phat dragon the chart pack january 2014
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China: the key messagesThe recovery exhibited a stop-start nature in the first half of the year. The tone of the data flow
shifted for the better in July and August though, with improved outcomes evident essentiallyacross the board. The good news culminated with the release of the Q3 national accounts,which reported decent gains in real and nominal growth. However, the month-of-Septemberdata showed signs that the recovery had peaked, with a loss of momentum in both domesticand external demand entering Q4. The October & Novemb er da ta rounds co nf i rmed th is ,par t icu lar ly in re la t ion to f ixed in ves tment . As long anticipated, the pipeline is not beingreplenished with sufficient urgency to maintain current growth rates in infrastructure; newhousing controls are being imposed in tier 1 cities; and the lagged impact of lessaccommodative monetary policy (new credit has been soft in halve of last 6 months) will soonbe felt.
Phat Dragon updates his basic views as follows:
a) The low ceiling recovery-expansion plateaued in Aug-Sep.b) Year-ended growth rates will begin to decelerate in earnest as a modest loss of momentum
(deduced from the now less lean inventory position in heavy industry, plus a diminishedtailwind from the hefty early year credit supply) combines with less flattering base effects.c) Now that the Plenum is past and the NAO report on local government debt has beenreleased, cyclical policies will tilt more decisively towards tightening.
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Key economic indicators
-10-50
5101520
25303540
-10-50
5101520
25303540
Real GDP Core IVA Steel Cement Exports Imports Real fixedinvestment
Housingsales
Auto sales
Dec-10 Dec-11
Dec-12 Nov-13
%yr
Sources: Westpac, CEIC. All indicators in volume terms except forimports and exports, which are nominal USDs.3mma of %yr rate for monthly data, quarterly otherwise.
%yr
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China: some compositional fundamentals
3035
40455055
3035
40455055 %GDP%GDP Gross savings
Gross investmentServices output
Secondary output
Household consumption
15
25
35
45
-3036912
Current account (rhs)
Gross exports (lhs)
Gross imports (lhs)
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Aggregate activity proxies
-15
0
15
30
45
-15
0
15
30
45
Dec-96 Dec-99 Dec-02 Dec-05 Dec-08 Dec-11
Central revenue Electricity productionM2 money supply Terrestrial freight
%yr %yr
Sources: CEIC, Westpac
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Aggregate activity proxies: industry & exports
-30
-15
0
15
30
45
60
-15
0
15
30
45
Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
Cement (lhs) Steel (lhs)Electricity (lhs) Exports (rhs)
%yr %yr
Sources: CEIC, Westpac.3mma of year-ended rates.
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Aggregate activity proxies
0
5
10
15
2025
30
35
40
-40
-20
0
20
40
60
80
Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
Construction starts
ImportsReal estate investment
%yr %yrSources: CEIC, Westpac.Data smoothed.
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Central government VAT & IVA
-15
0
15
30
45
-15
0
15
30
45
Jan-97 Jan-00 Jan-03 Jan-06 Jan-09 Jan-12
VAT revenuesIVA
%yr %yrSources: CEIC, Westpac. 3mma.
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Industrial production: core and headline
-10
0
10
20
30
40
50
-10
0
10
20
30
40
50
Jan-97 Jan-00 Jan-03 Jan-06 Jan-09 Jan-12
Core heavy industry
Headline industrial value-added
%yr %yrSources: CEIC, Westpac. 3mma.
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Chinese electricity production
-15
0
15
30
45
-15
0
15
30
45
Dec-96 Dec-99 Dec-02 Dec-05 Dec-08 Dec-11
Contribution from other sourcesContribution from thermal generationElectricity production
%yr/ppt %yr/ppt
Sources: CEIC, Westpac
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808590
95100105110
115120125130
Dec-99 Dec-02 Dec-05 Dec-08 Dec-115
10
15
20
25Nominal GDP growth (lhs)Business situation* (rhs)Domestic orders* (rhs)
Sources: CEIC, Westpac Economics.* 5000 enterprise survey.
% long run average%yr
China: business conditions, orders & GDP
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35
40
45
50
55
60
65
35
40
45
50
55
60
65
Jun-92 Jun-96 Jun-00 Jun-04 Jun-08 Jun-12
net bal.net bal.Foreign orders
Domestic orders
Profitability
Sources: CEIC, Westpac Economics.
