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Kamala And Trump Will Continue China De-Risking. Does That Make China A Turn-Off To Wall Street? https://ift.tt/rEvuyV9 Whether it’s Kamala Harris or Donald Trump at the helm of U.S. foreign policy in January 2025, one thing is likely: the continuation of a strategic decoupling from mainland China. That means Chinese companies outsourcing to or investing in factories in Southeast Asia and maybe even Mexico to keep their market share in the U.S. read more via Benzinga - Stock Market Quotes, Business News, Financial News, Trading Ideas, and Stock Research by Professionals https://ift.tt/u7hjfms August 08, 2024 at 12:16PM

China's leadership is showing real pessimism on the Chinese economy -- judging from today's People's Daily frontpage top story, which is on China's 9/26 Politburo meeting. Take-away: China is doubling-down on government intervention to halt market's pessimistic outlook. That includes renewed emphasis on fiscal stimulus, loosening monetary policy, and lifting various restrictive policy hurdles to investment, all in an attempt to salvage China's market confidence. 5 points that stand out from the Politburo meeting's readout: 1. Fiscal stimulus: "Strengthen degree of counter-cyclical fiscal and monetary policy adjustments. ENSURE necessary fiscal expenditures (get made)" Sidebar: - What are "3 guarantees"? Guarantee that people get basic livelihood, get salaries paid, and that offices stay open.  So let's do a verbal logic exercise: When the central government is announcing major fiscal stimulus for the explicit objective of ensuring these, it shows that it feels at this current rate, there is real systemic risks of lights going dark at the local level, if the center doesn't provide assistance asap. 2. Banks: "Implement forceful lowering of reserve requirements and of interest rates" Ok, so it's to lower the cost of borrowing to make Chinese businesses feel more confident about borrowing & investing. Which is fair, it's what US govt does just before presidential elections, too... (#KamalaBump) 3. Housing: "Must respond to people's concerns, 'adjust house purchase restriction policies, and lower interest rates for mortgages." Yes. So Politburo is acknowledging that its restrictive housing policy over the last decade wasn't quite "responding to people's concerns", and that it's, if not wrong-headed and myopic, at least in need of major "rolling updates". 4. Capital markets: "Must reinvigorate capital markets. #Boldly infuse medium-to-long term capital into the market by removing the barriers to entry for social insurance, insurance, and wealth management dollars." 5. Acknowledge existence of widespread bankruptcy risks: "Must support publicly traded companies mergers, acquisitions, and restructurings... and study & unveil new policy measures to protect small and medium investors".

What can China do to boost confidence? While using national funds to buy blue-chip stocks might support equity markets in the short term, what is really needed are measures to revive the economy, raise corporate earnings and restore business and household spending. Next week’s National People’s Congress would be a good time to announce such measures.

After the March National People's Congress, Chinese regulators may adopt a more systemic policy response to the cascading real estate crisis after a series of piecemeal policy responses failed to reflate asset prices. The crisis began with insolvencies at highly levered developers before stress spread to local government financing, consumers using homes as a store of value, investment products and companies, bank equity, and currency weakness. Recent policy measures include attempting to export excess production, limits on short selling, reductions in bank reserve requirements, official support for affected banks, restrictions on access to foreign assets, and arresting many executives for suffering poor business outcomes. Chinese leader Xi Jinping may use the March gathering to unveil a more focused set of policy measures, transitioning growth to a new model by supporting consumer spending instead of business investment. Current policies failed to stop the contagion from a deflating real estate bubble that began with financial problems at developer Evergrande three years ago. Attempts to maintain business investment by exporting surplus increasingly threaten trading relationships, as evidenced by recent disagreements with the EU about rapidly rising electric vehicle sales. Bans on short selling do not support asset values long term and simply cause the selling pressure to migrate to unaffected investors, venues, and time periods. Reducing bank reserve requirements makes the financial system more fragile. Purchasing artificially overvalued equities just wastes money and does not change intrinsic values. Argentina's current crisis shows that draconian external currency controls primarily redirect economic activity into circumventing currency controls. Arresting executives for suffering contagion from the collapse of an officially supported real estate bubble does nothing to address underlying economic issues. China should transition to policies that support consumer spending through programs to reinforce confidence. The country needs a New Deal style package of reforms to provide a social safety net that will allow consumers to save less, freeing up funds to drive a consumer led recovery. China faces demographic challenges similar to Japan with a falling population naturally reinforcing domestic deflationary trends. Last year's 5%+ GDP growth likely overstated activity due to Covid-related base effects. After three years of deflationary pressure and spiraling levels of public debt, lower prices could cause a vicious cycle. Xi Jinping may finally be ready to take dramatic action aimed at breaking the trend. #investing #equities #markets #realestate #china

