China Macro Reporter
1. Five things to watch for in China’s new GDP data

<table class="nl_card" id="19apr1701"><tr><td><table class="multi-block"><tr><td class="bg-holder"><a href="" target="_blank"><img src="" alt="CHINADebate"></a></td></tr></table><p class="caption"><a href="" target="_blank">FT</a><p class="excerpt"><strong>China's March data</strong>comes out today and the Financial Times suggests<a href="" target="_blank">'Five things to watch for in China’s new GDP data.'</a></p></td></tr><tr><td class="nl-post"><h2>1. A reprieve from Donald Trump?</h2><ul><li><strong>‘The CSI 300 index</strong>— which tracks the share prices of China’s biggest listed companies — ended 2018 almost 24 per cent lower than it was when the trade war began in earnest last May.’<li><strong>‘But the index</strong>began a sustained rebound when Mr Trump postponed plans to increase tariffs on Chinese imports on January 1, and later indicated that a final trade settlement was now only a matter of when, not if.’<li><strong>‘It is up</strong>by more than 30 per cent since the start of the year.’<li><strong>‘Wednesday’s data</strong>should provide evidence of whether this revival of animal spirits on the Shanghai and Shenzhen stock exchanges has been warranted.’</ul><hr><h2>2. Private sector revival?</h2><p><strong>‘In recent years</strong>private sector companies have found it increasingly difficult to secure credit from state banks as the government cracked down on alternative funding sources in the shadow banking sector.’<ul><li><strong>‘When share prices dropped</strong>last year, private companies that had pledged shares as collateral often saw those shares fall into state hands.’<li><strong>‘Private sector morale</strong>was so low last year that in October and November vice-premier Liu He and President Xi Jinping held a series of high-profile meetings, intended to bolster entrepreneurs’ morale.’</ul><p><strong>‘In January,</strong>Mr Liu and Premier Li Keqiang publicly lectured the country’s largest state banks on the need to give greater financial support to private sector firms.’<ul><li><strong>‘New data on fixed asset investment</strong>by the private sector should indicate if China’s entrepreneurs are reacting positively to these gestures of support from senior government leaders.’</ul><hr><h2>3. Are central government stimulus measures working?</h2><ul><li><strong>‘Mr Li has repeatedly pledged</strong>that the government, in its efforts to keep economic growth from slowing too sharply, would not resort to “flood-like stimulus” as it did in the wake of the global financial crisis of 2008-09.’<li><strong>‘Instead the State Council</strong>recently unveiled a series of tax cuts worth an estimated Rmb2tn to stimulate economic activity.’<li><strong>‘First-quarter consumption data</strong>should indicate whether consumers are responding to these measures.’<li><strong>‘China’s central bank</strong>has similarly refrained from cutting benchmark interest rates and instead reduced the amount of reserves commercial lenders are required to put aside — provided that the freed-up capital is directed towards rural development, small and medium-sized enterprises and other sectors favoured by the government.’</ul><hr><h2>4. Is Beijing also reverting to its traditional tricks to produce growth?</h2><ul><li><strong>‘Despite Mr Li’s pledge,</strong>a recent surge in local government bond sales and state investment in infrastructure projects suggest the Chinese government is also reverting to more traditional means of boosting growth.’<li><strong>‘Chinese bank lending</strong>set a quarterly record of Rmb5.8tn in the first three months of the year, driven by a credit surge in March.’<li><strong>‘New data due out on Wednesday</strong>may show a corresponding increase in fixed asset investment by state companies.’</ul><hr><h2>5. Are homes for speculating on again?</h2><ul><li><strong>‘As concerns about economic growth</strong>mounted over recent months, Chinese officials referred less frequently to their earlier slogan that “homes are for living in, not speculating on”.’<li><strong>‘Instead</strong>they are now easing restrictions on the property sector, which along with related industries accounts for a quarter of all economic activity according to some estimates.’<li><strong>‘The temptation</strong>to fire up this important economic engine is all the greater as auto sales, which traditionally boost demand in a range of ancillary industries, have fallen sharply over the past year.’</ul></td></tr></table>

2. 'Only Trump can save China'