Corporate survey: order books and profits
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35
40
45
50
55
60
65
35
40
45
50
55
60
65
Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
indexindex
NBS new orders*
NBS new export orders*
Markit-HSBC new export orders
Markit-HSBC new ordersSources: CEIC, Markit. *Seasonally adjusted byWestpac Economics pre February 2011.
New orders & export orders: PMI measures
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Steel inventory cycle: April 12 to Oct 13
-30
-15
0
15
30
45
60
0 3 6 9 12 15
inventories%yr
Sales%yr
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Chinese domestic machinery sales
-50
-250
25
50
75100
125
150
175
200
-50
-250
25
50
75100
125
150
175
200
Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14
%yr%yrBulldozer Excavator Loader
Sources: CEIC, Westpac Economics.
A slow recovery in 2013after two weak years
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Urban purchasing intentions: housing & cars
70
80
90
100
110
120
130
140
70
80
90
100
110
120
130
140
Sep-02 Sep-04 Sep-06 Sep-08 Sep-10 Sep-12
% average% averagePlan house purchase
Plan auto purchase
Sources: CEIC, Westpac Economics. All series expressed as a percent oftheir long run averages.
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Urban consumer confidence: income
80
85
90
95
100105
110
115
120
80
90
100
110
120
Sep-02 Sep-04 Sep-06 Sep-08 Sep-10 Sep-12
%net bal
Current income confidence
Future income confidence
Sources: CEIC, Westpac Economics. All series expressed as a percent of
their long run averages.
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Consumer saving/investment preferences
0
25
50
75
100125
150
175
200
60
70
80
90
100110
120
130
140
Mar-01 Mar-03 Mar-05 Mar-07 Mar-09 Mar-11 Mar-13
% long runaverage% long runaveragePreference for savingsdeposits (lhs)Preference for activeinvestment (rhs)
Sources: CEIC, Westpac Economics. All series expressed as a percent oftheir long run averages.
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Housing and auto sales
-50
-25
0
25
5075
100
125
150
-50
-25
0
25
5075
100
125
150
Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
%yr%yr
Auto sales
Housing sales
Sources: CEIC, Westpac Economics. Autos are unit sales. Housing sales are by value.
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Chinese housing sales by region
-50-250
255075100
125150175200
-50-25
0
255075
100
125150175200
Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15
%yr%yrCentre
East
West
Sources: CEIC, Westpac Economics.
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Chinese construction activity
0
10
20
30
40
0
10
20
30
40
Jan 05 Jul 06 Jan 08 Jul 09 Jan 11 Jul 12 Jan 14
%yr%yr
Raw %yr
%yr 3mma%yr 12mma
Sources: CEIC,Westpac Economics.
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The development of Chinas investment cycle
0
5
10
15
20
25
30
35
0
5
10
15
20
25
30
35
Real estate Manuf Transport Utilities Total
%ytd%ytd
Dec-11 Sep-12 Dec-12 2013H1 Nov-13
Sources: CEIC,Westpac Economics
Modestupswing
Stop start
Rail has peaked,overall growth
plateauing
Q3 reboundwill not amuse
BeijingModest
slowdown
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Chinese investment: converging trajectories
-15
0
15
30
45
60
75
-15
0
15
30
45
60
75
Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14
%ytd%ytdTransport (12%)
Manufacturing (30%)
Utilities (7%)
Real estate (22%)
Sources: CEIC, Westpac Economics.
end 2009 shares of totalinvestment in ( ).
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Contributions to Chinas investment growth
-6
-3
0
3
6
9
12
15
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14
ppt
InfrastructureReal estate
Sources: CEIC,Westpac Economics
Contribution to year-ended growth rate
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Commercial & off market urban construction
-20
0
20
40
60
-20
0
20
40
60
Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
%ytd%ytd Market res. (42%)Market non-res. (14%)
Non-market res. (8%)
Non-market non-res. (36%)
Sources: CEIC, Westpac Economics. End 2011 shares in parentheses.