Will the UK & China rebound continue? Firstly, continuing our summary for the year so far: Q1: Rate cuts fade but equities ‘March’ on April: Geopolitical risk and Reflexivity wake up (yields) May: Earnings Strength and Market rebound (don’t sell) June: The EU cut rates and strong earnings continue … 1️⃣ EPS > Revenues = continued cost cutting measures 2️⃣ Less rate cuts in the US and EU first to move 3️⃣ UK at an all-time-high but still an opportunity 4️⃣ China rebounds from property fund and stimulus Asset class strategy for June: ✔️ Preference for Equities, why? Good earnings, peak rates, resilient consumer, sentiment shift & AI (of course) ♻️ Reduced duration & credit exposure in Fixed Income, rotating proceeds into our preferred short-dated high quality credit (government or asset backed) ❌ Tougher environment for Alternatives, why? Higher yields in fixed income = lower risk premium and even more difficult when coupled with better sentiment (VIX). Still good for diversification but in specific areas. Regional strategy & update for June: UK and China have lagged the US and Japan over the past year and we saw a small reversal of this trend in June ⬇️ - see chart for the differential 📊 UK 🇬🇧 - “no longer a retirement home to investors” Spoken a lot on this recently … (see previous posts). Valuation opportunity from reduced supply (less IPO’s, more share buybacks and company privatisation from foreign capital as well as increased demand (foreign investors and pensions … GDP upward surprise The surprise index positive And … a new government which creates new expectations China 🇨🇳 - “will property continue to be a dragging anchor” Investors were more positive with a 9% rebound Exports are strong but the worry of US tariffs are real! The government is trying - $42bn fund to buy unsold property and use as social housing with other additional fiscal stimulus. Demand for credit is however low and stimulus needs to be closer to 4/5% of GDP Overall much of the narrative continues, particularly across the asset class strategy. We shall see on whether the regional bifurcation of performance continues. I regularly post on #Investments & #Markets here on LinkedIn so please do connect, like & comment if you’ve gone through the pain of reading this far 😆 Source: Cazenove Capital

Also I think that he gets this wrong. A lot of the reason I just disagree is that I've been listening to what the Chinese government is saying and what the public wants. Right now Chinese government is going to push more credit in the economy because people are concerned about employment, and they are in a better position to do so because Evergrande and friends are gone. Getting to 5 percent does not require massive stimulus, and 5 percent is a target so that you get decent amounts of employment growth and spending. The other thing is that a lot you can get just by *being here*. The thing about the Chinese government is that they really can change their mind and they can change their mind quickly. All of the stuff in the last month has been about boosting employment and pushing new technology, and they aren't as worried about financial risk or asset bubbles as they were two or three months ago. The big thing in Hong Kong was Xia Baolong visiting Hong Kong and the messages he was sending was focused on employment and growth so what he is hearing is just not what I am hearing here on the ground. Everything I've heard in the two months suggests that they are moving to a policy of moderate growth, and that contraction is over. One other thing is the role of Xi Jinping. People assume that he is Donald Trump when he just isn't. The thing was that Xi's picture was everywhere around 2020 because he was essentially running for election against Jiang Zemin (or more accurately Jiang's person Hu Chunhua). Now that Hu has been sidelined (he was kicked off the Politburo) and Xi has his team in place, there is no reason for Xi to be that public so all of the stuff is going through Xi's team (Li Qiang and He Lifeng). One weird thing about people is that they assume that Chinese politics involves announcing some big new plan. In fact the plan is something they came up with around 2015. What you are seeing is that they've moved the foot off the brake and are tapping the accelerator, but they are not pushing the pedal to the floor. The big decisions were made back in December. The other thing is that the NPC and CPPCC are *not* rubber stamp legislatures. The final vote on the bills are largely ceremonial but there is a pretty extensive legislative process where people have hearings and room for public comment. ------------------ https://lnkd.in/g4a4S5JJ

“The mood in China is dismal. Indicators of domestic and foreign sentiment — household consumption, private investment and inflows of foreign capital — have been anaemic. Property values continue to fall and the stock market is in the doldrums, both reflecting and feeding into the sense that the economy is rudderless and that the government either doesn’t understand the gravity of the situation or doesn’t have a plan to stem the rot. Or both. The third plenum of the Chinese Communist party’s Central Committee, a major meeting that typically sets out a road map for economic policies in each five year cycle, is set to take place next week. The government had been expected to lay out a clear policy agenda and specific reforms, in addition to offering short-term stimulus to support growth. Those hopes might be dashed. Chinese Premier Li Qiang recently spoke about dealing with the symptoms as well as root causes of the current problems. But he offered few remedies.” “The plenum will no doubt yield rote statements about further reform and opening up. Those will land with a thud if the government fails to reinvigorate market-oriented reforms. The government is resisting the clamour for monetary and fiscal stimulus, for fear of creating financial risks and adding to its debt burden. To boost the economy after the pandemic, Beijing did issue a sizeable quantity of long-maturity government bonds to finance infrastructure and other spending. The central bank has eased monetary policy moderately, but credit growth remains weak. Private firms are not eager to invest in an uncertain environment. The government has also stimulated production in selected industries. Support has boosted sectors such as green energy and electric vehicles, which fits the goal of technological upgrading of manufacturing. Getting households to consume more, when their confidence is at a low ebb and they see their homes and stock market investments falling in value, has proven a tough.” “The focus on large scale capital-intensive manufacturing has limited employment growth, further restraining consumption. With consumption falling behind the rise in production capacity, deflationary pressures are proving persistent. As China tries to export its way out of its problems, trade tensions with other countriesare ratcheting up, adding to the gloom. The banking system looks sound but is not channelling resources to the more productive parts of the economy. Banks have little incentive to lend to small and medium sized enterprises, including in the service sector. Fixing incentives, along with broader capital market development, is a major priority.  Local governments are under financial duress. They account for a large share of overall spending while the central government collects most tax revenues. This model, which was already broken, has become unsustainable. China’s current problems are both cyclical and structural, and action is needed on multiple fronts.”

