China expert Chris Balding joins us this week for #QuickHit to discuss “What China is thinking right now?” What is the state of the Chinese economy? Are they really doing well in Covid? How about the deleveraging process, is that even real? And what’s happening to CNY? Also talked about are the politics around China especially how it relates to Afghanistan.

Subscribe to our Youtube Channel.

💌 Subscribe to CI Newsletter and gain AI-driven intelligence.

📊 Forward-looking companies become more profitable with Complete Intelligence. The only fully automated and globally integrated AI platform for smarter cost and revenue planning. Book a demo here.

📈 Check out the CI Futures platform to forecast currencies, commodities, and equity indices

This QuickHit episode was recorded on August 24, 2021.Show Notes

TN: I’m really curious your view on the state of the Chinese economy right now. And what are Chinese economic planners thinking right now as they kind of potentially go into year two of Covid.

CB: So I think there is a couple of highlights out of the Chinese economy. First of all is that they’ve resorted to the pretty similar playbook that they go back to every year, which is pump credit, pump construction and infrastructure type spending.

Generally speaking, the rule is, if there’s a debate about whether or not they’re going to unleash credit growth, I would definitely take the over.

TN: So one of the interesting things you mentioned is that you said that they expended credit in the early part of this year. But what I read from investment banks and what I’ve read from other people who look at China is that China just underwent this big deleveraging process. Is that real?

CB: It’s tough to understand the Chinese National Bureau of Statistics and PBOC’s math as to how they arrived at that, because if you’re just running more generalized numbers, it’s very clear that debt at all levels has continued to outpace GDP.

TN: Do you see ongoing port capacity issues related to COVID? Is that something that you’re kind of concerned about?

CB: I think that is something that you’re going to be seeing for definitely the foreseeable future. And I should say it’s not just China. You’re seeing a lot of this in other parts of the world.

One of the debates in the United States right now is transitory or structural inflation. And I think, not to be capping out on the issue, but I do think it is kind of a mix of both.

TN: So it seems like regardless of the kind of official policy, whether it’s trade policy or just say public health policy, it looks like more of this regionalization is happening. Does that make sense to you?

CB: Yeah, absolutely. I mean, look, nobody is going to announce that they’re leaving China for many reasons. But you do absolutely see a spread of manufacturing capabilities.

TN: What’s the thought behind the elevated CNY?

CB: First of all, they have been running during Corona pretty significant surpluses. The United States has exports to China and other parts of the world have declined, not insignificantly or remained flat as we’re importing a lot more.

I think also the dollar has gone into a specific range. And the way that I think of the CNY is it’s basically just a reverse USD tracker.