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China
How many investors in the West even know that inflation in China remains under 2% but wages have been increasing by 8-9%? That is a great thing and not a negative, despite the spin in the West. Rising wages means rising discretionary income and rising incomes means growing spending. Thus we have the Chinese GDP set to grow at the fastest rate bar none for the No. 2 economy in the world.

Why Does Walmart Keep Upping Its Stake In Chinese E-Commerce Player JD.Com?

Domestic manufacturing workers with a high-school education saw wages rise 53 percent from 2010 to 2014, according to China Household Finance Survey data cited by BI.

China’s Robot Revolution May Affect the Global Economy - Bloomberg

In 2014, the Chinese government announced that it would invest $100 billion to assert itself as the global leader in the development and production of computer chips. It’s already begun spending large amounts of that money on new fabrication plants, but a new analysis by the management consulting firm Bain & Company suggests that the country’s investment alone won’t be enough to secure dominance. The state-owned chip maker XMC is hard at work building facilities that will manufacture NAND flash-memory and DRAM chips, the first of which is expected to be operational in 2017. And earlier this year the nation caught western chip makers by surprise, manufacturing the processors used in the world’s fastest supercomputer. But there is a long way to go. Certainly, huge quantities of silicon-based devices look set to flow through China: Bain predicts that an impressive 55 percent of the world’s memory, logic, and analog chips will flow through the country by 2020. But China currently produces only 15 percent of those semiconductors, and it’s stated aim is to increase that figure to 70 percent by 2025.

China’s Bid to Dominate the Chip Industry Is In Danger of Falling Short - MIT Technology Review

As he marches through a gritty factory that makes baby strollers and wheels, Hu Chengpeng says finding workers is his number one challenge these days. Turnover at the facility in Hanchuan in Hubei province in central China is running at 20 percent, even while wages have been growing by double digits for his 400-plus workers every year. “Labor costs are getting just too high,” he said.

China Robots Displace Workers as Wage Spiral Pressures Profits - Bloomberg

China's shift from a country that copies ideas from the West to a tech and innovation powerhouse is no longer an aspiration — it's a fact. That was the repeated conclusion last week at one of Asia's largest tech conferences. "China is changing from the so-called copycat nation to innovation nation," Jing Ulrich, managing director and vice chairman of APAC at JPMorgan Chase, told audiences at the RISE conference in Hong Kong last week. China's rise in technology has been spurred by the emergence of large companies such as Tencent, Alibaba and Baidu that paved the way for other local firms to follow.
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Traders struggled to find a reason for the 0.65 percent jump, with one noting that moves can be exaggerated amid thin liquidity in the overnight session. But the advance comes against a backdrop of increasing strength -- even before Monday’s gains, the yuan was the best performer in Asia this month.

Yuan's Outperformance Widens With Biggest Jump in Seven Months - Bloomberg

An almost two-year long study of the Chinese financial system by the International Monetary Fund found three major tensions that could derail the world's second-largest economy. Those tensions emerged as China moves away from its role as the world's factory to a more modern, consumer-driven economy, the IMF said. The financial sector is critical in facilitating that transition, but in the process it evolved into a more complicated and debt-laden system. "The system's increasing complexity has sown financial stability risks," the fund said in the 2017 China Financial Sector Stability Assessment report released on Thursday morning Asia hours.

IMF's Financial Sector Stability Assessment report on China's banking system

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The IMF concluded its Financial Sector Stability Assessment with China, saying this week that China’s policies could give rise to financial stability risks. “Pressures to keep non-viable firms open – rather than allowing them to fail – are strong,” a release on the IMFs website said. “As a result, the credit needed to generate additional GDP growth has led to a substantial credit expansion resulting in high corporate debt and household indebtedness rising at a fast pace.” Indeed, even China’s central bank chief sounded the alarm several months ago, when he warned of a “Minsky Moment.” But, despite the continued debt growth, corporate profits have been rising even faster. As Bloomberg reports Wednesday, supply cuts, rebounding prices and a boom in global trade have boosted profits and put China’s companies in better shape to cope with regulators’ efforts to reign in leverage.

