Happy Monday, here are some of the top things I am watching about China today: China's Q2 GDP met expectations, unsurprisingly. The debate, leaving out those who think the data are all fake and the economy is on the verge of collapse, now seems to be around the health of those numbers and what policy response may be expected. It sounds like more reserve ratio cuts and increasing fiscal stimulus are likely but I still think it is mistaken to assume the "tough battle" against debt and financial risks will be materially throttled back;
My thought on the reserve requirement for Tencent, etc., is that perhaps there are some significant headwinds expected, and China does not want to have to deal with damage to the reputation of some of their national champions. Even money market funds can fall below par (see 2008), so parking customer funds even in low-risk investments could lead to lock-ups, virtual bank runs, etc. So we have a potential drag on growth in exchange for stability, and wonder how many more of these types of decisions are being made...
Q2 economic data; China-EU Summit; Beidaihe rumor season starting; Overseas security agency coming?: The "Jinjiang experience" and the 40th anniversary of Reform & Opening; Rural E-commerce
My thought on the reserve requirement for Tencent, etc., is that perhaps there are some significant headwinds expected, and China does not want to have to deal with damage to the reputation of some of their national champions. Even money market funds can fall below par (see 2008), so parking customer funds even in low-risk investments could lead to lock-ups, virtual bank runs, etc. So we have a potential drag on growth in exchange for stability, and wonder how many more of these types of decisions are being made...