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State owned enterprises & fixed investment
15
20
25
30
3540
45
50
55
0
10
20
30
40
50
60
2005 2006 2007 2008 2009H1 2009H2 2010H1 2010H2 2011H1 2011H2 2012H1 2012H2 2013H1
ppt contSOE contribution (lhs)
Other contribution (lhs)SOE share of growth (rhs)Peak SOE share (rhs)
Sources: CEIC,Westpac.
peak share forSOEs (Jan/Feb 2009)
% share of growth
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Investment projects by approver & by SOEs
-10
0
10
20
30
40
50
-10
0
10
20
30
40
50
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14
%ytd%ytdSOEsCentral government
Local government
Sources: CEIC, Westpac Economics.
value of projects
28
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New and ongoing projects
-30
-15
0
15
3045
60
75
90
-30
-15
0
15
3045
60
75
90
Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
%yr%yr
on-going projectsnew starts
Sources: CEIC, WestpacEconomics. 3mma.
value ofprojects
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Chinese infrastructure spending growth
28
2216
23
42
18
3
6
2218
-10
0
10
20
30
40
50
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
ppt cont.Other Other transport*HighwaysEnergyTotal
Sources: CEIC, Westpac.Contribution to full year growth. * Railways, airports, mass urban transit, pipeline, waterways.
forecast
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Contributions to fixed investment growth
5.0 5.38.2
5.6 5.48.2 8.3
5.8 4.8 4.6
9.1 7.64.4
7.0
13.75.5
1.03.8
5.3 4.4
10.18.2 9.9 9.1
7.6
7.711.9
6.9 5.74.3
4.5
3.63.8
4.8
5.2
3.1 5.9
4.93.6
3.4
0
10
20
30
40
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
ppt cont.ppt cont. Other services & primaryManufacturingInfrastructureReal estate
Sources: CEIC, Westpac.Contribution to full year growth.
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Major cities: rail network & population density
0
100
200
300
400
500
600
700
0 5 10 15 20 25 30
Sources: WestpacEconomics, OECD.
2012 figures.
1000 people per sqm
Rail track metres per sqmHongKong
ShanghaiGZNew
York
Singapore
Nagoya
Tokyo- Yokohama
Seoul-Incheon
Paris
Osaka-Kobe-Kyoto
London
CQNJBJTJ
WH DL
TaipeiSZ
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China: existing and planned subways
0
100
200
300
400
500
600
700
800900
0
200
400
600
800
1000
1200
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35
Track metresper sqmkms Planned (lhs)Underway (lhs)
Existing (lhs)
Eventual city density (rhs)
Beijing current density (rhs)
Eventual weighted density (rhs)
Sources: OECD, Westpac.
1 Fosham2 Wuhan3 Zhengzhou4 Guangzhou5 Fuzhou6 Shanghai7 Taiyuan8 Dongguan9 Shenyang10 Nanjing11 Tianjin12 Ningbo13 Xian 14 Shenzhen15 Nanning16 Chongqing17 Wuxi18 Beijing19 Harbin
20 Hangzhou21 Qingdao22 Nanchang23 Guiyang24 Dalian25 Suzhou26 Wenzhou27 Changchun28 Kunming29 Lanzhou30 Hefei31 Shijiazhuang32 Xiamen33 Chengdu34 Changsha35 Changzhou
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Monetary and fiscal policy in China
-20
-15
-10
-5
0
5
10
15
-4
-3
-2
-1
0
1
2
3
Mar-97 Mar-01 Mar-05 Mar-09 Mar-13
% of GDPGap pptCredit to GDP gap (lhs)*
Fiscal position (rhs)
Sources: CEIC, Westpac Economics.* Bank lending only, BIS methodology.
Q4 estimate
34
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Central government finances
-4
0
4
8
12
-12
0
12
24
36
Dec-96 Dec-99 Dec-02 Dec-05 Dec-08 Dec-11
Balance %GDP (rhs)Revenue growth (lhs)Expenditure growth (lhs)
%yr%GDP
Sources: CEIC, Westpac
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Growth in the monetary aggregates
0
10
20
30
40
0
10
20
30
40
Dec-99 Dec-02 Dec-05 Dec-08 Dec-11
Deposits
M1
M2
DXRR*
%yr %yr
Sources: CEIC, Westpac.* DXRR: Deposits ex required reserves.
