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Liu He signals desire for stability; Outbreaks; MSS in the US; Ukraine
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Liu He signals desire for stability; Outbreaks; MSS in the US; Ukraine

Bill Bishop
Mar 16, 2022
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Liu He signals desire for stability; Outbreaks; MSS in the US; Ukraine
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Markets went nuts after the Wednesday financial stability and development committee (FSDC) meeting chaired by Liu He signaled the government wants stability in financial markets and more clarity in regulatory actions.

The readout shows how worried policymakers have become about the markets, real estate and the economy but I would be cautious in assuming that the messaging from Liu He and other financial regulators means the tough days are over. They are certainly trying to send a signal that they don't want markets to go down more, but is it not clear this a real shift or more of a calibration to stabilize things.

Stability has been the keyword, especially since the December Central Economic Work Conference and at the recent NPC meeting. There does appear to be a course calibration underway, but Xi can course correct, so seeing this as some sort of "pushback" on Xi is problematic in the absence of more evidence.

This chart from the Chief Economist at the IFF is interesting. Maybe these data have Liu He and others in the leadership worried, as foreign capital inflows are still very much needed:

Twitter avatar for @RobinBrooksIIF
Robin Brooks @RobinBrooksIIF
Something big is happening in global capital flows. China (pink) is seeing big capital outflows, while the rest of EM gets inflows. Never happened before on this scale and reflects asset managers looking at China in a new light after Russia's invasion of Ukraine. With @econchart
Image
2:30 PM ∙ Mar 16, 2022
137Likes55Retweets

The comments from the FSDC on platform regulations are also interesting, I interpret them more as regulations are here to stay but they will be executed better, rather than there will be a pullback:

As for the platform economy, relevant departments should improve the established plans to govern the sector. They should steadily advance and complete the rectification work on large platform companies as soon as possible through standard, transparent, and predictable regulation, the meeting said.

Both "red lights" and "green lights" should promote the steady and healthy development of the platform economy and improve its international competitiveness

关于平台经济治理,有关部门要按照市场化、法治化、国际化的方针完善既定方案,坚持稳中求进,通过规范、透明、可预期的监管,稳妥推进并尽快完成大型平台公司整改工作,红灯、绿灯都要设置好,促进平台经济平稳健康发展,提高国际竞争力

I was a bit snarky in yesterday’s newsletter, but now this JPMorgan call does like the perfect contrarian signal, at least for today:

Congrats to anyone who owns some of these China Internet firms, especially if you bought them Tuesday:

The comments from the FSDC about “regulation over US-listed Chinese firms” helped those stocks today, but as I discuss in item 3 I would be cautious about overexuberance about a possible deal.

Today’s Essential Eight:

  1. Outbreaks spread

  2. Financial stability and development committee signals desire for stability

  3. Deal for accounting of US-listed PRC stocks?

  4. Property tax pilot expansion on hold as real estate needs support

  5. Ukraine-China

  6. US-China

  7. Multiple indictments of MSS actors in the US

  8. Chen Yixin on Peaceful China

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