Chinese Economics Thread

[GiantPanda]

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

The UK 10 year yield is 4.00 while 30 is 4.50.

China's are 2.19 and 2.39.

So you are telling me that people have more confidence in a UK growing at 0.4% vs a China growing at 5.0%?

 

[chgough34]

The UK 10 year yield is 4.00 while 30 is 4.50.

China's are 2.19 and 2.39.

So you are telling me that people have more confidence in a UK growing at 0.4% vs a China growing at 5.0%?

The Bank of England policy rate right now is 5% and the People’s Bank of China’s policy rate is 3.35% so both long term yields point in the same direction - financial market pessimism at the future of macroeconomic environments in both countries such that future central bank policy rates will remain sustainably low for decades into the future

 

[theorlonator]

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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

1 will not matter so much now because China is large source of FDI now. They're not looking for extra investment from the US/EU/JPN when they're largely technology leaders now in a variety of sectors.

Also, most Chinese related bills never pass the House. I believe there were like 600 or so last year and they didn't pass?

 

[chgough34]

1 will not matter so much now because China is large source of FDI now. They're not looking for extra investment from the US/EU/JPN when they're largely technology leaders now in a variety of sectors.

It’s not that this particular policy matters much but it will - less capital deepening, less technology and information spillovers, less competition, it’s that the policies in combination with the chilling effects, combined matter.

Also, most Chinese related bills never pass the House. I believe there were like 600 or so last year and they didn't pass?

Most China bills end up getting consolidated into the NDAA or foreign affairs authorizing act; they get considered, just not on the house floor. This is different because it’s getting to the floor

 

[Sinnavuuty]

1 will not matter so much now because China is large source of FDI now. They're not looking for extra investment from the US/EU/JPN when they're largely technology leaders now in a variety of sectors.

FDI is not just about absorbing or developing technology. All FDI could be used to further increase production and services, further boosting China's growth. This would be particularly interesting for China at a time when there is a strong contraction in the country's real estate market.

 

[Sinnavuuty]

https://twitter.com/i/web/status/1823343905678438511

It seems to this guy that there is an expectation from the authorities to support the demand side in China with policies to be approved in the coming months to boost growth

 

[theorlonator]

It’s not that this particular policy matters much but it will - less capital deepening, less technology and information spillovers, less competition, it’s that the policies in combination with the chilling effects, combined matter.

Most China bills end up getting consolidated into the NDAA or foreign affairs authorizing act; they get considered, just not on the house floor. This is different because it’s getting to the floor

All those apply to America when it's restricting FDI into the US too. You're framing it as a China only loss. If any market needs more competition, it's the US one.

 

[chgough34]

All those apply to America when it's restricting FDI into the US too. You're framing it as a China only loss. If any market needs more competition, it's the US one.

The U.S. is the larger economy that is on the generally on technological frontier

 

[theorlonator]

The U.S. is the larger economy that is on the generally on technological frontier

Which is why the US is pushing Samsung, TSMC, Hyundai, Toyota, EVE, CATL, and many others to do FDI in the US. What American companies do you think China is dying for extra FDI from?

 

[SanWenYu]

Can mods throw this alter account of sleepy out of a window?