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Peoples Bank open market operations
-1600
-1200
-800
-400
0
400
800
1200
1600
-1600
-1200
-800
-400
0
400
800
1200
1600
Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13
RMBbnRMBbn
Reverse repo maturities Repo
Bills issued Bill maturities
Reverse repo Repo maturities
Net injection/withdrawal
Sources: CEIC, Westpac
Net injection
Netwithdrawal
RRR cuts
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Interbank loan volumes by maturity: weekly
y = 1.3262x + 562.37
0
250
500
750
1000
1250
1500
1750
2000
0
250
500
750
1000
1250
1500
1750
2000
Jan-10 Sep-10 May-11 Feb-12 Oct-12 Jul-13
RMBbnRMBbn
Other maturity
Overnight
Total
Sources: CEIC, Westpac.
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Interbank loan turnover volume by type of FI
0
2000
4000
6000
8000
10000
12000
0
2000
4000
6000
8000
10000
12000
Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13
RMBbnRMBbnOther FIs
Foreign
Private urban banks
State banks
Rural banks & Credit co-ops
Sources: CEIC, Westpac.
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Percent of loans issued at a discount
0
10
20
30
40
0
10
20
30
40
Dec-04 Dec-06 Dec-08 Dec-10 Dec-12
% of loans executed 10%below benchmark
% %
Source: CEIC, Westpac Economics.
41
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SHIBOR & repo/reverse repo corridor
0
2
4
6
8
10
12
14
0
2
4
6
8
10
12
14
May-12 Sep-12 Jan-13 May-13 Sep-13
%pa%pa
PBOC revealed 7 day rate corridor
Overnight SHIBOR
Sources: WestpacEconomics, CEIC.
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2
3
4
5
6
7
8
910
2
3
4
5
6
7
8
910
Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13
%pa%pa
General loans Bills
1-yr policy rate Housing
Sources: Westpac Economics, CEIC.
The policy benchmark & actual loan rates
43
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The deposit ceiling and WMP returns
1
2
3
4
5
6
1
2
3
4
5
6
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14
%pa%pa
Deposit rate with 10% top up
1 year benchmark saving deposit
Weighted average WMP return
Sources: Westpac, CEIC.
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New lending : shadow sedate in second half
-500
0
500
1000
1500
2000
2500
3000
-500
0
500
1000
1500
2000
2500
3000
Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14
RMBbn RMBbnOther financing* Bank to HouseholdBank medium & long term Bank short termBank - Bill finance Total bank
* Other financing includes trust and entrusted loans, equityand bond raisings, non-bank bills and FX loans.
Sources: Westpac, CEIC.
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Medium & long term loans
0
20
40
60
80
100
120
140
0
250
500
750
1000
1250
Jan 04 Jan 06 Jan 08 Jan 10 Jan 12
MLT % of total RMBbn
New medium and longterm loans (rhs)
MLT share (lhs)
Sources: CEIC, Westpac.MLT share is smoothed.
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Total credit supply new flows
-160-80080160240320
400480560640
Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14-50-25
0255075
100
125150175200
%yr%yr
TSF (lhs)Banks* (lhs)Other finance (rhs)
Sources: CEIC, Westpac.* Local currency loans only.12 month sum of new flows.
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0
25
50
75
100
125
150
175
-50
-25
0
25
50
75
100
125
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14
%yr%yr
TSF (lhs)
MLT share of bank loans (rhs)
Sources: Westpac Economics, CEIC.TSF is total social financing.MLT is medium and long terms loans.
Credit supply growth & loan composition
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Property developer finance: growth by type
-50
-25
0
25
50
75
100
125
-50
-25
0
25
50
75
100
125
Dec-04 Dec-06 Dec-08 Dec-10 Dec-12
%yr%yr
"Self raised"
Loans
Down payments and sales revenue
Total
Sources: CEIC,Westpac Economics.
49
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Land purchased and construction starts
-40
-20
0
20
40
60
80
-40
-20
0
20
40
60
80
Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14
%yr%yr
Starts (volume)
Land purchased
Sources: CEIC, Westpac Economics. 12mma.
50
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Sales volumes usually lead starts by 6 months
-30
-15
0
15
30
45
60
75
-30
-15
0
15
30
45
60
75
Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
%yr%yr
Sales 6mths prior
Starts
Sources: CEIC, Westpac.Underlying data in sqm.12 month average of raw oya growth rate.
51
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Housing sales, completions & land prices
90
100
110
120
130
140
150
160
75
100
125
150
175
200
225
250
Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13
indexindex
Completions (lhs)
Sales (lhs)
Residential land price (rhs)
Sources: CEIC, Westpac. Aug-2006 = 100.Underlying activity data in sqm.Land price is a spliced series of 105 and 70 city data.
