GlobalSource Partners | Country Insights | China Advisory

The announcement that Xi Jinping will seek an unlimited term as President of China has been widely misinterpreted as the act of a strongman that could lead to a return to the days of Maoism. Instead, we should view the announcement as a sign of weakness – Xi is tightening his political control as...

Is Xi Jinping in control of the Chinese economy?

CHINA ADVISORY · Presentation · 20 Feb 2018

Xi Jinping is both Chairman and CEO of China, which has led to ineffective policy making: no one is “driving” supply side reform. But while reform has been limited, there are signs of risk reduction in the financial sector, and local governments are providing some solutions.

China buys the world: The domestic politics of China’s foreign direct investment

CHINA ADVISORY · Presentation · 20 Feb 2018

There is a suspicion that there is a collective brain that directs Chinese companies’ actions, and that recent outbound acquisitions have been directed by pervasive government planning. However, China’s ambitions are complex, and there is no invisible hand. State and market capital will continue ...

China’s bad debt problem: Underestimated NPLs still a big threat to China’s banking system

CHINA ADVISORY · Report · 16 Feb 2018

There have been a number of external estimates of China’s bad loans. The most widely utilized number was provided by the IMF, which analyzed 2,871 companies to estimate what percentage was not generating enough cash to pay interest expense. It arrived at an estimate of 15.5% of total corporate lo...

China’s hidden stimulus: LGFVs local investment platforms load up on bonds

CHINA ADVISORY · Report · 22 Jan 2018

Chinese officials have made many statements in recent months about reducing risk in the financial system, and “deleveraging.” However, while tools such as higher interest rates and rules to reduce risky assets have targeted the weakest banks, credit continues to flow into the economy. Credit s...

The systemic risk of private-public partnerships

CHINA ADVISORY · Report · 03 Jan 2018

• Regulatory Arbitrage. China is promoting Private-Public Partnerships (PPP) as the new way to stimulate the economy and bypass restrictions on local debt. • Local Debt. This is implicit debt of local governments. Holders of Rmb1.28 trillion of domestic LGFV bonds and $34.0 billion of foreign LG...

Chinese capital flight 3.0 three new nethods of capital flight are testing the regulators

CHINA ADVISORY · Report · 12 Dec 2017

For the ninth straight month, in October China’s foreign exchange reserves continued to rise, reaching US$3.11trn. SDR-denominated foreign exchange reserves also bounced back to a level above $2.2trn. After witnessing China’s crackdown on capital flight in 2017, and with stable foreign exchange r...

Beijing Sees New Problems

CHINA ADVISORY · Report · 24 Nov 2017

We just conducted a week of interviews in Beijing and nearby Jinan, Capital of Shandong Province. A few thoughts on these subjects: * Inflation * Consumer Debt * Growing Receivables * New Private Banks * Rising Power of Reformer Wang Yang * The Mantra of Private Public Partnerships

China’s Financial Opening Opportunities in Bank Consolidation

CHINA ADVISORY · Report · 22 Nov 2017

China has agreed to open its banking sector to greater foreign ownership. This could signal an opportunity for foreign investors – depending, of course, on how serious Beijing is. There are many options for China entry for foreign institutions, from commercial lending, to securities transactions,...

Alibaba and Tencent’s Global Strategy

CHINA ADVISORY · Report · 07 Nov 2017

Summary • Domestic Competition. Tight competition for payments within China is pushing Alibaba and Tencent to explore overseas expansion. • Financial Services. Both companies currently rely on Chinese tourists and business travelers. In future, the easiest entry access is via local joint ventu...

ABS and Deleveraging in China

CHINA ADVISORY · Report · 19 Oct 2017

• Explosion in ABS. By the end of September, there were 1,129 ABS securities with an outstanding balance of Rmb1.5trn. Encouraged by government policies, we estimate ABS will grow by double digits through 2020. • Fiscal “Band-aid.” The central government has retreated from using fiscal resources...

What Will Xi Jinping Do After the Party Congress?

CHINA ADVISORY · Report · 03 Oct 2017

Most analysts believe Xi Jinping is likely to increase his power following the Party Congress on October 18 by strengthening his control over the Party’s Standing Committee. This, in turn, could give him the political freedom to institute economic reforms, including the restructuring of state fir...

China’s Mortgage Crisis Rising Interest Rates Will Hurt Consumers

CHINA ADVISORY · Report · 02 Oct 2017

China’s consumers are rapidly leveraging up. This is a policy encouraged by Beijing, which views the consumer both as “underleveraged” and also not part of China’s “official” credit system. Chinese institutions are rapidly offloading credit – both good and bad – to the consumer. This is often thr...

Bond Default Recaps: Recapitalization Patterns

CHINA ADVISORY · Report · 18 Aug 2017

As the economy slows and bad debt increases, the outcome of the current round of defaults, along with related programs like the debt-for-equity swaps, tell us a lot about what China will do and not just what it says it will do. We believe this initial pool of defaults provides a clue to how the s...

Rising Consumer Concerns about WMPs

CHINA ADVISORY · Report · 30 Jun 2017

In May, we conducted a survey of buyers of Wealth Management Products (WMPS) in China and also examined related data on defaults from the courts and public sources. We believe the RMB 26 trillion WMP market is the most liquid and volatile within China’s financial system and would be prone to runs...