China Watch: No more stimulus until the USD allows for it
It’s been almost a month since sentiment around China showed signs of life, spurred by attempts from the PBoC and the Finance Ministry to revive domestic demand. While many investors jumped into the China story, hoping that “this time would be different,” we held our position on the sidelines. As it turns out, the much-hyped conference where the Finance Minister was expected to deliver large-scale stimulus—a “bazooka” spending package—proved to be mostly a “nothing burger.” We took that as the perfect opportunity to fade the move.
Chart 1.a: China Nowcast
Chinese GDP trends are being masked by a significant inventory build-up, as electric vehicles pile up in parking lots across China, and to some extent, in the West. China urgently needs a weaker USD to continue its easing efforts.
0 Comments