Decoupling, and its impact on growth

The rift that has widened between China and the US was caused by China’s emergence as a geopolitical competitor to the US, rather than the personality of Donald Trump. Decoupling will continue whether or not the two reach a deal on tariffs. This may spur technological advances in some areas, but the net impact is likely to be slower productivity growth, and a more antagonistic relationship that could steer the two sides towards wholesale disengagement.
Mark Williams Chief Asia Economist
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China Economics Weekly

Local governments prepare to step in

Evergrande creditors face a bumpy few weeks with a string of bond coupon payments due. Even if the company can scrape together the cash – not at all certain, given that it just missed one payment deadline – its chances of repaying the principal on bonds maturing early next year are low. Officials are initially pushing creditors to find a solution that allows work on ongoing projects to resume. But if that fails, the company will most likely be broken apart at the hands of local governments.

24 September 2021

China Economics Update

Most developers are not on the brink of default

With a couple of exceptions, most major developers are in a much stronger financial position than Evergrande and should be able to weather a temporary spike in their borrowing costs amid contagion fears. Successfully navigating the structural decline in housing demand over the coming decade will prove more challenging. A drawn-out consolidation of the sector over many years seems more likely than an imminent wave of developer failures.

Drop-In: Evergrande – What are the risks to China and the world? Chief Asia Economist Mark Williams and Senior China Economist Julian Evans-Pritchard will be joined by Senior Markets Economist Oliver Jones to take your questions about the Evergrande situation. They’ll be covering the implications of collapse for China’s financial system and growth outlook, and assessing the global markets fallout. Register here for the 0900 BST/1600 HKT session on Thursday, 23rd September.

22 September 2021

China Economics Update

Where might markets be wrong about Evergrande?

If Evergrande were to cause a financial or economic shock it would either be because policymakers failed to contain financial contagion or because the company’s collapse precipitated a much bigger decline in construction activity than most investors currently expect. The latter is probably the bigger risk and hinges on whether the company’s demise triggers a substantial drop in property sales.

22 September 2021

More from Mark Williams

Emerging Asia Economics Update

Taiwan: severe capacity constraints but few inflation fears

Taiwan’s economy is struggling with severe capacity constraints but there are few signs in recent data that this is fuelling broad-based wage or price pressure. That’s a stark contrast with the US, and should provide some reassurance to central bankers not just in Taipei but also further afield that economic recoveries, even if strong, won’t necessarily trigger inflation.

10 June 2021

China Economics Weekly

PBOC’s turn to target currency manipulators

After regulators last week pledged to root speculators out from the domestic commodity market, this week it was the turn of the People’s Bank to tackle manipulation in the currency market, which it abhors. We suspect though that, as with commodity prices, it will be fundamental forces rather than these campaigns that cause the renminbi to weaken over coming months.

28 May 2021

China Economics Focus

The implications for China and the world of eCNY

In this Focus we detail what is known about how China’s central bank digital currency (CBDC) will operate, when it will launch, what the People’s Bank is trying to achieve, and whether it will succeed. One conclusion is that the launch of eCNY will do nothing to relax the constraints that have prevented the renminbi being widely adopted in international trade or as a reserve currency. Indeed, we argue that the People’s Bank will have to compel eCNY’s use for it even to take off within China.

27 May 2021
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