Chief Economist, Aletheia Capital

Dr. Jim Walker

Chief Economist

Independent and original Asian investment research

Aletheia Capital

Aletheia Capital (HK) Ltd. (previously known as Asianomics) combines the extensive knowledge of its experienced team with technology and regulatory changes to disrupt Global Markets business in Asia. The firm is completely independent with no conflicts of interest either on Investment Banking advisory or Capital Markets execution.

Macroeconomics

The Chinese government takeover of Anbang Insurance rekindled gross misunderstandings regarding deleveraging in China. The media fired off proclamations regarding “confirmation about China’s determination to rein in surging corporate debt ... demonstrates that short-term economic pain will be tolerated for the longer-term goal of a more sustainable expansion”. Our view is different.While Xi Jinping and the Chinese leadership have committed themselves to a deleveraging programme, a wholesale paying down of debt in China is far from a likely outcome. China is not deleveraging and, like most countries, has no appetite for short-term pain. It will grow every bit as fast this year as in 2017, if not faster, and more debt will be at the heart of that growth. Since the global financial crisis, debt has risen in the OECD countries and China will be no different (although the preponderance of the debt will shift). The reason for this is simple: debt is true inflation and once an inflation has been started it has to be fed or recession will ensue. China flirted with just such an outcome in 2014 and 2015 and will not be in a hurry to repeat the experience.

The Chinese government takeover of Anbang Insurance rekindled gross misunderstandings regarding deleveraging in China. The media fired off proclamations regarding “confirmation about China’s determination to rein in surging corporate debt ... demonstrates that short-term economic pain will be tolerated for the longer-term goal of a more sustainable expansion”. Our view is different.While Xi Jinping and the Chinese leadership have committed themselves to a deleveraging programme, a wholesale paying down of debt in China is far from a likely outcome. China is not deleveraging and, like most countries, has no appetite for short-term pain. It will grow every bit as fast this year as in 2017, if not faster, and more debt will be at the heart of that growth. Since the global financial crisis, debt has risen in the OECD countries and China will be no different (although the preponderance of the debt will shift). The reason for this is simple: debt is true inflation and once an inflation has been started it has to be fed or recession will ensue. China flirted with just such an outcome in 2014 and 2015 and will not be in a hurry to repeat the experience.

We are constantly warned that the Chinese debt build up constitutes a risk to the global system. We know this because the early-warning indicators developed since 2008 by the Bank for International Settlements are ringing the alarm bells loudly, despite having been wrong for quite some time. The China bear case is easily understood but it relies on false positives and ignores a large part of the story.

We are constantly warned that the Chinese debt build up constitutes a risk to the global system. We know this because the early-warning indicators developed since 2008 by the Bank for International Settlements are ringing the alarm bells loudly, despite having been wrong for quite some time. The China bear case is easily understood but it relies on false positives and ignores a large part of the story.

When will US investors get tired of comparing China in 2017 with the United States financial system in 2007, the year the Global Financial Crisis started? Some of these investors say that the Chinese financial system today is in even worse shape than the US was then (although that is hard to believe even under the worst of circumstances). They are all positioned for the Chinese financial meltdown and the currency collapse that they expect to accompany it. We suspect, were they old enough, that they would have made exactly the same arguments about Japan in 1990. As we all now know, the yen then went on a 20-year journey to nowhere and the much-derided JGB market just kept grinding higher.Are Chinese financials (and the renminbi) today the investment graveyard that was JGBs in the 1990s? Quite possibly for the bears. We have looked at the conditions which combine to produce financial crises and find that there are few similarities between USA 2007 and China 2017. Moreover, the economic cycle in China is in the wrong phase to cause a financial sector meltdown. That was much more likely in 2014 and 2015, when the economy was in near recession, than it is today.

When will US investors get tired of comparing China in 2017 with the United States financial system in 2007, the year the Global Financial Crisis started? Some of these investors say that the Chinese financial system today is in even worse shape than the US was then (although that is hard to believe even under the worst of circumstances). They are all positioned for the Chinese financial meltdown and the currency collapse that they expect to accompany it. We suspect, were they old enough, that they would have made exactly the same arguments about Japan in 1990. As we all now know, the yen then went on a 20-year journey to nowhere and the much-derided JGB market just kept grinding higher.Are Chinese financials (and the renminbi) today the investment graveyard that was JGBs in the 1990s? Quite possibly for the bears. We have looked at the conditions which combine to produce financial crises and find that there are few similarities between USA 2007 and China 2017. Moreover, the economic cycle in China is in the wrong phase to cause a financial sector meltdown. That was much more likely in 2014 and 2015, when the economy was in near recession, than it is today. 

A Tale of Two Bubbles: US 2007 Vs China 2017

Amareos

Ryan Shea

Thematic (Sector/Industry)

<h2>Summary</h2>A lot of smart investors worry that China is a gigantic bubble in search of a pin. It is not hard to see why. China’s economic growth trajectory over the past several decades has been nothing short of miraculous. However, it has generated some substantial imbalances, most visibility indebtedness has surged. Speaking on the sidelines of the recently concluded 19th Party Congress, PBoC Governor Zhou went as far as to reference a possible “Minksy Moment” for the Chinese economy - unusual…

SummaryA lot of smart investors worry that China is a gigantic bubble in search of a pin. It is not hard to see why. China’s economic growth trajectory over the past several decades has been nothing short of miraculous. However, it has generated some substantial imbalances, most visibility indebtedness has surged. Speaking on the sidelines of the recently concluded 19th Party Congress, PBoC Governor Zhou went as far as to reference a possible “Minksy Moment” for the Chinese economy - unusual…

The Market Sentimentalist – China Worries

Public Relations and Social Media Manager, Dechert LLP

Peggy Heffner

Public Relations and Social Media Manager

Dechert is a global specialist law firm

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China has announced the launch of a new initiative that is likely to liberalize the process for foreign investors to invest in the China bond market. As the third largest bond market in the world, this could be a significant boost to international investors wanting access to the Mainland China debt market.<div class="content-highlight">On 15 March 2017, following the fifth annual meeting of the 12th National People' Congress, Premier Li Keqiang announced the intention to launch a bond trading link between China and Hong Kong…</div>

China has announced the launch of a new initiative that is likely to liberalize the process for foreign investors to invest in the China bond market. As the third largest bond market in the world, this could be a significant boost to international investors wanting access to the Mainland China debt market.On 15 March 2017, following the fifth annual meeting of the 12th National People' Congress, Premier Li Keqiang announced the intention to launch a bond trading link between China and Hong Kong…

China-Hong Kong Bond Connect on Its Way. A Legal Update from Dechert's Financial Services Group

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China: Deleveraging Delusions

The Chinese government takeover of Anbang Insurance rekindled gross misunderstandings regarding deleveraging in China. The media fired off...

Dr. Jim Walker

China Myths: Dispelling the Bear

We are constantly warned that the Chinese debt build up constitutes a risk to the global system. We know this because the early-warning indicators...

Dr. Jim Walker

A Tale of Two Bubbles: US 2007 Vs China 2017

When will US investors get tired of comparing China in 2017 with the United States financial system in 2007, the year the Global Financial Crisis...

Dr. Jim Walker

The Market Sentimentalist – China Worries

SummaryA lot of smart investors worry that China is a gigantic bubble in search of a pin. It is not hard to see why. China’s economic growth...

Amareos

China-Hong Kong Bond Connect on Its Way. A Legal Update from Dechert's Financial Services Group

China has announced the launch of a new initiative that is likely to liberalize the process for foreign investors to invest in the China bond...

Dechert LLP

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)