DECOUPLING: China’s factories had a surprisingly good month. But there’s trouble ahead for the economy.

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via MSN:

The latest data presented some troubling signals. New export orders fell to the lowest level this year — an indication that foreign demand is declining as the US-China trade war rages on, said Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group.

The trade war has shown no signs of abating, and the most recent escalation comes as concerns about slowing global growth are building, and as the fear of recession stalks several major economies. The latest round of tariffs that the United States and China imposed on each other went into effect Sunday.

Zhong pointed out in a note accompanying the Caixin data that there was “no sign of improvement” in business confidence.

“China’s economy showed signs of a short-term recovery, but downward pressure remains a long-term problem,” he wrote.

Plus: “What China is doing now to support its economy may not be enough to stave off problems later this year.”

While China’s military buildup and neoimperialist ambitions are worrisome, Trump is hitting them where it hurts.


THAT’S WHAT THEY ALL SAY: China’s Most Indebted Firm Is Too Big to Fail.

There’s a lot working against China’s most indebted property firm. China Evergrande Group is sitting on $113.7 billion in debt and its core profit fell 45% in the first half of the year. Real-estate growth is slowing, with banks under orders to curb home loans. President Xi Jinping’s refrain that houses are for living in, not speculation, has been cropping up more frequently.

Time to rein things in, right? Not Evergrande. The company, whose portfolio already includes theme parks and a football club, now wants to become the world’s biggest electric-vehicle maker in the next three to five years. It’s burning through precious cash – 160 billion yuan ($22 billion) – to build factories in Guangzhou.

For anyone gawking at Evergrande’s improbably ballooning debt load, just waiting for the doomsday clock to strike midnight, there’s a valuable lesson: This firm is too big to fail. Evergrande is one of China’s biggest developers – with projects in 226 cities – and its billionaire founder, Hui Ka Yan, is the country’s third-richest man. With property accounting for about a quarter of China’s gross domestic product, any instability in the sector has proven too much for Beijing to stomach. Time and again, the government has reluctantly reopened the credit spigots to boost a flagging real-estate market. Just look at 2008, 2011 and 2014.

This will end well.


h/t SG


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