growing by 6.9% in real terms and beating the consensus forecast as well as our own estimate (both at 6.8%).

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Central Bank Transparency, Or Doing Deliberate Dollar Deals With The Devil

2018-01-25

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2018-01-25

Hong Kong HKD, Jul 2012 - Jan 2018
The advent of open and transparent central banks is a relatively new one. For most of their history, these quasi-government institutions operated in secret and they liked it that way. As late as October 1993, for example, Alan Greenspan was testifying before Congress intentionally trying to cloud the issue as to whether verbatim transcripts of FOMC meetings actually existed.

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The Blatant Dishonesty of the ‘Boom’

2018-01-20

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2018-01-20

China Fixed Asset Investment, June 2013 - Dec 2017
Why do humans tend to behave in herds? It’s a fundamental question that only recently have researchers been able to better understand. On the one hand, it doesn’t take an advanced degree in some neurological science to see the basis behind it; survival for our ancestors often meant getting along with the crowd. There are times when that very trait applies still.

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China: FX reserves rise again

2018-01-18

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2018-01-18

According to the Chinese State Administration of Foreign Exchange (SAFE), China’s FX reserves amounted to USD3.14 trillion at end - December 2017, up USD20.7 billion from the previous month. This marks the 11th consecutive monthly increase in Chinese FX reserves since February 2017.

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The Dea(r)th of Economic Momentum

2018-01-17

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2018-01-17

China Exports, Jan 2008 - Jan 2018
For the fourth quarter as a whole, Chinese exports rose by just less than 10% year-over-year. That’s the highest quarterly rate in more than three years, up from 6.3% and 6.0% in Q2 2017 and Q3, respectively. That acceleration is, predictably, being celebrated as a meaningful leap in global economic fortunes. Instead, it highlights China’s grand predicament, one that country just cannot seem to escape.

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Inflation Correlations and China’s Brief, Disappointing Porcine Nightmare

2018-01-14

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2018-01-14

China Price Stability, Jun 2014 - Dec 2017
Two years ago, China was gripped by what was described as an epic pig problem. For most Chinese people, pork is a main staple so rapidly rising pig prices could have presented a serious challenge to an economy already at that time besieged by massive negative forces. It was another headache officials in that country really didn’t need.

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Industrial production: The Chinese Appear To Be Rushed

2018-01-04

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2018-01-04

All China's Dollars, Aug 2016 - Jan 2018
While the Western world was off for Christmas and New Year’s, the Chinese appeared to have taken advantage of what was a pretty clear buildup of “dollars” in Hong Kong. Going back to early November, HKD had resumed its downward trend indicative of (strained) funding moving again in that direction (if it was more normal funding, HKD wouldn’t move let alone as much as it has). China’s currency, however, was curiously restrained during that...

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Chinese demand leads the Swiss watch industry’s recovery

2017-12-28

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2017-12-28

Switzerland Exports, 2005 - 2017
The most important driver of the Swiss watch industry’s recovery has been the revival of the mainland China market. After years of impressive growth, the Swiss watch industry faced difficult conditions in 2015 and 2016, when exports declined by 3.2% and 9.9% respectively in value terms.

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China Exports and Industrial Production: Revisiting Once More The True Worst Case

2017-12-16

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2017-12-16

Labor Market Growth, 1968 - 2017
As weird as it may seem at first, the primary economic problem right now is that the global economy looks like it is growing again. There is no doubt that it continues on an upturn, but the mere fact that whatever economic statistic has a positive sign in front of it ends up being classified as some variant of strong. That’s how this works in mainstream analysis, this absence of any sort of gradation where if it’s negative it’s bad (though in 2015...

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