<table class="nl_card" id="19apr1702"><tr><td><table class="multi-block"><tr><td class="bg-holder"><a href="" target="_blank"><img src="" alt="CHINADebate"></a></td></tr></table><p class="caption"><a href="" target="_blank">New York Times</a><p class="excerpt">Some Chinese Say Yes: Business leaders and intellectuals say one of Beijing’s toughest critics could force the country to change. Still needed: voices of support from the inside</p></td></tr><tr><td class="nl-post"><p><strong>‘Some people in China</strong>have their own label for the polarizing American president:<strong>savior,</strong>’<a href="" target="_blank">writes Li Yuan</a>in The New York Times.<ul><li><strong>‘At dinner tables</strong>, in social media chats and in discreet conversations, some of the country’s intellectual and business elite are half-jokingly, half-seriously cheering on the leader who has built a large part of his political career on China-bashing.’<li><strong>‘“Only Trump can save China,”</strong>goes one quip. Others call him the “chief pressure officer” of China’s reform and opening.’<li><strong>‘Their semi-serious praise</strong>reflects the deepening despair among those in China who fear their country is on the wrong track.’<li><strong>'An aggressive outsider like President Trump,</strong>according to this thinking, can help China find its way again.’</ul><p><strong>'The Communist Party</strong>has become more involved in business, the economy, public discourse and other elements of everyday life.'<ul><li><strong>'Many of these elite</strong>fear that after 40 years of reform and opening up, China is retreating.'<li><strong>'To make matters worse,</strong>nobody at home appears willing or able to fight the trend.'<li><strong>'President Xi Jinping</strong>has become the country’s most powerful leader since Mao Zedong, hurting the chances that internal opposition can push back.'</ul><p><strong>‘Then came Mr. Trump</strong>and his trade war.’<p><strong>‘“More market-oriented</strong>actions are being reconsidered or put back on the table,” said Zhu Ning, an economist at Tsinghua University in Beijing. “In this sense, the trade war is helping China’s reform.”’<ul><li><strong>‘But there’s little evidence</strong>that the leadership is easing its grip in a lasting way.’<li><strong>‘The few</strong>business-friendly gestures are reactive rather than proactive.’<li><strong>‘In other words,</strong>there hasn’t been any fundamental change in the leadership’s thinking.'<li><strong>'The party</strong>must control, as Mr. Xi has said, “all tasks.”’'</ul><strong>Still, ‘“The trade war is a good thing,”</strong>said Mr. Zhu, the Tsinghua economist. “It gives us hope when we’re hopeless.”’</td></tr></table>

3. ‘China’s land prices deserve as much attention as European industrial production or U.S. retail sales’

<table class="nl_card" id="19apr1703"><tr><td><table class="multi-block"><tr><td class="bg-holder"><a href="" target="_blank"><img src="" alt="CHINADebate"></a></td></tr></table><p class="caption"><a href="" target="_blank">WSJ</a><p class="excerpt">China’s land prices and transaction data deserve as much attention as European industrial production or U.S. retail sales</p></td></tr><tr><td class="nl-post"><p><strong>Couldn’t agree more</strong>. Some years ago a hedge fund asked me, if you could look at just one indicator of the China economy, would it be? Answer: the property market.<ul><li><strong>At the time</strong>I was thinking of the outsized impact – impacts, really - on the Chinese economy.<li><strong>As for impacts</strong>on the global economy, I was only considering commodities.</ul><p><strong>But as</strong><a href="" target="_blank">‘How the World Economy Became a China Property Play’</a>in the Wall Street Journal argues, China property has become an indicator for the global economy, as well as individual economies - the article’s subtitle: ‘The Chinese housing market is picking up, likely boosting growth in Japan and Germany.’<ul><li><strong>‘A 10% decline</strong>in demand for real estate and home construction would lead to a 2.2% reduction in Chinese output growth, according to the Kansas City Fed [<a href="" target="_blank">'How Much Would China’s GDP Respond to a Slowdown in Housing Activity?'</a>].’<li><strong>‘That is twice</strong>the impact it would have had just a decade ago, when real estate played a more modest role in Chinese savings and investment.’<li><strong>‘At the same time</strong>as housing became more important to the Chinese economy, the Chinese economy became more important globally.’<li><strong>‘A two percentage-point drop</strong>in Chinese growth this year and next would shave 0.5% off global growth by 2020, according to Oxford Economics.’<li><strong>‘The effects should work</strong>in the opposite direction if housing market activity and growth break higher, as now seems to be happening.’</ul><p><strong>'China’s impact</strong>on commodity-exporting emerging markets such as Brazil and global inflation are well known, but its influence won’t end there.'<ul><li><strong>'Japan and Germany</strong>are in a prime position to benefit from any rebound.'<li><strong>'They have outsize exports</strong>to China relative to the size of their economies: Germany’s $110.69 billion of exports to China last year was four times France’s figure, while shipments from Japan, worth $144.45 billion dollars, outstripped those from the U.S.'</ul></td></tr></table>

