March 7, 2021 

A financial professional, Chuck (Atsushi) Kawakami (pictured) reported today regarding the inherent risks in the Chinese economy are still large. MIRUPLUS introduce the analysis as follows;

 

Last week, NASDAQ100's earnings per share forecast 12 months ahead rose more than 5% from the previous week, but the optimistic stock market didn't hit a high. Stock indexes are also volatile, moving more than 2% throughout the day trading. The stock market index has a daily standard deviation of about 1.5%, so there is a certain amount of fluctuation. It is a fact that the rise in long-term interest rates in the United States was triggered by the high price turbulence during the maturity of the market.

 

In the midst of these movements, the indicators that preceded the U.S. and Chinese economies, which had been considered to be a favorable recovery, are reaching a plateau.

 

Corporate purchasing managers' business sentiment index, an index called PMI, for February, the U.S. manufacturing industry performed well at 60.8 points, the highest level since the corona shock, while the non-manufacturing industry returned from last year, it has fallen from a peak of 58.7 points in January to 55.3 in February. 

 

Non-manufacturing accounts for more than 70% of GDP, which could slow down overall.

 

On the other hand, according to the National Bureau of Statistics of China, the peak of the return of the manufacturing industry was 52.1 points in November last year, 50.6 points in February, and the peak of the service industry was 58.4 points in June last year. February has fallen to 51.5 points. Both show that the recovery momentum after the corona shock is declining. Also, the fact that consumption will be weak these days is also reflected in the slump in consumer prices.

 

In February, the bankruptcy filing of Hainan Airlines' HNA Group (Peak 2017 FY: Total assets of $ 171 billion) led to legal restructuring. That tendency will also be increasing in China.

 

According to BIS statistics, the debt balance of all non-financial companies in China is 163.1% of GDP as of September 2020, which is higher than 149.4% as of December 2019. Compared to the peak of the Japanese bubble era, which was 149.2% in December 1994, it can be seen that the actual situation is more serious than in Japan at that time. 

 

Currently, there are many expectations that the Chinese economy is generally strongly viewed, but I think the inherent risks are still large.


 

Chuck (Atsushi) Kawakami

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