Breaking News!!! 🤝 On Sunday night, Chinese Finance Minister Lan Fo'an held talks with U.S. Treasury Secretary Janet Yellen in Beijing. The two sides exchanged views on the macroeconomic situation between China and the United States, bilateral economic relations, and cooperation in addressing global challenges. Chinese Vice Premier He Lifeng and Yellen held several rounds of talks in Guangzhou City, Guangdong Province, from Friday to Saturday. Focusing on the implementation of the important consensus between the two leaders, the two sides had in-depth, frank and constructive exchanges on the macroeconomic forms of the two countries and the world, China-U.S. economic relations and global challenges. The two sides agreed to discuss issues such as balanced growth of the U.S.-China economy and the global economy, financial stability, sustainable finance, and anti-money laundering cooperation under the framework of the U.S.-China Economic and Financial Working Group. "China and the United States have obvious economic complementarities, and cooperation between the two sides can promote technological exchanges, expand markets, and improve the industrial chain supply chain, thus improving economic efficiency." Lin said. If the two countries work together to reduce trade barriers, improve the flow of goods and services, and promote two-way investment, it will bring more business opportunities for enterprises, thus increasing employment and consumption options for people in both countries and improving relations. During Ambassador He's meeting with Yellen, China expressed serious concern over the U.S. economic and trade restrictions on China and provided a comprehensive response on capacity issues. #sinoUS #futureoutlook #cooperation #globalchallenge #partnership #purchasing #sourcingsolutions #marketresearch #marketentry

As Australia looks ahead to the next United States presidential election, the potential outcome – a Kamala Harris presidency or a return of Donald Trump – would have very different impacts on our economy. Both candidates’ policies could significantly impact trade, currency markets, and overall economic relations between our nations. Learn how Trump or Harris' approach will impact Australia. https://lnkd.in/gAvzQ_5v #RayWhite #USPresidentialRace #Australianeconomy #economicimpacts

A Chinese flag flutters on top of the Great Hall of the People ahead of the opening ceremony of the Belt and Road Forum (BRF), to mark 10th anniversary of the Belt and Road Initiative, in Beijing, China October 18, 2023. Edgar Su | Reuters BEIJING — China is set this week to kick off its annual parliamentary meetings, which investors are watching closely for signals on economic stimulus. The country’s gross domestic product grew by 5.2% in 2023, but overall recovery from the Covid-19 pandemic was slower than many had expected. A prolonged slump in the massive real estate market and falling global demand for Chinese exports have contributed to low levels of consumer and business sentiment. That’s all led to questions over whether Beijing will step in with large-scale support. So far, authorities have been relatively reserved. Beijing signaled in December that any new policy support would be “appropriate,” said Wang Jun, chief economist at Huatai Asset Management, adding “there’s no way” that stimulus would be as large as it was in 2008. That’s according to a CNBC translation of his Mandarin-language remarks. China’s economic policy is typically set at an annual meeting in December by leaders within the ruling Communist Party of China. The meetings this month, known as the “Two Sessions,” are at the government, instead of party, level and typically release more details on policy plans, such as the GDP target for the year. Wang said he is watching for comments on authorities’ plans for the real estate sector, capital markets and local government finances. Back in 2008, when the world was reeling from the financial crisis, China unleashed a massive stimulus package to sustain growth with greater demand. While the economy rebounded, the measures drew criticism for a resulting surge in local government debt. Beijing in recent years has emphasized the need to stem financial risks and clamped down on real estate developers’ high reliance on debt for growth, an issue tied to local government finances. This time around, China’s monetary policy also faces constraints on how far it can deviate from the U.S. Federal Reserve’s interest rate path. GDP and other economic targets The Chinese People’s Political Consultative Conference, an advisory body, is set to kick off its annual meeting on Monday. The following day the National People’s Congress legislature is due to begin its meeting. Tuesday is also when the country’s premier is expected to share the year’s targets for GDP, employment and other economic indicators in what’s called the “Government Work Report.” “The target will likely remain relatively high,” said Bank of China’s chief researcher Zong Liang, noting GDP grew by 5.2% last year. That’s according to a CNBC translation of his Mandarin-language remarks. He expects the target for the fiscal deficit will be around 3.5% and that monetary policy will also be relatively