52
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Chinese land prices: total & residential
-10
-5
0
5
10
15
20
25
-10
-5
0
5
10
15
20
25
Mar-05 Sep-06 Mar-08 Sep-09 Mar-11 Sep-12 Mar-14
% 6mthannualised
% 6mthannualised
Total
Residential
Sources: CEIC, Westpac Economics.Land prices are a spliced series for 70cities up to Dec-10 and 105 cities since.
53
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70 city house prices: net balance m/m change
-80
-60
-40
-20
0
20
40
60
80100
-80
-60
-40
-20
0
20
40
60
80100
Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13
Net % of cities Net % of citiesNew
Secondary market
Sources: CEIC,Westpac Economics
54
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Major city house prices: level
100
105
110
115
120
125
130
100
105
110
115
120
125
130
Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13
Index2010=100
Index2010=100
Beijing ShanghaiGuangzhou ShenzhenChongqing
Sources: CEIC,Westpac Economics
55
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Daily iron ore prices in China
70
85
100
115
130145
160
175
190
70
85
100
115
130145
160
175
190
Aug-10 Feb-11 Sep-11 Mar-12 Oct-12 Apr-13 Nov-13
USD/tUSD/t
3 mth forward9 mth forwardTSI 62% fines benchmark
Sources: Westpac Economics,Bloomberg, SGX Asiaclear
30% intwo months
36% intwo months
+82% in3 months
30% in
five months
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Chinese imports total & key raw materials
050100150200250300350400450500550600650700
050
100150200250300350400450500550600650700
Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
indexindex
Total imports
Crude oil
Iron ore
Sources: CEIC, Westpac Economics. Value of total imports and volume of raw materials.
57
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Various measures of inflation
-10
-5
0
5
10
15
-10
-5
0
5
10
15
Mar-04 Sep-05 Mar-07 Sep-08 Mar-10 Sep-11 Mar-13
%yr%yr
Non-food CPI
Fixed investment price index
Consumer price index
GDP implicit price deflator
Producer price index
Sources: CEIC, Westpac Economics.
58
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Chinese consumer prices
-10
-5
0
5
10
15
20
25
-10
-5
0
5
10
15
20
25
Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
%yr
TotalShelter ClothingFoodHealth
Sources: CEIC, Westpac Economics.
%yr
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Chinese CPI: the shelter component
-20
-15
-10
-5
0
5
10
15
-20
-15
-10
-5
0
5
10
15
Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
%yr
TotalBuilding costsRent
Private housingUtilities
Sources: CEIC, Westpac Economics.
%yr
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61/101
Chinese CPI: clothing & related
-4
-2
0
2
4
6
8
1012
-4
-2
0
2
4
6
8
1012
Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
%yr
Total Garment
Footwear Material
Tailoring
Sources: CEIC, Westpac Economics.
%yr
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Chinese producer prices
-30
-20
-10
0
10
20
30
40
-30
-20
-10
0
10
20
30
40
Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
%yr
TotalProducer goodsMiningRaw materialsManufactured
Sources: CEIC, Westpac Economics.
%yr
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Chinese consumer prices
-10
-5
0
5
10
15
20
25
-10
-5
0
5
10
15
20
25
Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
%yr
TotalShelter ClothingFoodHealth
Sources: CEIC, Westpac Economics.
%yr
63
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Chinese CPI: the shelter component
-20
-15
-10
-5
0
5
10
15
-20
-15
-10
-5
0
5
10
15
Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
%yr
TotalBuilding costsRent
Private housingUtilities
Sources: CEIC, Westpac Economics.
%yr
64
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Chinese CPI: clothing & related
-4
-2
0
2
4
6
8
1012
-4
-2
0
2
4
6
8
1012
Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
%yr
Total Garment
Footwear Material
Tailoring
Sources: CEIC, Westpac Economics.
%yr
65
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Chinese producer prices
-30
-20
-10
0
10
20
30
40
-30
-20
-10
0
10
20
30
40
Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
%yr
TotalProducer goodsMiningRaw materialsManufactured
Sources: CEIC, Westpac Economics.
%yr
66
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Decomposing 12 month real CNY appreciation
-12
-8
-4
0
4
8
12
1620
-12
-8
-4
0
4
8
12
1620
Jan-96 Jan-99 Jan-02 Jan-05 Jan-08 Jan-11 Jan-14
pptpptRelative price levelNominal exchange rateReal exchange rateUSD/CNY inverted
Source: BIS, Westpac.
