China Economic Watch

China’s Rebalancing Will Not Be Automatic

Nicholas R. Lardy — Wed, 22 Feb 2012 14:51:26 +0000

This piece was originally posted on East Asia Forum The imminent rebalancing of China’s economy has been forecast repeatedly over the past several years. With the shrinking of China’s external surplus during 2011, proponents of this argument have all but declared victory. The decrease of the current account surplus, from 10.1 per cent in 2007 to [...]

The Myth of China’s Giant Fiscal Deposits

Nicholas Borst — Thu, 09 Feb 2012 21:51:07 +0000

There is a recurring notion that pops up every now and then that the Chinese government has a giant rainy day fund. When growth slows but banks are constrained in expanding lending, analysts start to call on China to tap into these reserves to finance fiscal stimulus. Macquarie: “Running down PBC [People’s Bank of China] [...]

Can Affordable Housing Sustain China’s Economic Growth?

Nicholas Borst — Fri, 03 Feb 2012 17:18:52 +0000

China’s affordable housing program is considered by many to be a ray of hope in what is otherwise a bleak property market. CLSA’s China Macro Strategist Andy Rothman was memorably quoted as being completely convinced that the Chinese government was “going to spend a hell of a lot of money on affordable housing.” The affordable [...]

Chinese Housing Market Correction Update

Nicholas Borst — Thu, 26 Jan 2012 20:05:22 +0000

The housing market correction we analyzed in November continues apace, but it appears to still be in the very early stages. Tightening measures, first implemented in early 2010, are slowly reducing super-elevated levels of housing investment and forcing developers to lower their prices to clear inventory. One of the most important trends underway [...]

Beware False Prophets of Rebalancing Part II

Nicholas Borst — Tue, 17 Jan 2012 22:01:46 +0000

This looks like it might become a recurring series on this blog. A new Barclays research piece, China: Beyond the Miracle – The Great Wave of Consumption Upgrading, lays out the case for consumption being significantly undervalued in official Chinese statistics. The points made in this report have been picked up by both the Financial [...]

Beware False Prophets of Rebalancing

Nicholas Borst — Thu, 05 Jan 2012 17:50:13 +0000

A LEX column in this week’s Financial Times had an optimistic article about China’s economic rebalancing. Governments all over the world are bemoaning the non-consuming consumer. But in China, at least, the masses are doing their part. From January to November, nominal retail sales rose 17 percent year-on-year. The article then goes on to detail why [...]

Why Soccer Is a Lot Like the Stock Market In China

Nicholas Borst — Tue, 03 Jan 2012 19:30:39 +0000

The Economist had a great article last month on why professional soccer in China continues to face so many problems. Despite a tremendous amount of interest in the game, Chinese professional leagues have struggled to succeed. Game fixing and institutionalized corruption have undermined belief in the fairness of matches. Fans have become disgusted with the [...]

The Politics of Declining Land Revenues

Nicholas Borst — Tue, 03 Jan 2012 15:33:49 +0000

Falling home prices and fewer land purchases are leading to increased tensions between the central and local governments in China. Land sales (aka long-term land lease fees) are a critical source of funds for local governments. Efforts by the central government to burst the property bubble have been viewed warily by local governments, which are [...]

The World in 2012 – China Predictions

Nicholas Borst — Fri, 23 Dec 2011 21:11:35 +0000

Be sure to check out Nick Lardy’s predictions for the Chinese economy next year at The Economist’s World in 2012 Festival.

RQFII to the Rescue?

Nicholas Borst — Tue, 20 Dec 2011 21:42:15 +0000

Continuing on last week’s theme of expectations, let’s take a look at ongoing developments in the offshore renminbi market. Despite breathless predictions of continued growth by the investment banks, the offshore market has hit a rough patch and deposits in Hong Kong actually declined in October. What’s at work here? Well it seems that expectations [...]