Debt warnings continue, but Chinese firms in best shape in years | Asia Times

Chinese stock markets will continue their trend higher over the long term despite recent dips caused by a regulatory clampdown in the country, one technical analyst told CNBC Monday. "Our view is China's actually still in a bull move. We've been looking for 3,600 (points) in the Shanghai composite for quite a long period of time, and we don't see at the moment a reason to change that," David Sneddon, global head of technical analysis at Credit Suisse, said. Chinese shares fell across the board in the last week of November, with China's blue-chip benchmark CSI 300 suffering its biggest loss since June 2016, tumbling nearly 3 percent on November 23. The Shanghai composite Index fell more than 2 percent during that session, as did the Shenzhen composite Index. In the following trading sessions the Shanghai index continued to move down, only picking up from Friday December 8 when it added 0.55 percent to close at 3,289.99 points. It added another 0.98 percent on Monday and closed at 3,322.24 points. Chinese indexes across the board have risen since Friday.

China's still in a bull market despite investor concerns, analyst says

China's 10-year sovereign bond yield topped 4 percent Tuesday Beijing time for the first time since October 2014. Analysts attributed the rise to expectations of tighter monetary policy in China as Beijing makes reforming the debt-dependent economy a priority. Benjamin Mandel, a global strategist at J.P. Morgan Asset Management in New York, says a persistent rise in the yield could reverse the bullish global market sentiment.

China's climbing bond yields raises new concerns for markets

China is planning to relax its goal of cutting debt in its economic outline that's set for release Wednesday, The Wall Street Journal reported Tuesday. The revised plan will instead clamp down on the rise in borrowing, sources told the WSJ. The move would fly in the face of the Chinese government's mission to bring down the country's soaring debt, a goal President Xi Jinping has made a cornerstone to his economic platform. The weakened priority may prove to be a concession by top Communist Party leaders that China's economy may be more reliant on leveraged growth than the government would like.

China is reportedly having second thoughts about cracking down on country's ballooning debt

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China's central bank boss spelled out his strategy to prevent a future financial crisis, urging broadened equity funding and direct finance to reduce corporate leverage and eliminate "zombie" companies, official media reported on Saturday. Zhou Xiaochuan, Governor of People's Bank of China, said that the market should play a "decisive role" in allocating financial resources, but also stressed the importance of stronger regulation and Communist Party leadership in guiding financial reform, according to the Shanghai Securities News.

People's Bank of China chief Zhou Xiaochuan on financial crisis risk

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China is not using yuan depreciation as a tool in its trade conflict with the U.S., and will likely step in to avert any disorderly decline, according to Morgan Stanley. “We don’t expect policymakers to encourage material RMB depreciation,” China economists at the bank, led by Robin Xing in Hong Kong, wrote in a July 1 note, referring to the renminbi, the official name of China’s currency. “The PBOC could step up intervention if depreciation risk intensifies.” The People’s Bank of China has already signaled that it’s on alert for excessive declines, by setting the yuan’s reference rate on the strong side of what models had predicted last week, according to Morgan Stanley. Strategists at Goldman Sachs Group Inc. also on Friday concluded that the PBOC has been “leaning against excessive depreciation in recent days.”

China Will Halt Any Disorderly Yuan Slide, Morgan Stanley Says - Bloomberg

A slump in the yuan deepened on Friday after the central bank weakened its daily reference rate for the currency by the most in two years. The People’s Bank of China weakened the fixing by 0.9 percent to 6.7671 per dollar. While the rate was in line with the average forecast of traders and analysts in a Bloomberg survey, the yuan turned sharply lower after the move, sinking as much as 0.7 percent to 6.8367 per dollar in offshore trading before paring declines. Bets for further monetary easing and speculation the authorities are sanctioning the losses by not intervening have helped make the yuan the worst performer among more than 30 major currencies in the past month. The rapid descent has undermined confidence in other emerging market peers and helped fuel a plunge in commodity prices. "The Chinese authorities continue to refrain from active intervention," said Khoon Goh, Singapore-based head of Asia research at Australia & New Zealand Banking Group Ltd. "This suggests that they are allowing market forces to drive the currency and are not seeking to defend any particular levels. Markets will take this as a signal to continue to push the yuan weaker until there is firm signal from the authorities that they feel it has gone too far."

