Caixin | As two of the most significant economies driving global growth today, commentators often compare the emerging market behemoths, China and India. In recent times, the two countries have eclipsed Brazil, Russia and South Africa, their BRICS counterparts, in terms of economic growth. However, there are significant differences between the two Asian economies.
UBS | Improved EM asset performance this year has been driven by a) the tremendous credit stimulus from China, b) a change in the reaction function of the Fed, which helped EM currencies rally against the USD, and, c) the rebalancing in the oil market. Investors are already questioning the first two, but oil has continued to trade very well.
UBS | The recent credit market sell-off, spate of defaults, spike in Chinese yields and spreads, bond issuance cancellations basically reflect: 1) investors re-pricing credit risk and policy easing expectations.
Caixin | Financial markets have been jolted by a number of defaults on corporate debt in recent weeks, with state-owned Dongbei Special Steel Group Co. missing a 700 million yuan repayment on May 5.
Chinese corporate debt has not stopped growing since 2007 (it is around 160% of GDP). But given the level of reserves, Beijing does not yet understand the alarmism unleashed by international agencies.
UBS | We hosted three meetings in HK this week for Chinese construction companies, which included China Railway Construction Corporation (CRCC), China Railway Group (CRG) and China Communications Construction Company (CCCC).
Caixin | Until recently, Chinese officials could rest assured that their path on the bureaucratic ladder went only upward, unless they were punished for some reason, usually corruption. No more. A policy passed in June 2015 by the Communist Party’s second-highest decision-making body, the 25-member Politburo, stipulated that officials should be demoted for failing to meet the requirements of their post.
Andrew Sheng via Caixin | Most studies on yuan internationalization focus on how it affects trade and investment flows and GDP growth. They typically neglect the balance sheet aspects, as well as the profits, or return on equity, issue.
In the Asia Times there is an article about the tricks China has begun to use to conceal the truth about its foreign currency position. Up until December, China released the two figures corresponding to foreign currency reserves, that of the Central Bank and that of the banking sector (which let’s not forget is state-owned).
Caixin | Creating a new problem to address an old one may trim the real estate glut in the short term, but it will cause headaches for the economy in the long run.