China CB CEO in China Daily. Comment: It deserves a reading in full.
Chinese banks are funding long term investments with deposits and loans of still shorter maturity.
Jacob directed me to a good ValueWalk article.
Corsair Capital, the event-driven long-short equity hedge fund, gained 6.6% net during the second quarter, bringing its year-to-date performance to 17.5%. Q2 2021 hedge fund letters, conferences and more According to a copy of the hedge fund's second-quarter letter to investors, a copy of which of ValueWalk has been able to review, the largest contributor Read More
Though some of it is beyond me (I’m not sophisticated), I noted several points:
A) The Chinese economy has slowed considerably.
There is no doubt what the consensus is among government officials and macro economists following a few days of visits in Beijing this week. It is that the Chinese economy bottomed in the third quarter, one quarter later than official expectations at the start of this year. Three reasons are given for the delay.
– First, overcapacity has become more evident in sectors such as iron and steel.
– Second, the government only really started to ease seriously in May in terms of approving more infrastructures spending when it became clear that growth was surprising to the downside.
– Third, the infrastructure stimulus this year is much smaller than the 2009 whopper and it is in the context of an economy where the base has grown.
Comment: This fits the metallic raw material prices very well – I do like when cross references check out.
Iron ore plummeting – not much construction going on needing steel – and copper – if not in a tailspin, then certainly not optimistic.
B) The new leadership is unlikely to do very much about it.
The first, and the most obvious, is that those mostly outside China who are looking for the new leadership to embark on an aggressive easing are very likely to be disappointed. Indeed if the consensus of officialdom is, rightly or wrongly, that the economy has bottomed then there would seem to be no need for any real easing at all either in the property market or in terms of monetary policy. In the case of the property market the view is that the current controls on investors will remain in place in the prime cities and indeed there will be renewed tightening measures if there is any evidence of momentum in terms of rising prices. This is because the issue of the affordability of property remains extremely sensitive in political terms.
For related reasons the overwhelming consensus of meetings is that the main focus of the likely new premier, Li Keqiang, will be primarily on accelerating urbanisation in his ten-year term in office. (The new leadership will take over formally in March next year.) Remember that 30% of the population still work in the rural sector. This is likely to lead to even more focus on building public housing for rental and on related issues such as reform of hukou, a residency-permit system, to encourage internal immigration by making it easier for rural residents to move to cities.
Urbanisation is all fine; but if those moving to the city can’t afford the housing on the income they earn – correction: What income? How are they to get a job?
Europe as an export market does not seem to be too optimistic:
There will be no trade war between Europe and China according to EU’s head of trade Karel De Grucht, that however affirms that the EU will do its bit to protect the Unions industries against Chinese competition seen as unfair.
Comment: Solar Cells are specifically mentioned – which I smugly recall pointing out had been an export disaster for China – losing money on both discount and adverse currency: No need to humiliate the Chinese more!
With investments in the doldrums, the CB CEO talking openly of Ponzi schemes in Chinese finance what more do we need? Ouch! High food prices.
Well, I might not know stock quotation of “Pling-Plong Industies” , but I do tend to interpret light at the end of tunnels as evidence of an express train heading my way and not sunshine.