Entries for 'Asia Pacific'

China's local government debts have long been on people's worry list due to their rapid growth in size and opacity in structure. In this piece, we illustrate the size of the LG debt problem and discuss Beijing's attempts to defuse the bomb of the LG debt.

We recently led an investor trip to China where people wanted to kick the tires on the ground. This piece summarizes some of the takeaways.

China faces many structural challenges similar to Japan's during its 'lost decades'. However, we think China is facing income stagnation instead of a balance sheet recession like Japan in the 1990s.

The IMF recently agreed to a 9-month, US$ 3bn, program, providing Pakistan with a temporary financial lifeline. However, much needed fiscal measures and structural reforms will be put on hold in an election year. Increasing the risk that future tranches of the program may not be disbursed.

China's recovery lost momentum in 2Q due to both cyclical and structural woes. We expect GDP to accelerate modestly in 2H thanks to extra fiscal firepower, yet remain below the growth potential.

China's exports are facing strong headwinds of weaker global demand. We expect the whole-year exports to fall, failing to drive economic growth this year.

China’s economy recovered robustly in 1Q at 2.2% q/q and 4.5% y/y, beating the consensus estimate. We believe the growth is still below potential and can continue expanding for the rest of the year. We revise the whole-year forecast by 0.4 pts higher to 6.0%.

Banks in China suffered from rising non-performing loan (NPL) formation in Covid years. Banks are still well-capitalized thanks to the aggressive capital raising in the past years, and business conditions are improving as the economy and loan demand recover.

The headline deficit reported by the official budget is nar-rowly defined and thus misleadingly low. We calculate and present the cash-basis consolidated deficit, which is more than twice as large. The large deficit helps to avoid a fiscal cliff like the one in 2021.

China’s gigantic official foreign asset is still a black box. This note looks into the changing structures and management of China’s foreign reserves and other foreign currency assets.

Many are concerned that China's reopening from the Covid lockdowns will be inflationary for the global economy. We argue that such fear is overblown.

China's inbound FDI was surprisingly strong in the past two years, despite its economic woes, precarious policies, rising production costs, travel disruptions by Covid, and friend-shoring by the US. China's economy and supply chains are more resilient than many expected.

Pakistan is on the verge of a balance of payments crisis. However, we believe an agreement with the IMF will be reached in the next few days, releasing much needed financing. Further official aid will be needed in FY23, while a renewed IMF program and debt reprofiling is expected by the end of 2023.

• China's expected 5.5% GDP growth in 2023 will contribute 1 point towards global growth, … • … however, the spillover to the rest of the world through import demand will be limited. • Pent-up consumption demand will be mainly in domestic services. • The likely tepid fixed asset investments cap

We expect China’s GDP growth to rebound to 5%-5.5% this year, thanks to reopening and a low base last year. However, weaker exports, depressed housing, and tight local government finance are strong headwinds.

We discuss external bond recovery value scenarios, … consistent with Sri Lanka’s restructuring targets, … while illustrating the importance of Chine...

• China experienced a record net portfolio outflow of $80 bln last year. • The outflows were predominantly in bonds, suggesting Fed hikes were the main trigger for the outflows.

• Given the weak export and housing prospect, consumption is crucial for economic recovery this year. • Chinese households amassed almost ¥18 tln new deposits in 2022, 80% more than the previous year… • …thanks to higher savings, fewer home purchases, and asset reallocation.

• PBoC was restrained in terms of direct FX intervention amid the intense CNY depreciation this year. • PBoC increasingly deploys monetary and regulatory tools to lean against the wind. • These tools include required reserves on FX deposit and forward contracts, … • …and macroprudential policies