China Highlights Threefold Economic Pressure

Please consider China’s economic policymakers doubling down on ‘stability’ for 2022 in the face of ‘threefold pressure’

Beijing has pledged to “front-load” policies to shore up the economy next year, as leaders remained on high alert against strong headwinds at the tone-setting annual central economic work conference that concluded on Friday.

“We are facing threefold pressure, including contraction of demand, supply shocks and weaker expectations,” the official Xinhua News Agency reported, citing an official statement from the conference. “Our policy support should be front-loaded appropriately.”

The emphasis on “stability” – the word appeared 25 times in the 4,700-word statement – comes as leaders are trying to project a positive image to the world ahead of February’s Beijing Winter Olympics, and with their sights set on the 20th National Party Congress – a key political gala that will usher in twice-a-decade leadership reshuffle for the Communist Party in the second half of next year.

“We need to concentrate on stabilising the macroeconomy, keeping the economic operation within a reasonable range and maintaining social stability,” the statement said.

“[The meeting] emphasised the downward pressure – the notion of ‘threefold pressure’ was very rare in the past,” said Zhou Hao, a senior emerging markets economist with Commerzbank.

He added that it was also uncommon for such official statements to mention the need to strengthen countercyclical regulations, and said it also warrants mentioning that the phrase “houses are for living in, not for speculation” showed up again, in reference to Beijing’s strong regulation of the sector.

China Headwinds

• Financial risks amplified by the Evergrande debt crisis
• A regulatory crackdown
• Biden continues Trump tariff policies
• US monetary tightening
• Climate change pressures from the US and EU 

Expect climate change to take a back seat in the process.

In the statement, Beijing also stressed that the carbon-neutrality initiative cannot be “accomplished in one battle”, and noted that the nation’s energy supply is still dominated by coal.

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This seems to suggest local governments will accelerate spending plans to prevent too steep a slowdown in economic activity next year. I assume it also means some relaxing of pressure on the property sector, although not enough to undermine their credibility on debt.

— Michael Pettis (@michaelxpettis) December 10, 2021 

It depends on how the slowdown affects the trade account, but if it is driven by reining in debt, this could cause the trade surplus to grow even further.

— Michael Pettis (@michaelxpettis) December 14, 2021

I like this question.

You lose a lot of money due to friction.

Example: if you send 100$ to your friend in the US, they only get 95$. You lost 5$ as two banks are involved.

Now, imagine a system, where Banks are replaced by a piece of solid code (the ledger can be seen by anyone).

That's DeFi.

— Akshat Shrivastava (@Akshat_World) December 13, 2021

China's Coal Imports Surge 200% but Its Trade Surplus is the Third Highest in History

China has responded to the slowdown in advance by simulating exports. This will not go over well with Biden, Congress, or the EU.

For discussion, please see China's Coal Imports Surge 200% but Its Trade Surplus is the Third Highest in History

What About Inflation?

The global economy is far weaker than Biden, the Fed, and ECB think.

If so, right as the Fed finally gets inflation religion it might have to reverse with nowhere to go.

Bubbles Burst 

Absurd asymmetric central bank policies lead to bubbles that inevitably burst. 

The moment the stock market cracks in a sustained way, demand for houses, cars, and all kinds of goods will plunge.

For now, inflation is way understated and demand is through the roof confounding supply chains.

But what room do central banks have to cut if demand plunges? 

On top of that, the Fed is in a bind because nearly everything Biden seeks is inflationary. 

For discussion, please see Biden's Union Push is a Push For Still More Inflation

And for a discussion of bubbles by five different measures, please see Margin Interest Hit a Massive $595 Billion, What's it Mean?

 All eyes will be on Jerome Powell on Wednesday.