First, the China Manufacturing “Flash” PMI had “markets” exhaling relief since an increase from 50.2 to 50.5 meant, Manufacturing Rebound Relieves Growth Concerns. A week later, however, that PMI increase disappeared as the final PMI for September came in at an even 50.2 instead – which altered the commentary from “rising” manufacturing to “thankfully” steady manufacturing. So both rising and [...]
The PBOC continues along with its path of “targeting” liquidity rather than “flooding” as has been done in the past. Expectations for Chinese action, however, seem to be resistant to getting that message. This is not something that is just now being applied, as if a sudden and unanticipated change in thinking. The entire default drama at the beginning of [...]
I still cannot fathom the infatuation with all these PMI’s. An extremely minor adjustment in a PMI can send risk markets soaring with enthusiasm, so much so that any recent angst about actual data fades into obscurity. Of course, that says a lot more about the state of such “markets” than it does the quality of the data, but these [...]
Chinese financial behavior more recently has been far more favorable than the first part of the year. While there still remains this idea of PBOC control, I think, again, that the second quarter fully bears out the lack of control and the fear that engendered. Very quietly, the PBOC in June rolled out something called the “pledged supplementary lending” program. [...]
Earlier in the year, China was the primary topic of conversation as its economy teetered upon the precipice of the great unknown, growth less than the “minimum”, while corporate defaults suddenly became somewhat contagious. At the time, monetarists globally were unconcerned despite the outward projection of a high degree of disorder because they “knew” the PBOC was “in control”, going [...]
The latest money growth figures from China seemed to have brought back worries over more disorder in finance. Tomorrow the Chinese government will release GDP figures for the first quarter and current expectations (I know) are for 7.3% Y/Y growth. That would be the slowest rate of expansion in memory. The two are inextricably linked as slowing growth, including the [...]
There are certain compounds that just do not go together without creating volatile reactions. These binary substances, when mixed, are exceedingly dangerous under even stable conditions. It seems as if there is a lot to be said of the latest near miss in Chinese bond defaults. Again, we are dealing with a relatively tiny business that should, on its own, [...]
The appearance and intensity of uncertainty is in direct proportion to the counter efforts intended to sow content and maintain the idea of control. It amounts to the financial equivalent of a “show of force.” Yet, how often do such forceful demonstrations actually provide comfort? More often than not, participants in that uncertainty interpret the need to show force as [...]
Analyzing anything of and around China is difficult to begin with, so any misconceptions that form are understandable. That being said, there are certain methodologies to global finance that penetrate even these potential bends in conventional wisdom. I think that applies to recent commentary on the Chinese financial system as it relates to currency changes. After appreciating steadily since revaluation [...]
The core of 2014 Chinese defaults is really about control, as it ever is in 21st century finance. Central banks believe they have it and can exercise it with precision, a mysticism that is accepted widely by market participants. In allowing smaller firms to default, they are sending the signal that they want greater order in what is near-universally recognized [...]
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