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Chinas exchange rate: broad & bilateral USD
70
80
90
100
110
120
130
140
70
80
90
100
110
120
130
140
Jan-94 Jan-97 Jan-00 Jan-03 Jan-06 Jan-09 Jan-12
indexindex
Real Nominal USD per Yuan
Sources: CEIC, BIS.Indices = 100 in July 2005.
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The exchange rate & inflation
-20-15-10-50510
15202530
-20-15-10
-505
10
15202530
Jan-01 Dec-03 Nov-06 Oct-09 Sep-12
%chg%chg
Annualised CPI inflation (lhs) Annualised CNY appreciation (rhs)
Sources: CEIC, Westpac Economics
69
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Food prices & the CNY exchange rate
-2
0
2
4
6
8
10
-5
0
5
10
15
20
25
Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15
%%
Food price inflation %yr (lhs)
USD/CNY %yr (rhs)
Sources: Westpac Economics, CEIC.
forecast
70
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Exporter margins and the exchange rate
-2
0
2
4
6
8
10
-2
0
2
4
6
8
10
Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
%%
Range of profit margins in key export industries
Annual appreciation of CNY
Sources: Westpac Economics, CEIC,
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Overnight SHIBOR & the 12mth CNY NDF
0
2
4
6
8
10
12
14
0.5
1.0
1.5
2.0
2.5
3.0
Sep-12 Jan-13 May-13 Sep-13 Jan-14
%pa%chg
CNY NDF 12mth (lhs)Overnight SHIBOR (rhs)
Sources: WestpacEconomics, CEIC.
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USD/CNY NDF pricing
6.06.26.4
6.66.87.07.27.4
7.67.88.08.28.4
6.06.26.4
6.66.87.07.27.4
7.67.88.08.28.4
Feb 03 Jan 05 Jan 07 Jan 09 Dec 10 Dec 12
3mth6mth12mth1mth
CNY
Sources: Westpac, CEIC
CNY
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USD/CNY NDF curves
-70-60-50-40-30-20-10
010203040
-70-60-50-40-30-20-10010203040
Feb 03 Jun 04 Oct 05 Mar 07 Jul 08 Dec 09 Apr 11 Sep 12 Jan 14
12mth minus 3mth12mth minus 6mth12mth minus 1mth
bps
Sources: Westpac, CEIC
bps
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USD/CNY NDF curves
-25
-20
-15
-10
-5
0
5
1015
-25
-20
-15
-10
-5
0
5
1015
Jan 10 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13
12mth minus 3mth12mth minus 6mth12mth minus 1mth
bps
Sources: Westpac, Bloomberg
bps
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Growth spillovers between systemic economies
From ChinaFrom Euro area
From USFrom Japan
0.00
0.05
0.10
0.15
0.20
0.25
China
Euro area
US
Japan
per c
ent
Impulse responsefrom positive1ppt outputshocks.Source: IMF
77
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Net IIP in the G20: many debtors, few creditors
-50
-40
-30
-20
-10
0
10
20
30
4050
-50
-40
-30
-20
-10
0
10
20
30
4050
JPY DEUCNYARPRUB INR KRWFRA CADGBPZAR USDBRL ITA IDR MXNTKL AUD
%GDP %GDP
Source: IMF, Westpac.
78
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Various measures of Chinese export leverage
0
10
20
30
40
0
10
20
30
40
2000 2002 2004 2006 2008 2010 2012
%GDP%GDPNet exports %GDP
Export GVA %GDP
Gross exports %GDP
Sources: CEIC, Westpac.
79
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World export shares by country & region
0
3
6
9
12
15
1984 1988 1992 1996 2000 2004 2008
% world total
Sources: WDI, Westpac.Goods & services.
India
UK
Japan
Germany
USA
China
Other Asia
France
80
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Manufacturing exports and resource imports
0
5
10
15
20
25
1980 1985 1990 1995 2000 2005 2010
% world totalJapan - manuf exports Japan - resource importsChina & HK - manuf exports China & HK - resource importsGermany - manuf exports Germany - resource importsUSA - manuf exports USA - resource imports
Sources: WDI, WTO.Resource imports definedas fuel & mining products.
