China is going to hit you with so much news that you’ll have a difficult time crafting a consistent narrative and who knows, maybe that’s the point.
GDP was of course inline (6.8% in Q1), because that’s how it goes and the rest of the data deluge was generally mixed. It looks as though China is continuing to mark a slow but steady transition from a smokestack economy to a consumer-led growth model.
“Despite the moderation in growth industrial production and infrastructure investment in March, the increases in real estate investment and retail sales picked up notably during the month,” Barclays writes, in their summary, before noting that in their mind, “the easing in IP growth (Mar: 6.0%, Jan-Feb: 7.2%) likely reflected slowing exports on weakening external demand, disruptions to domestic production due to a holiday hangover (Chinese New Year ended in later February) and a longer-than-usual NPC meeting (16 days).” As for weaker infrastructure investment, Barclays says that likely “echoed the weakening credit growth against the backdrop of continued tightening on local-government financing.”
Of course the old ——-> new economy transition won’t be seamless. “March data point to nascent signs of a growth slowdown underway, led by old economy sectors,” Nomura’s Rob Subbaraman told Bloomberg on Tuesday. “We don’t expect growth in new economy sectors to fully offset the slowdown in the old, heavily-indebted sectors of the economy in the quarters ahead, [but] this is a necessary adjustment to improve the quality of China’s growth.”
Right. Here’s a table from Barclays that gives you a snapshot of all the recent data (a lot of these charts have become useless as they basically look like an EKG flatline on a long enough time frame):
Perhaps more important than Tuesday’s raft of econ were the announcements that followed it, specifically China’s decision to remove ownership limits on auto ventures and do away with foreign limits for the shipbuilding industry and also for manufacturers of planes, helicopters and drones. This all reinforces Xi’s message delivered in his keynote address at the Boao Forum in Asia last week.
Here’s a translated version of a message that appeared on the National Development and Reform Commission’s website:
At present, China’s manufacturing industry is basically open, and the direction for further opening up is very clear. It is to achieve full opening. The new negative list of foreign investment will make manufacturing opening a key point. For example, the auto industry will implement separate types of transitional period, and in 2018 , the ratio of foreign-invested shares of special vehicles and new energy vehicles will be abolished; the ratio of foreign-invested shares of commercial vehicles will be removed in 2020 ; the foreign-invested-to-equity ratio of passenger cars will be lifted in 2022 , and the joint venture will be cancelled. There are no more than two corporate restrictions. Through the 5- year transition period, the auto industry will cancel all restrictions. Another example is that the shipping industry will cancel the restrictions on foreign-invested shares in 2018 , including design, manufacturing, and repair. For another example, the aircraft manufacturing industry will cancel restrictions on foreign-invested shares in 2018 , including trunked aircraft, regional aircraft, general aircraft, helicopters, drones, and aerostats.
That gave European automakers a boost.
All of that should please Trump.
On the other hand, Beijing also imposed temporary anti-dumping deposits of 178.6% on grain sorghum imported from the U.S. That caused an immediate spike in soybean meal for Sept. delivery on the Dalian as investors look ahead to what’s next:
In case it’s not clear enough, the Foreign Ministry said Beijing is ready to start trade countermeasures. So if, as Danske Bank’s Allan von Mehren suggested, Trump’s Monday tweet about yuan devaluation “could signal the possible announcement of extra tariffs on $100b Chinese goods (i.e., the extra tariffs Trump proposed earlier this month), well China is all set to go.
Believe it or not, this wasn’t all the news out of China, but in the interest of splitting this up into digestible bites, we’ll call this post closed for now.