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COUNTRY INSIGHTS

Biden’s infrastructure plan and the China threat
CHINA ADVISORY · Report · 11 Jun 2021

Biden’s new infrastructure plan is a counter-strike against China’s economic growth and investment in technology. As The Wall Street Journal noted in April, “When President Biden unveiled the plan, he mentioned China six times, including this reference: 'That’s what competition between America an...

Can China fund its semiconductor ambitions?
CHINA ADVISORY · Report · 26 May 2021

China has made investment in technology a key policy for the coming decade, with semiconductors as the centerpiece. However, there are questions about China’s ability to “decouple” from the global semiconductor chain by building its owns state giants. One major question concerns funding. The pol...

Interest rates and shadow banking in China
CHINA ADVISORY · Report · 14 May 2021

China is attempting to reduce risk in the financial system. This includes controlling monetary policy and interest rates. However, the substantial participation of shadow banking in total capital flows – ranging from heavily regulated to lightly regulated forms – means that Beijing has a limited ...

China’s Credit Guarantee Funds and risk
CHINA ADVISORY · Report · 11 May 2021

China is pursuing two contradictory goals simultaneously. One calls for throttling back credit to risky parts of the financial system. The second is the creation of a default mechanism for ailing companies that in some cases includes state assistance. The policies are designed to continue to inje...

Huarong and state defaults
CHINA ADVISORY · Report · 30 Apr 2021

The Huarong near default was important because a) it is the largest of the country’s Asset Management debt workout firms; b) it is 61 percent owned by the Ministry of Finance, making it directly owned by the central government; and c) it is has a significant amount of outstanding bonds, both dome...

The Huarong default and China’s macroeconomy
CHINA ADVISORY · Report · 15 Apr 2021

China’s State Council Tuesday issued a decree ordering a “deepening” of reform of the budget management system. The key point is an order to reduce financial risk and increase transparency of local government finance. This order follows the recent cancellation of the Ant Group IPO and stricter re...

China’s monetary policy and U.S. rates
CHINA ADVISORY · Report · 08 Apr 2021

“China’s odd monetary transmission mechanisms are largely function of distortions to the Chinese economy, particularly in the Chinese commercial banking system.” John Fernald, Federal Reserve Bank of San Francisco. Rising interest rates in the U.S. could increase capital flight pressure on Chi...

No signs of credit restraint in China
CHINA ADVISORY · Report · 24 Mar 2021

There is widespread talk within Beijing following the leadership meetings about a return to lower credit growth following years of excesses. This is being echoed by the western media. The Financial Times just published a piece saying that Xi Jinping is “curbing the credit fuelled excesses of the ...

Bad loans and the AMCs
CHINA ADVISORY · Report · 12 Mar 2021

There is a longstanding debate about the size of bad loans in China’s banking system. The shortage of data has made it difficult for external analysts to arrive at a comprehensive number that would clarify the banks’ actual financial position. The level of non-performing loans (NPLs) within...

More problems in Hong Kong
CHINA ADVISORY · Report · 26 Feb 2021

A number of events have raised the level of concern among local residents about the future of Hong Kong. These include the arrest of media enterpreneur Jimmy Lai and of former leglisator and pro-democracy activist Martin Lee, the imposition of nationalist curriculum in the lower schools, and the ...

What’s behind the latest attack on Ant?
CHINA ADVISORY · Report · 18 Feb 2021

The Wall Street Journal published an article blaming the cancellation of the Ant Group IPO on corrupt insider dealings in the allocation of shares. While the article is fascinating, it serves too neatly Beijing’s interest in clipping the wings of Jack Ma and Alibaba. The documents conveniently le...

China’s stimulus and the bond market
CHINA ADVISORY · Report · 16 Feb 2021

What is the state of China’s stimulus programs in 2021 and can it be sustained? If the consumer sector fails to pick up speed – as is currently the case, particularly in services – how will China generate growth? The bond market has been an important source of credit, with a 13 percent rise in ou...

HNA and debt in China
CHINA ADVISORY · Report · 03 Feb 2021

One of China’s largest conglomerates, HNA, has been under a cloud for several years, and has officially been put in bankruptcy reorganization under the Chinese courts. Several senior former executives have been accused of corruption for stealing as much as US$10 billion from HNA company units. Th...

Consumer sector metrics in China
CHINA ADVISORY · Report · 27 Jan 2021

As China moves into 2021, two key questions for the economy are: 1) Will consumer spending increase to match the gains in other sectors? 2) Will China be able to reduce the stimulus through state spending on fixed asset investment? The official data on retail sales for December 2020 and FY2020...

Truck traffic, Covid-19 and the economy in China
CHINA ADVISORY · Report · 20 Jan 2021

There is continued debate about the severity of Covid-19 in China, and more generally, about the accuracy of the country’s economic data. The latest WHO visit to China starting on January 14 to assess the source and impact of Covid-19 has continued to raise questions about the transparency of the...

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