Wednesday, June 29, 2016

Fiscal Gap Exceeds 10%

Reanalysis by two groups of economists put China’s effective fiscal deficit between 9 and 10 percent in 2015 and 10 and 12 percent in 2016 — numbers far higher than the 3 percent gap in the official budget. Fiscal measures such as local bond issues to finance real estate projects are boosting economic growth, but at tremendous cost and in a pattern that obviously can’t be sustained for two more years.

Friday, June 24, 2016

Stocks Down After U.K. Vote

The U.K. vote to leave the European Union has led to declines in stocks worldwide, but China has held up better than most, revisiting but not falling through its lows for the month. Some forecasters expect a recession in the U.K. and some adjustments in the euro zone and in international banking, but that would imply little direct impact on China.

The greatest market turbulence today has been in currency markets, which have seen the widest ranges in a decade.

Tuesday, June 21, 2016

Bad Training

How bad is training in banks? A short video that shows a bank trainer beating bankers with a stick in the northern Chinese province of Shanxi suggests that bank managers and trainers are not always taking training very seriously. Regulators suspended two executives at the bank when the video came to light.

Sunday, June 19, 2016

Slowing Trade

Chinese imports are down 4% compared to last year, and it’s a bigger drop in Japan with imports down 13%. More attention is being paid to Japan’s exports, down a surprising 11%. The decline is being attributed to slower spending by consumers, especially in China and developing countries, but also seen in Japan and some countries in Europe.

Saturday, June 11, 2016

IMF Warning on Corporate Debt in China

An IMF official warned about the high level of business debt in China and said the solution includes better corporate governance, especially in state-owned enterprises. Reuters story:

Tuesday, June 7, 2016

China’s Currency and Reserves Decline

It’s hard to find two experts who agree on what’s happening with China’s currency which continues to decline in value. I believe to understand the exchange rates you have to look at currency reserves. China’s stock of foreign currency is declining sharply, and that suggests to me that there is not much more China can realistically do to support its currency.

Wednesday, June 1, 2016

Manufacturing Growth, But Just Barely

The China manufacturing PMI indicated the slightest degree of growth for the second month in a row. There was similarly optimistic indicators from Australia and the United States, but these were balanced out by notes of caution in data from Japan and Europe. Continuing the trend from last year, it looks like the world is moving away from manufacturing, but the move is not fast enough to trigger a recession.