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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Three Years Ago QE, Last Year It Was China, Now It’s Taxes

2017-12-13

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2017-12-13

China Manufacturing PMI, May 2007 - Nov 2017
China’s National Bureau of Statistics reported last week that the official manufacturing PMI for that country rose from 51.6 in October to 51.8 in November. Since “analysts” were expecting 51.4 (Reuters poll of Economists) it was taken as a positive sign. The same was largely true for the official non-manufacturing PMI, rising like its counterpart here from 54.3 the month prior to 54.8 last month.

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Globally Synchronized Downside Risks

2017-11-17

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2017-11-17

Markets and Economy. March 2012 - 2017
Oil prices were riding high after several weeks of steady, significant gains. It’s never really clear what it is that might actually move markets in the short run, whether for crude it was Saudi Arabia’s escalating activities or other geopolitical concerns. Behind those, the idea of “globally synchronized growth” that is supposedly occurring for the first time since before the Great “Recession” while it may not have pushed oil investors to buy...

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Maybe Hong Kong Matters To Someone In Particular

2017-11-11

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2017-11-11

PBOC Balance Sheet, Sep 2011 - 2017
Hong Kong stock trading opened deep in the red last night, the Hang Seng share index falling by as much as 1.6% before rallying. We’ve seen this behavior before, notably in 2015 and early 2016. Hong Kong is supposed to be an island of stability amidst stalwart attempts near the city to mimic its results if not its methods.

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Bonds And Soft Chinese Data

2017-11-04

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2017-11-04

China Treasury Bonds
Back in June, China’s federal bond yield curve inverted. Ahead of mid-year bank checks, short-term govvies sold off as longer bonds continued to be bought. It was for some a rotation, for others a reflection of money rates threatening to spiral out of control. On June 19, for example, the 6-month federal security yielded 3.87% compared to a yield of 3.525% for the 10-year.

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An Unexpected (And Rotten) Branch of the Maestro’s Legacy

2017-10-29

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2017-10-29

China Fixed Asset Investment, March 1998 - Sep 2017
The most significant part of China’s 19th Party Congress ended in the usual anticlimactic fashion. These events are for show, not debate. Like any good trial lawyer will tell you, you never ask a question in court that you don’t already know the answer to. For China’s Communists, that meant nominating Xi Jinping’s name to be written into the Communist constitution with the votes already tallied.

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Global Inflation Continues To Underwhelm

2017-10-19

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2017-10-19

Another Side of China, Aug 2016 - Oct 2017
Chinese producer prices accelerated in September 2017, while consumer price increases slowed. The National Bureau of Statistics reported this weekend that China’s PPI was up 6.9% year-over-year, a quicker pace than the 6.3% estimated for August and a 5.5% rate in July. Earlier in the year producer prices were driven mostly by 2016’s oil rebound, along with those in the rest of the global economy, but in recent months there has been more influence...

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China Exports/Imports: Enforcing A Global Speed Limit

2017-10-18

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2017-10-18

China Imports, Jan 2008 - Jul 2017
Chinese imports rose 18.7% in September 2017 year-over-year. That’s up from 13.5% growth in August. While near-20% expansion sounds good if not exhilarating, it isn’t materially different from 13.5% or 8% for that matter. In addition, Chinese trade statistics tend to vary month to month.

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Noisy PMI’s In China

2017-10-14

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2017-10-14

China Manufacturing PMI, March 2007 - Sep 2017
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. In China, the potential for irregularity is perhaps as great, though it has nothing to do with the weather. In a little over a week, Communist Party officials will gather for their 19th Party Congress.

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Not Political Risk For China, But Unwelcome Reality

2017-10-01

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2017-10-01

PBOC Balance Sheet, Aug 2011 - 2017
China’s Communist Party concluded the Third Plenum of its 18th Congress in November 2013. It was the much-discussed reform mandate that many in the West took to mean another positive step toward neo-liberal reform. At its center was supposed to be a greater role for markets particularly in the central task of resource allocation. In some places, the Party’s General Secretary Xi Jinping was hailed as the great Chinese reformer.