81
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Nominal export shares: major countries
0
10
20
30
40
50
60
AUD FRA DEU JPY KRW SEK TKL GBP USD BRL INR CNY
% GDP
2000
2007
2011
Sources: CEIC, OECD, Westpac, Dragonomics. Ex China,nominal national accounts basis for goods and services. ForChina, goods only, value-added estimates.
82
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Chinas share: selected elements of world activity
0
5
10
15
20
25
H o u s e
h o
l d
c o n s u m p
t i o n
G r o s s
f i x e
d
c a p
i t a l f o r m a
t i o n
E x p o r t s
*
I m p o r t s
*
M a n u
f a c t u r i n g
v a
l u e a
d d e
d
C o n s
t r u c t
i o n
v a
l u e a
d d e
d
S e r v
i c e s v a
l u e
a d d e
d
P P P G D P
N o m
i n a
l U S D
G D P
C O 2 e m
i s s i o n s
` `
E n e r g y u s e
^
%
1980 2000 2010
Sources: UN, IMF, IEA, Westpac Economics. * Goods & services.^ Total primary energy supply `` From fossil fuel combustion.
All national accounts related shares are in 2005 constant US dollars.
83
l b d
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Export unit value by industry
-25-20-15-10
-505
1015202530
-25-20-15-10-505
1015202530
Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
Clothing & footwear Furniture
Elec & telcoOffice machineryTextiles
%yrSources: Westpac, CEIC. 3mma.
%yr
84
Th C T d F i i b ll h
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The Canton Trade Fair: sourcing bellwether
-40
-30
-20
-10
0
10
20
3040
-40
-30
-20
-10
0
10
20
3040
2005 2006 2007 2008 2009 2010 2011 2012 2013
%yr%yr
Spring Autumn
Total both sessions
Sources: CEIC, Westpac.
E i l b i d
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86/101
Export unit value by industry
-25-20-15-10
-505
1015202530
-25-20-15-10-505
1015202530
Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
Clothing & footwear Furniture
Elec & telcoOffice machineryTextiles
%yrSources: Westpac, CEIC. 3mma.
%yr
E b b d
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Exports by broad sector
-45
-30
-15
0
15
30
45
6075
-45
-30
-15
0
15
30
45
6075
Jan-2001 Jan-2004 Jan-2007 Jan-2010 Jan-2013
Light and basicMachinery & transport
Other manufacturesChemicals
%yrSources: Westpac, CEIC. 3mma.
%yr
I b b d
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Imports by broad sector
-45
-30
-15
0
1530
45
60
7590
-45
-30
-15
0
1530
45
60
7590
Jan-2001 Jan-2004 Jan-2007 Jan-2010 Jan-2013
Other raw materials Fuel
Chemicals Other manufactures
Machinery & transport Food
%yrSources: Westpac, CEIC. 3mma.
%yr
Chi t t d l d k t
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Chinese exports to developed markets
-45
-30
-15
0
15
30
45
6075
-45
-30
-15
0
15
30
45
6075
Jan-2001 Jan-2004 Jan-2007 Jan-2010 Jan-2013
US Japan Australia New ZealandCanada EU
%yrSources: Westpac, CEIC. 3mma.
%yr
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90/101
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Imports from emerging markets
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Imports from emerging markets
-60
-30
0
30
60
90
120
150180
-60
-30
0
30
60
90
120
150180
Jan-2001 Jan-2004 Jan-2007 Jan-2010 Jan-2013
India KoreaTaiwan RussiaBrazil ASEAN
%yr
Sources: Westpac, CEIC. 3mma.
%yr
Chinese trade: uneven outcomes
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Chinese trade: uneven outcomes
-45
-30
-15
0
1530
45
60
7590
-45
-30
-15
0
1530
45
60
7590
Jan-2001 Jan-2004 Jan-2007 Jan-2010 Jan-2013
Exports to US/EU/JPImports from commodity producers
Imports from NIEs
Exports to NIEs
Imports from US/EU/JP
%yrSources: Westpac,CEIC. 3mma.
%yr
Chinas current account balance
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Chinas current account balance
-3
0
3
6
9
12
-3
0
3
6
9
12
Dec-98 Dec-01 Dec-04 Dec-07 Dec-10 Dec-13
% GDP % GDP
Other CA
Trade
Current account
94
Chinas balance of payments
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China s balance of payments
-20
-15
-10
-5
0
5
10
1520
-20
-15
-10
-5
0
5
10
1520
Dec-98 Dec-01 Dec-04 Dec-07 Dec-10 Dec-13
% GDP % GDPCurrent account Change in reserves
Other Portfolio balance
Direct balance
Inflow
Outflow
Source: CEIC, Westpac Economics.
