Hello from China Charts. We are a pair of finance professionals with boots on the ground in China, each with 10 years of experience in the country. This is The Brief, a collection of charts from the past week on China’s economy and what we find interesting.

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Contents:

1. China ADR pain

2. PMIs

3. Fraud

4. Real Estate

5. Auto sales

6. Trade as % of GDP

I. China ADR pain different this time

Note the persistent divergence from S&P 500 Index. Very close to prior low from 3-Jan-2019. Will these two indices converge in the future?

II. PMIs

Manufacturing PMIs turned up

As we’ve noted in prior Briefs, policy effects on coal and other inputs are easing inflation.

III. Fraud

Anyone living in China has received scam calls and messages, they don’t seem to be slowing down despite more investigations.

Financial schemes have a long history of thriving in China, where decades of runaway economic growth have created not only enormous personal wealth but also a get-rich-quick mindset among the public.

Wire fraud arrests has skyrocketed in 3 years.

While Beijing has made a big push to put scammers behind bars, and the number of annual arrests has surged fivefold over the past three years, a significant number of fraudsters have emerged unscathed through operating abroad or hiding their identity with better technology.

Might this be part of the reason behind the eCNY digital currency as well as some of the stricter regulations on data privacy?

IV. Real Estate

As we’ve previously noted, China’s regulators are trying to carefully deleverage the real estate industry, if they succeed, it’s share of GDP will decline. What will replace it?

Bank lending to Real Estate and Construction sector picked up in November. A sign of the easing we expected. China Beige Book has some of the best early data on this.

China Beige Book’s Qazi notes:

In Nov “Property firms are actually leading the pace with bond issuances as well,” Qazi said. “Not only are they seeing recovery in lending through banking channels, but they are also clearly being provided the space to sell corporate bonds as well.”

V. Auto Sales

October passenger vehicle sales was 6th month of consecutive year-over-year decline. But the 12-month moving average has returned to Oct’19 rate of 1.8 million units.

Daily average auto sales (weekly bars) are down slightly from same period in 2019 and 2020, on 26-week moving average and most recent 11/24 week. End of month week is where most of spikes occur, also around holidays.

We’ll be watching the 4th week numbers to get a feel for how China’s consumer is faring.

VI. World Trade

We swapped in different countries, compare to last Long View issue. Note Mexico’s trade growth as % of GDP and Korea’s reversal after 2010 but remaining a trade-led economy.

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Sincerely,
China Charts Team