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Little Behind CNY

2017-09-28

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2017-09-28

PBOC Balance Sheet, Aug 2010 - 2017
The framing is a bit clumsy, but the latest data in favor of the artificial CNY surge comes to us from Bloomberg. The mainstream views currency flows as, well, flows of currency. That’s what makes their description so maladroit, and it can often lead to serious confusion. A little translation into the wholesale eurodollar reality, however, clears it up nicely.

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China: Losing Economic ‘Reflation’

2017-08-16

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2017-08-16

China Fixed Asset Investment Jul 2012-2017
If “reflation” was born last year in Japan, and I think it was, it was surely given its most tangible dimensions in China. The idea that the Bank of Japan was going to do something magnificent was perhaps always a longshot, but enough given the times for people to hope (sentiment) they might try (helicopter). The Chinese, however, have been relatively more pragmatic. Authorities began 2016 with an actual rather than imagined “stimulus” injection...

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China Exports, China Imports: Textbook

2017-08-09

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2017-08-09

China Exports 2013-2017
China’s export growth disappointed in July, only we don’t really know by how much. According to that country’s Customs Bureau, exports last month were 7.2% above (in US$ terms) exports in July 2016. That’s down from 11.3% growth in June, which as usual had been taken in the mainstream as evidence of “strong” or “robust” global demand.

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China’s Economy Shorthand the Largest Asset Bubble in Human History

2017-07-22

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2017-07-22

China Industrial Production, June 1997 - Jun 2017
The term “ghost city” is a loaded one, often deployed to skew toward a particular viewpoint. In the context of China’s economy, it has become shorthand for perhaps the largest asset bubble in human history. While that may ultimately be the case, in truth China’s ghost cities aren’t about the past but its future.

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China Imports and Exports: The Ghost Recovery

2017-07-16

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2017-07-16

China Trade Ghost Cities
To the naked eye, it represents progress. China has still an enormous rural population doing subsistence level farming. As the nation grows economically, such a way of life is an inherent drag, an anchor on aggregate efficiency Chinese officials would rather not put up with.

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Competing CPI,PPI, Industrial Production and Retail Sales: No Luck China, Either

2017-07-15

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2017-07-15

China Retail Sales and Industrial Production
Former IMF chief economist Ken Rogoff warned today on CNBC that he was concerned about China. Specifically, he worried that country might “export a recession” to the rest of Asia if not the rest of the world. I’m not sure if he has been paying attention or not, but the Chinese economy since 2012 has been doing just that to varying degrees often just shy of that level.

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Weird Obsessions

2017-07-04

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2017-07-04

US Banks Claims On Total Europe
People often ask why I care so much about China. In some ways the answer is obvious, meaning that China is the world’s second largest economy (the largest under certain methods of measurement). Therefore, marginal changes in the Chinese economy are important to understanding our own global situation.

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Basic China Money Math Still Doesn’t Add Up To A Solution

2017-07-01

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2017-07-01

China Basic Money Math
There are four basic categories to the PBOC’s balance sheet, two each on the asset and liability sides of the ledger. The latter is the money side, composed mainly of actual, physical currency and the ledger balances of bank reserves. Opposing them is forex assets in possession of the central bank and everything else denominated in RMB.

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Now China’s Curve

2017-06-28

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2017-06-28

China Treasury Bond Curve
Suddenly central banks are mesmerized by yield curves. One of the jokes around this place is that economists just don’t get the bond market. If it was only a joke. Alan Greenspan’s “conundrum” more than a decade ago wasn’t the end of the matter but merely the beginning. After spending almost the entire time in between then and now on monetary “stimulus” of the traditional variety, only now are authorities paying close attention.

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Chinese Basis For Anti-Reflation?

2017-06-26

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2017-06-26

China Industry Drives Its Consumers
Yesterday was something of a data deluge. In the US, we had the predictable CPI dropping again, lackluster US Retail Sales, and then the FOMC’s embarrassing performance. Across the Pacific, the Chinese also reported Retail Sales as well as Industrial Production and growth of investments in Fixed Assets (FAI). When deciding which topics to cover yesterday, it was easy to leave off the Chinese portion simply because much of it didn’t change.

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The ‘Dollar’ Devil Shows Itself Again In China

2017-06-21

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2017-06-21

China Treasury Bond Curve
Some economic and financial conditions leave a yield curve as a more complex affair.Then there are others that are incredibly simple.The UST yield curve is the former, while right now the Chinese Treasury curve is the latter.

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