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China Is Likely Seeing 1 Million Covid Cases, 5,000 Deaths a Day

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China is likely experiencing 1 million Covid infections and 5,000 virus deaths every day as it grapples with what is expected to be the biggest outbreak the world has ever seen, according to a new analysis.

The situation could get even worse for the country of 1.4 billion people. This current wave may see the daily case rate rise to 3.7 million in January, according to Airfinity Ltd., a London-based research firm that focuses on predictive health analytics and has been tracking the pandemic since it first emerged. There’ll likely then be another surge of infections that will push the daily peak to 4.2 million in March, the group estimated.



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China To Correct Past 'Mistaken' Housing Policies

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China will roll out supportive measures for the property market in order to correct past “mistaken” policies aimed at curbing the sector’s growth, according to the head of a top economic think tank in the country.

“It seems like the government is going to put forward more concrete measures,” said Yao Yang, the dean of the National School of Development at Peking University, in an interview. “The government has to at least stop the decline of the housing market. There are encouraging signs of it.”

Top officials including President Xi Jinping pledged in a policy meeting last week to support housing demand in 2023. “That is a code word for promoting the housing sector again,” Yao said.



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China's Economy Braces for More Turmoil as Covid Wave Spreads

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“The November data were way below consensus, pointing to a worsening slowdown” which will continue this month, Lu Ting, chief China economist at Nomura Holdings Inc. wrote in a note. “Surging Covid infections will offset some of the positive impact of the easing in the near term,” he wrote, adding that “the road to a full reopening may still be painful and bumpy.” 

The scrapping of many of the Covid rules will allow residents to move about freely and for shops, factories and restaurants to remain open without fear of snap lockdowns. However, with the virus likely to sweep through a country largely unprepared for the mass illness and deaths that could occur, fear of infection will probably keep people confined to their homes and weigh on economic activity.



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China's Covid Pivot Set to Worsen the Global Energy Crunch

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China’s pivot away from Covid Zero is poised to boost natural gas demand in the world’s biggest importer, potentially curbing supply to Europe and other Asian nations.

China National Offshore Oil Corp. is now looking to secure more shipments of the super-chilled fuel for next year. The return to the market of one of the nation’s largest liquefied natural gas buyers follows a period of subdued demand, due to virus curbs suppressing economic activity, and may herald a rebound in imports. 

Beijing’s move to reopen its economy and live with Covid-19 has seen most internal restrictions being dismantled over the last few weeks. Provided that’s not rolled back as cases surge, that will increase the challenge for Europe next year as it prepares for the winter of 2023/24 with little or no natural gas from Russia. 

Chinese gas imports are likely to be 7% higher in 2023 than this year, according to Wang Zhen, president of Cnooc’s Energy Economics Institute.

The forecast belies still-weak industrial demand. Many factories will send workers home earlier-than-usual for the Lunar New Year holidays, while local production and Russian pipeline flows are rising.

There are already signs China will need to increase LNG purchases to prepare for next year, however. Inventories at northern ports are depleting faster than normal amid cold weather and have dropped to the mid-to-low level, according to ENN Energy’s research group, while domestic LNG prices are trending higher.



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China Considers GDP Target of About 5% in Pro-Growth Shift

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The Politburo on Wednesday signaled more stimulus could be on the cards next year, saying fiscal policy will be kept active with a focus on improving its efficiency, while monetary steps will be “targeted and forceful.” China will “push for overall improvement of the economy,” the official Xinhua News Agency said in a readout of the meeting. 

Larry Hu, head of China economics at Macquarie Group Ltd., said the message from the Politburo meeting was “loud and clear: Zero-Covid is behind us, and growth would be the top priority for next year.” The signals suggest policymakers want to bring next year’s growth rate back to its potential of above 5%, he said.

The growth outlook for next year remains highly uncertain, given a likely surge in coronavirus infections and further disruption expected to the economy. The global economy is also at risk of falling into recession, and a recovery in China’s property market remains elusive.



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Chiang Kai-shek's Great-Grandson Claims Key Taiwan Poll Win

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According to Central Election Commission, KMT won 13 out of 21 cities and counties, while DPP only managed to secure five cities in the southern part of Taiwan, the least since its founding in 1986. KMT candidates took 50% of votes in the contests, versus 41.6% for the DPP, 11.39 million votes counted as of 11:53 pm in Taipei, according to the official election website.

That prompted President Tsai Ing-wen to step down as party leader, saying in televised remarks: “In the face of these results, there are many areas where we need to engage in self-reflection.”

