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Risk Watch: Crashing China Property Stocks in Hong Kong Forebode Bubble Crisis

In the afternoon of Jan. 17, three Hong Kong-listed stocks suddenly plummeted by over 60 percent. Two of the three shares were those of Jiayuan International (down 80.62 percent) and Sunshine 100 China Holdings (down 64.59 percent). Other Chinese property developers like Evergrande (3 percent), Country Garden (3.5 percent), R&F Properties (3.5 percent), Vanke (3.7 …

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Risk Watch: Call for PBoC to Buy A-shares Comes as Confidence in Stock Markets Fall

On Jan. 8, the official China Securities Journal ran an article titled “The Good Prospects of the PBoC Holding Domestic Stock” by Dongxing Securities lead economist Zhang Anyuan. The article suggests that the central bank should own 1.58-1.78 trillion yuan (about $233.17 billion to $262.68 billion) worth of “suitable” domestic equity assets, and cites the …

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Risk Watch: Rising Business Failure and Unemployment Heighten Political Risk in China

Summary: Recently released official data shows that China’s economy performed poorly across the board in October. Several key indicators hit new lows and fell below market expectations. Many Chinese businesses, including prominent firms, have failed since the start of 2018. The Chinese authorities claim that unemployment has been kept stable at about 4 percent. Non-government …

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Risk Watch: Declining Export Surplus Will Affect China’s Forex Earnings

The Sino-U.S. trade war and China’s worsening economy have hurt China’s export surplus. According to official economic figures released near the end of September, China’s export surplus fell by a third in the first eight months of 2018 as compared to the previous year. China’s top three performing provinces by GDP, Guangdong, Jiangsu, and Zhejiang, …

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Risk Watch: The CCP’s ‘Controlled Blow Up’ of Local Debt Could Trigger a Black Swan

China’s State Council and the Chinese Communist Party (CCP) General Office published guidelines that call on state-owned enterprises (SOEs) to reduce their debt ratio on Sept. 13. A measure in the guidelines that allows local government financing platforms to go bankrupt has sparked social debate and some panic.[1] We believe that the CCP is carrying …

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Risk Watch: China’s Social Security and Taxation Changes Could Spark Wave of Business Failure and Unemployment

The Standing Committee of the National People’s Congress (NPCSC) revised China’s tax law on Aug. 31. At a glance, the revision seemed to be helpful. Individual taxpayers saw their annual tax-free threshold raised from 3,500 yuan per month to 5,000 yuan per month (60,000 yuan per year). However, in an overhaul of its income tax …

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Risk Watch: China’s State-owned Enterprise Debt Financing ‘Ponzi Scheme’

On July 24, China’s Ministry of Finance (MoF) released economic data for state-owned enterprises (SOEs) for the first half of 2018. In the statement accompanying the data, the MoF declared that SOEs performed well in H1 2018, and that “both solvency and profitability had improved over the same period last year.” On July 27, China’s …

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Risk Watch: China’s Industrial Firms’ Profits Fell, Not Grew, in H1 2018

According to China’s National Bureau of Statistics (NBS) data released on July 27, the country’s industrial firms’ (“industrial enterprises above designated size”) profits grew 17.2 percent from the previous year. We compared the 2018 figures with that from 2017, and found that China’s industrial firms’ profits actually fell 6.8 percent. The statistics bureau’s official explanation …

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Risk Watch: PBoC 502 Bln Yuan Injection Cannot Band-Aid China’s Economic Woes

On July 23, the People’s Bank of China (PBoC) lent 502 billion yuan (about $74.36 billion) to financial institutions at a rate of 3.3 percent through its one-year medium-term lending facility (MLF). The PBoC said in the same statement that it skipped reverse repurchasing operations that day. Given that there were 170 billion yuan worth …

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Risk Watch: China’s Local Debt ‘Iceberg’ Emits ‘Cracking Sounds’

Caijing Magazine’s 16th issue of 2018 (published on July 9) featured a cover page with a man hauling a piggy bank atop a cracking iceberg. The headline read: “The Worries of Local Debt Hanging High Overhead.” The cover page article likened China’s local government implicit debt to an iceberg, with a small portion publicly visible …

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