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USD/CNH: A Lookalike to USD/JPY with a Lag?
Read Time: 2 minutesChinese Yuan Echos Japanese Yen: The USD/CNH (onshore Yuan) is mirroring the USD/JPY (Japanese Yen) weakness against the US Dollar. Both currencies are pressured, prompting intervention threats from their respective central banks. Lagging Behind: While the Yen hits multi-year lows, the Yuan seems to be a step behind. This lag might be…
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China’s unexpected interest cut!
Read Time: 2 minutesBREAKING: China delivers a record interest rate cut! But here is why it is NOT going to work to revive the Chinese economy. The chart below shows the 5-year Chinese Loan Prime Rate: this is the reference rate used in China for mortgages, and so the idea was to reduce mortgage and…
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China’s visible US holdings relative to its reserves
Read Time: 5 minutesChina’s most visible US holdings (the Treasuries held with US custodians) ticked up in the November data, so the TIC release didn’t get much coverage (valuation changes should have pushed the market value of all foreign holdings up in November) I usually push back against overly dramatized headlines about China selling Treasuries…
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China’s currency peg
Read Time: 4 minutesCurrency management has (mostly) fallen out of the headlines. But there is still a lot of management going on! Of course, the Chinese yuan still attracts the most sustained attention. With the dollar’s recent rebound and the run of relatively bad Chinese data, it is once again getting close to the weak…
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WTO issues: China targets French brandy imports in escalating trade dispute
Read Time: 2 minutesChina Launches Anti-Dumping Probe into French BrandyChina has commenced an anti-dumping investigation into French brandy imports, escalating trade tensions with the European Union. This move by the Chinese commerce ministry follows after domestic manufacturers raised concerns. Brandy, predominantly sourced from France, is the most imported spirit in China. The initiation of this…
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China & its FX Settlement Data
Read Time: 2 minutesChina’s fx settlement data (sales of fx through both the PBOC and the state banks) provides the strongest confirmation of intervention in September to date — net sales of around $20b, $30b after adjusting for forwards. Still manageable pressure of course for a country with over $3 trillion in reserves and a…
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China restricts export of graphite products required for EV batteries
Read Time: 2 minutesChina’s commerce ministry has announced that starting December 1, export permits will be needed for specific graphite products to safeguard national security.As the world’s top producer of graphite, China plays a vital role in the electric vehicle (EV) battery industry.In fact, the country supplies 67% of the world’s natural graphite and refines…
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Is China facing a BoP crisis?
Read Time: 3 minutesThe details of China’s current account may be more interesting right now than the details of China’s financial account. In broad terms, the reversal of net FDI flows and foreign bond sales have taken $200b out of China over the last 4qs of data. That leaves a roughly $200b net influx of…
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Is China selling USD bonds?
Read Time: 4 minutesThe odds are that China isn’t actually selling dollar bonds. Or even moving its reserves out of the dollar. A new blog on how to interpret the US TIC data. A couple of notes on the blog. It goes through, in great detail, how to find China’s Agency holdings and how to…
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China and its Balance Sheet Recession
Read Time: 3 minutesWhat’s the balance sheet recession some claim it’s going on in China? A balance sheet recession is a toxic economic loop where after being burnt by deleveraging and lower asset prices households and corporates refuses to take in new credit and focus on just repaying their debt and shrinking balance sheets. That…
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CHINA WATCH: THE PEOPLE’S BANK PICKLE – IS 7.30 THE LINE IN THE SAND?
Read Time: 2 minutesThe PBoC rate cuts are not a surprise to us as the pressures facing China are intensifying. But where does it leave monetary policy going forward? – As the PBoC confronts Yuan depreciation and counters deflationary momentum, the continued divergence between these challenges will strain the central bank’s ability to effectively manage both–…
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Chinese Economy & its problems!
Read Time: 4 minutesThis very good article explains quite well the problems the Chinese economy currently faces, but it should stress more that the model didn’t “break down” recently, when growth rates started to slow sharply. It broke down at least 10-15 years ago. China’s 40-Year Boom Is Over. What Comes Next? 2/14 In fact…
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Does PBOC needs to support CNY?
Read Time: 4 minutesThe biggest unpriced duration supply risk is that the PBOC will need to intervene to support the CNY. CNY at 15 year lows means not too much longer before the PBOC mounts a more aggressive defense. Last time they did, it created a huge ripple through global markets. Thread. While the PBOC…
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China’s state banks seen selling dollars for yuan in London and New York hours
Read Time: < 1 minuteChina’s major state-owned banks were seen busy selling U.S. dollars to buy yuan in both onshore and offshore spot foreign exchange markets this week, people with direct knowledge of the matter said, in an attempt to slow the yuan’s depreciation. Though they also trade on their own behalf or to execute…
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China’s & its reluctance to use the financial strength of its central government to directly support household consumption!
Read Time: 4 minutesAs China’s data continue to disappoint, there is a persistent theme in much of the outside commentary on its economic woes: that China is for some reason failing to take the “obvious” step of sending stimulus checks to households. The implicit argument is that the US handed out massive subsidies directly to…
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China should move to a “market-determined” exchange rate – Does the world care?
Read Time: 3 minutesI don’t think it is in the interest of the US (or Europe) for China should move to a “market-determined” exchange rate when that more less means letting the CNY float down (even tho it never floated up unfettered) This is a case where the “market reforms” are the best path frame…
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The US-China Rare Earth battle
Read Time: 2 minutesThe Mountain Pass Rare Earth Mine in Southern California is reviving with a patriotic twist, with workers wearing US flag patches and souvenir crystalline chunks of orange rare-earth ore. The mine’s regeneration has received U.S. government backing, including funding from the Department of Defense, as part of a Washington plan to rebuild…
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China’s trade surplus diversion by $270bn over the past year! What is happening?
Read Time: 5 minutesWhy have two official estimates of China’s trade surplus diverged by $270bn over the past year? It’s not data manipulation. Turns out, it’s another case of multinationals exploiting preferential tax rules and messing up the global balance of payments data. Let’s investigate! Here’s the basic issue. According to China’s customs agency, its…
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Deep diving into China’s International Trade
Read Time: < 1 minuteChina has a significant global market share of manufactured goods, with exports rising 8.5% YoY in April. This growth is mainly due to base effects and mainly to the global South (EM). China exports to the US and EU have been dragged down by lower demand there and tariffs/sanctions/industrial policy (IRA).…
