CHINA: BIG MISSES ON MACRO DATA & SURPRISE RATE CUTS
China’s central bank unexpectedly cut key policy rates for the second time in three months on Tuesday, in a fresh sign that the authorities are ramping up monetary easing efforts to boost a sputtering economic recovery. This move opens the door to a potential cut in China’s lending benchmark loan prime rate (LPR) next week.Earlier this morning, China reported big data miss in July. Retail sales rose by 2.5% in July from a year ago, below expectations for a 4.5% increase, according to analysts polled by Reuters. A spokesperson for the National Bureau of Statistics said the bureau is suspending the youth unemployment number release due to economic and social changes, and is reassessing its methodology. Source: CNBC
President Joe Biden blasted China’s economic problems as a “ticking time bomb” and referred to Communist Party leaders as “bad folks”
His latest barb against President Xi Jinping’s government even as his administration seeks to improve overall ties with Beijing. In comments that included several major inaccuracies about the world’s second-largest economy, Biden said at a political fundraiser Thursday that China was in “trouble” because its growth has slowed and it had the “highest unemployment rate going.” He also blasted Xi’s signature Belt and Road Initiative as the “debt and noose,” because of the high levels of lending to developing economies associated with the global investment program. Although Biden misrepresented key statistics about China, overall outlook remains grim. This chart by Bloomberg thru Holger Z is a harsh remainder of the amount of leverage in the Chinese economy. As growth slows down alongside deflationary threat, this could become a major issue. Source: Bloomberg
Ominous sign of weakness in Chinese economy: China is suffering Italian style youth unemployment despite Chinese women retiring in early fifties
Source: Francois Trahan thru Michel ArouetT
Over the last few weeks, the newsflow for China assets has been horrendous, whether it’s the macro data or the policy side (disappointment at the scale and lack of detail)
While sentimnet on China is very bearish, Greater China stocks have outperformed over the past month. This could be a sign that the worst is behind and that bad news are already priced in. Source: J-C Gand, Bloomberg
Rice prices soared to the highest in almost 15 years in Asia on mounting concerns over global supplies as dry weather threatens production in Thailand and after top shipper India banned some exports
Concerns over the potential impacts of El Nino on production in some suppliers provided further underpinning to prices, as did rain-induced interruptions and quality variability in Vietnam’s ongoing summer-autumn harvest,” a FAO report stated. India, the world’s leading rice exporter, banned exports of non-basmati white rice on Jul. 20, as the government seeks to keep a cap on soaring food prices at home, and ensure there are enough supplies domestically “at reasonable prices.” Source: Bloomberg. CNBC
China's consumer and producer prices both declined in July for the first time since November 2020, a sign of deflation pressure amid weakening demand
CPI dipped 0.3% from a year earlier while PPI retreated for a 10th consecutive month, sliding 4.4%. "China is in deflation for sure," said Robin Xing at Morgan Stanley. "The question is how long." The statistics bureau attributed the CPI decline to the high base of comparison, saying the dip is likely to be temporary. Source: J-C Gand
China's Inward Foreign Direct Investment Falls To The Lowest Level On Record...
Indeed, Inward FDI fell further in Q2: The preliminary Q2 Balance of Payments (BOP) data released last week showed China's current account still enjoys a healthy surplus, but the financial account continues to see notable net outflows. In particular, inward Foreign Direct Investment (FDI) fell to the lowest level since the series started in 1998. Source: SAFE, www.zerohedge.com
This could be a problem for sugar prices which already hit 12-year highs back in May
Source: Barchart