Yuan Nears `PBOC Put' Level That Could Help Markets, Nomura Says - Bloomberg

While China’s reliance on trade for its growth is declining, exports to the US still account for around 4% of GDP. Our trade war scenario assumes a 15-25 percentage points increase in bilateral China-US tariffs. It would reduce China’s annual GDP growth rate by 0.3-0.6 percentage points over 2018-2020.

China Economic Outlook: Quarter 2 of 2018

China will improve the flexibility of macro-economic policy and ensure the macro-economic fundamentals remain stable,” said Yan, adding that policymakers also will expand effective investment and look for ways to boost domestic demand. He cited a number of supportive factors for the economy, including China’s low budget deficit ratio and government debt levels, commercial banks’ high capital adequacy ratio and provision coverage ratio, declining corporate debt levels and plenty of policy tools that authorities can employ.

China still confident of hitting 2018 growth target despite slowdown, trade risks | Reuters

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In the context of today’s trade war, however, an “engineered” competitive devaluation of the renminbi, even if technically possible, would not be in China’s best interest. Unlike in the past – and despite the Trump administration’s view of China as an unreformed currency manipulator – a weak renminbi has more costs than benefits for China. For starters, by increasing import prices and bolstering export sectors, a weaker renminbi would undermine the Chinese government’s goal of shifting away from export-led growth and toward a model based on higher domestic consumption. Moreover, a weaker renminbi could invite renewed US complaints about currency manipulation... Finally, and more crucially, a weak renminbi at the same time that dollar-denominated assets become more attractive could cause China to suffer capital flight. In this scenario, Chinese monetary authorities might be forced to reverse course and prop up the renminbi. By then, such an intervention would have to be large, implying a significant decrease in the country’s official reserves, as happened in 2015 and 2016.

China’s Currency Catch-22 by Paola Subacchi - Project Syndicate

China’s private debt burden has reached a record high, according to new research, adding to worries ballooning household debt could weigh on long-term consumer spending and drag on the pace of growth in the world’s second largest economy. China’s debt-to-GDP ratio hit an all time high of 49.1 per cent in 2017, marking an increase of nearly 20 per percentage points over the past five years, German insurer Allianz said in its latest global wealth report. “This amounts to an increase of 30 percentage points in just ten years – no other country saw its private debt burden rising so fast,” Allianz said, with the caveat that “China needed to catch up to some extent, as Chinese private households only obtained access to bank loans in 2003”.

China’s private debt reaches record high: report | Financial Times

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The trade war with the US is getting more of today's China-focused headlines, but the world's second-largest economy is facing an even greater problem. "The biggest concern regarding financial stability and the sustainability of economic growth has been China's ballooning debt problem, especially in the corporate sector," according to a note published by JPMorgan. Chinese corporate debt is among the highest in the world — it's a stunning 162% of gross domestic product.

JPMorgan: China 'zombie' corporate debt pile derailing economic growth - Business Insider

And China has a history of tightening too much, and slowing an economy that still structurally relies on credit to generate internal demand (the flip side of high savings) whenever it tries to wean the economy off bank and shadow bank lending. Look at the weakness in Chinese imports in the chart above in late 2014 and most of 2015. That’s the last “tightening” cycle.

China's Slowdown and the World Economy | Council on Foreign Relations

China's economic data show the country is under major strain from attempting to rein in debt. And it isn't just corporate profits or the financial sector that are getting hit, weakness in consumer spending has spread across the economy. Part of this is because Chinese consumers have taken on a bunch of debt really fast.

Chinese consumers debt load worsens slowdown - Business Insider

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