Chinese Economics Thread

[GiantPanda]

This and the 50 year bond yield really blow my mind. I remember this is what happened for much of early 2010s to UST.

https://twitter.com/i/web/status/1823022942378189067

Absolute stupidity in trying to force a China collapse narrative:


Bond yields go UP when there is lack of confidence because the government needs to increase interest to attract buyers.

Yields go DOWN when there is confidence in the country and the government can sell bonds at will.

Bond yields going down means the cost of government borrowing is low.

Yes, this is something that is usually accorded to a safe-haven. Not saying China is a safe-haven but it is unlike any other Emerging Market.

Chinese LT bonds can now attract buyers with little interest unlike in the past -- where like all EM economies, it needed to pay far more than the US to find buyers.

 

[tphuang]

Bond yields going down means the cost of government borrowing is low.

it's important to not get bogged down with the original tweet and focus on Luke and my comment. This is more about China bond's low yield.

 

[Maikeru]

it's important to not get bogged down with the original tweet and focus on Luke and my comment. This is more about China bond's low yield.

Well...what does it all mean? PRC bonds are now a safe haven? There is deflation in China?

 

[tphuang]

Well...what does it all mean? PRC bonds are now a safe haven? There is deflation in China?

it probably is considered a safe haven by enough people. The vast majority of buyers are probably domestic.
It also indicates people aren't buying homes and think stock market is too risky.

But for Chinese govt, getting lower yield is always better.

 

[coolgod]

it probably is considered a safe haven by enough people. The vast majority of buyers are probably domestic.
It also indicates people aren't buying homes and think stock market is too risky.

But for Chinese govt, getting lower yield is always better.

I recalled there was a domestic news about this, Chinese finance regulators see this as a way to bet against Chinese economy, and warned against these actions. Their goal is probably to get financial institutions to invest more in stocks instead of central gov bonds.

 

[Quan8410]

I recalled there was a domestic news about this, Chinese finance regulators see this as a way to bet against Chinese economy, and warned against these actions. Their goal is probably to get financial institutions to invest more in stocks instead of central gov bonds.

The Chinese stock market peaked in 2007. 17 years later the index value is reduced to half. That's why the Chinese invested in real estate. The Chinese stock market need much more reform to get people really interested in.

 

[Overbom]

I recalled there was a domestic news about this, Chinese finance regulators see this as a way to bet against Chinese economy, and warned against these actions. Their goal is probably to get financial institutions to invest more in stocks instead of central gov bonds.

the Chinese stock market is a disaster if you want to store your wealth in...
Much better, as people have started doing apparently, to invest in govt bonds


The govt can say whatever it wants but data is data, and data says if you want to lose your money, invest in the stock market

 

[Proton]

the Chinese stock market is a disaster if you want to store your wealth in...
Much better, as people have started doing apparently, to invest in govt bonds


The govt can say whatever it wants but data is data, and data says if you want to lose your money, invest in the stock market

Im not too familiar with the Chinese financial market, but when I look at big Chinese companies by market cap - Mostly the banks - they seem to give 5-8% annual dividends, doesn't seem bad. Companies like Tencent and Alibaba at 1% dividends. CATL and Kweichow Moutai is somewhere in between with 3% dividends.

At inflation below 1% this seems like solid investments.

 

[chgough34]

Bond yields go UP when there is lack of confidence because the government needs to increase interest to attract buyers.

Yields go DOWN when there is confidence in the country and the government can sell bonds at will.

No. Yields go down when there is less confidence in the future since the expectation is that the monetary authority will cut rates in the future. Risk-free rates on sovereign debt are not risk rates on corporate and household debt. Sovereign debt yields are all effectively bets on the future path of monetary policy - weak macroeconomic circumstances results in lower future rates (in order to stimulate and generate inflation), strong macroeconomic circumstances results in higher future rates (to prevent from the economy from overheating). There will always be endless demand for sovereign debt due to bank & insurer capital adequacy requirements as well as corporate treasurer money market fund sweeps - only question is whether they buy those risk free instruments or other comparable risk free instruments such as lending in the overnight interbank market or interest bearing deposits at the central ban

 

[chgough34]

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Litany of China related legislation headed to a floor vote on the House including

1) outbound investment restrictions on FDI, which will chill global FDI in China (due to the extraterritorial nature of them)
2) more export controls
3) financial sector sanctions on Chinese exporters to Russia and Iran (chilling trade among large corporates; ex., PetroChina has limited Iran oil plays all to maintain its access to the U.S. financial sector),
4) an abolishment of the de minimis tariff exception, so purchases from SHEIN and Temu are now going to have the standard tariff applied to them, hurting their growth plans and
5) the BIOSECURE Act which will ban purchases from Chinese Contract Research Organizations, limiting the global scope of CROs such as Wuxi AppTec