4 'Trump’s Foreign Policies Are Better Than They Seem'

<table class="nl_card" id="19apr1704"><tr><td><table class="multi-block"><tr><td class="pdf-container"><iframe src=";embedded=true" style="width:100%; height:500px;border:none;"></iframe></td></tr></table><p class="caption"><a href="" target="_blank">open the pdf</a><p class="excerpt">‘Overall the president deserves a high grade for his policies on China.’</p></td></tr><tr><td class="nl-post"><p>Trump’s Foreign Policies Are Better Than They Seem is a 112-page Special Report just published by the Council on Foreign Relations (CFR) - thorough and long on opinion - and grades.<ul><li><strong>The opinion and grades</strong>are by<a href="" target="_blank">Robert D. Blackwill,</a>an experienced diplomat and academic and now the Henry A. Kissinger Senior Fellow for U.S. Foreign Policy at the CFR.<li><strong>He is also a Republican</strong>who clearly dislikes Mr. Trump the person but finds some very good things in the President's erratic foreign policy.<li><strong>Here's some</strong>of his take on Mr. Trump's policies and actions toward China.</ul><p><strong>‘Overall</strong>the president deserves a high grade for his policies on China.’<ul><li><strong>‘His administration</strong>has taken the lead in awakening the United States to the growing threat that China poses to U.S. vital national interests and democratic values.’<li><strong>‘Without the Trump</strong>administration’s persistent political push regarding the increasing dangers of Chinese power, America could well have continued sleepwalking while Beijing decisively drew large parts of Asia into its orbit and away from the United States.’</ul><p><strong>‘While these presidents</strong>[Clinton, G.W. Bush and Obama] were making such optimistic statements over a nearly twenty-year period, China’:<ul><li><strong>‘implemented</strong>a grand strategy designed to undermine U.S.-Asian alliances, which has accelerated under Xi Jinping; used geoeconomic tools to coerce its neighbors and others, including most recently through the Belt and Road Initiative (BRI);’<li><strong>‘violated</strong>international commercial practices, including by committing massive theft of U.S. intellectual property;’<li>‘<strong>manipulated</strong>its currency for trade benefits;’<li><strong>‘threatened</strong>Taiwan;’<li><strong>‘built up its military forces</strong>to push the United States beyond Japan and the Philippines;’<li><strong>‘constructed and militarized</strong>artificial islands in the South China Sea, in violation of international law;’<li><strong>‘systemically and brutally</strong>violated the human rights of its own people; and’<li><strong>‘patiently and incrementally</strong>built its power and influence with the strategic goal of replacing the United States as the primary power in Asia.’</ul><p><strong>‘These American misunderstandings</strong>of China’s objectives over nearly two decades rank as one of the three most damaging U.S. foreign policy errors since the end of World War II, along with the 1965 military escalation in Vietnam and the 2003 invasion of Iraq.’<ul><li><strong>‘Indeed, this prolonged failure</strong>in China policy could turn out to be the biggest U.S. policy deficiency in the past seven decades, given the accumulating dangerous strategic consequences of the rise of Chinese power for world order as well as for the United States and its allies and friends.’</ul><p><strong>‘But the Chinese leadership</strong>, faced with successively acquiescent U.S. administrations that miscalculated China’s strategic intentions, went on pushing until it finally provoked a Thermidorean reaction from the United States.’<ul><li><strong>‘To its credit</strong>, however, the Trump administration has since adopted a much more clear-eyed approach regarding China that breaks with many of the errors of the past.’</ul><p><strong>'Trump Grade</strong>on China Policy: B+'<hr><p><strong>Besides China.</strong>'The grades for President Trump’s foreign policies just past the halfway point in his term are':<ul><li><strong>China</strong>(B+)<li><strong>North Korea</strong>(B)<li><strong>Syria</strong>(B+)<li><strong>Saudi Arabia</strong>(B+)<li><strong>Israel</strong>(B)<li><strong>Iran</strong>(C)<li><strong>Afghanistan</strong>(B+)<li><strong>India</strong>(B+)<li><strong>Venezuela</strong>(B+)<li><strong>trade</strong>(C)</ul><p><strong>'Against</strong>his grades for':<ul><li><strong>climate</strong>(F)<li><strong>European security</strong>(D)<li><strong>Russia</strong>(F)<li><strong>policy process</strong>(F)<li><strong>character</strong>(F)<li><strong>American values</strong>(F)<li><strong>U.S. alliances and deterrence</strong>(F)<li><strong>policy implementation</strong>(D).</ul><p><strong>'Overall</strong>foreign policy grade of D+'</td></tr></table>