The state of global imbalances
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The state of global imbalances
-3
-2
-1
0
1
2
3
1994 1998 2002 2006 2010 2014 2018
% WGDPSouth Asia NIEs & ASEAN 5
MENA, Canada and Russia Latam
CEE and CIS ex Russia Germany
Other EU Japan
China USA
Sources: IMF, Westpac.
% WGDP
96
Chinas trade balance decomposed
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China s trade balance decomposed
-10
-5
0
5
10
15
-10
-5
0
5
10
15
1980 1985 1990 1995 2000 2005 2010
% GDP % GDP
Overall trade balancePrimary products balanceTotal manufacturing balancemachinery and transport balance (lhs)
Current USD prices converted to RMB.Sources: CEIC, Westpac Economics.
97
Industrial profits: level & as a share of GDP
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98/101
3
4
5
6
78
9
10
1112
5
6
7
8
9
Nov-00 Nov-03 Nov-06 Nov-09 Nov-12
% GDPLn index
Profits - log level
Profits % GDP
Sources: CEIC. Underlying dataseasonally adjusted by Westpac Economics.
Log level is in the quarter. % of GDP is 4qtr sum.
Industrial profits: level & as a share of GDP
98
Income level per capita & its distribution
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Income level per capita & its distribution
20
30
40
50
60
70
0 10 20 30 40 50 60
Sources: WestpacEconomics, WDI
Gini index
PPP GDPper head
China
US
Brazil
South Africa
WealthyOECD
INR & IDR
Russia
Poland
Chile
Mexico
Malaysia
Thai
Colombia
99
China: the key messages reiterated
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China: the key messages reiterated
The recovery exhibited a stop-start nature in the first half of the year. The tone of the data flowshifted for the better in July and August though, with improved outcomes evident essentially acrossthe board. The good news culminated with the release of the Q3 national accounts, which reporteddecent gains in real and nominal growth. However, the month-of-September data showed signsthat the recovery had peaked, with a loss of momentum in both domestic and external demandentering Q4. The October & November da ta rounds c onf i rm ed th is , par t icu lar ly in re lat ion tof ixed inv es tment . As long anticipated, the pipeline is not being replenished with sufficient urgencyto maintain current growth rates in infrastructure; new housing controls are being imposed in tier 1cities; and the lagged impact of less accommodative monetary policy (new credit has been soft in
halve of last 6 months) will soon be felt.
Phat Dragon updates his basic views as follows:
a) The low ceiling recovery-expansion plateaued in Aug-Sep.b) Year-ended growth rates will begin to decelerate in earnest as a modest loss of momentum(deduced from the now less lean inventory position in heavy industry, plus a diminished tailwindfrom the hefty early year credit supply) combines with less flattering base effects.c) Now that the Plenum is past and the NAO report on local government debt has been released,cyclical policies will tilt more decisively towards tightening.
100
Disclaimer
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The author of this communication is employed by Westpac and is not registered or qualified as a research analyst, representative, or associated person under the rules of FINRA, any other U.S. self-regulatory organisation, or the laws, rules orregulations of any State. Unless otherwise specifically stated, the views expressed herein are solely those of the author and may differ from the information, views or analysis expressed by W estpac and/or its affiliates.For the purposes of Regulation AC o nly: Each analyst whose name appears in this report certifies that (1) the views expressed in this report accurately reflect the personal views of the analyst about any and all of the sub ject companies and theirsecurities and (2) no part of the compensation of the analyst was, is, or will be, directly or indirectly related to the specific views or recommendations in this report.For XYLO Foreign Exchange clients: This information is provided to you solely for your own use and is not to be distributed to any third parties. XYLO Foreign Exchange is a division of W estpac Banking Corporation ABN 33 007 457 141 and
Australian credit licence 233714. Information is current as at date shown on the publication. This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on thisinformation, consider its appropriateness, having regard to your objectives, financial situation or needs. XYLO Foreign Exchange s combined Financial Services Guide and Product Disclosure Statement can be obtained by calling XYLO ForeignExchange on 1300 995 639, or by emailing [email protected].