The elections represented the last major test of Tsai’s DPP before her second and final term draws to a close and Taiwan picks a successor in early 2024. The KMT, or Nationalist Party, hopes the gains in local races will help it mount a comeback after defeats in presidential elections in 2016 and 2020.

The results will be closely watched in Washington and Beijing, since the DPP’s rise to power has prompted China to cut off communications with Taiwan and ramp up diplomatic and military pressure on the island. The KMT, which favors eventual unification with China, had previously overseen a historic expansion of ties with Beijing, easing travel, trade and investment across the Taiwan Strait. 



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Gold, Copper Slip as Traders Favor Dollar on China Covid Worries Bloomberg

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Gold fell to the lowest in over a week as the dollar advanced amid concern China may reverse its lighter-touch approach to the coronavirus. Copper also fell.

Worsening Covid-19 outbreaks across China and the first deaths in Beijing for six months are stoking concerns that authorities may again resort to harsh restrictions. That would be bearish for the copper market, where a squeeze in global supplies just appears to be easing. US equities declined, while the dollar rose on haven buying, pressuring gold and copper as they’re priced in the greenback. 

Commodities have been pressured in recent months by the Federal Reserve’s aggressive monetary tightening to fight inflation, with a gauge of the raw materials recording two consecutive quarterly losses by the end of the third quarter. 

Traders are now waiting for fresh clues about the Fed’s interest-rate hiking path from the central bank’s minutes due on Wednesday. 

San Francisco Fed President Mary Daly said that officials will need to be mindful of the lags with which monetary policy work, while repeating that she sees interest rates rising to at least 5%. Her counterpart at the Cleveland Fed, Loretta Mester, said she has no problem with slowing down the central bank’s rapid rate increases when officials meet next month.

Spot gold slipped 0.7% to $1,739.10 an ounce as of 4:06 p.m. in New York. Copper for three-month delivery on the London Metal Exchange fell 2.4% to settle at $7,880.50 a metric ton. All other main LME metals declined. The Bloomberg Dollar Spot Index gained 0.7%. Silver and palladium spot prices dropped, while platinum gained.



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China Asks Banks to Report on Liquidity After Bond Slump

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Bank of China said it would contain losses and actively pursue relatively secure investments. Industrial Bank Co. and China Zheshang Bank Co. also sent similar posts on their official WeChat accounts, encouraging investors to “buy at lows” and position for longer-term return after the sharp losses in bond market.

The PBOC injected a net 123 billion yuan ($17.3 billion) of seven-day liquidity via its open-market operations on Wednesday. The central bank said in a statement earlier this week that injections topped 1 trillion yuan this month, through a combination of short-, medium- and long-term policy tools. 

The yield on China’s one-year government bond was little changed at 2.17% on Thursday, ending a seven-day climb that took it to highest since January. The yield on the 10-year note fell 3 basis point to 2.80%, after jumping 10 basis points earlier this week in its worst drop since 2016. The CSI 300 Index of stocks fell 0.4%.

Banks’ wealth management products have drawn increased scrutiny from regulators in past few years, amid concern about a host of risks from implicit guarantees and leverage, to duration mismatches and a lack of transparency around where the money is invested.



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Email of the day on Chinese property developer US Dollar bonds

Thanks a lot for another very informative Friday video. Could you please kindly comment on the Chinese Construction Companies’ default situation. How serious and general are the defaults of their international bonds. Thanks in advance.



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China's Last Offshore Property Bond Havens Are Crumbling

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The latest moves have dragged even more junk dollar notes from Chinese property companies into distress, with 94% now trading below 70 cents on the dollar. That market was until just years ago one of the most lucrative bond trades globally. But it all began to unravel after a nationwide clampdown started in 2020 on leverage and real estate speculation, and has snowballed into record defaults by developers including China Evergrande Group. 

The contagion is even reaching property giants that still have investment-grade ratings including China Vanke Co., the nation’s second biggest developer by sales. Its note due 2027, which was trading above 80 cents just a month ago, fell 4 cents Tuesday in the worst two-day drop ever to an all time-low of 40.3 cents.

“Now with some presumably better-off developers getting into trouble, people start to worry about a contagion to non-state developers,” said Raymond Cheng, head of China and Hong Kong research at CGS-CIMB Securities. “It’s not just a confidence issue, and developers’ liquidity conditions are only getting tighter in the future given sales have been slower than expected.”

And

As refinancing costs surge in global debt markets, China’s property sector has at least $292 billion of onshore and offshore borrowings coming due through the end of 2023, raising the specter of even worse payment pressure to come. There’s $53.7 billion borrowings still due the rest of 2022, followed by $72.3 billion of maturities in the first quarter of next year. 

“We have seen no improvement in terms of the funding for private-sector developers,” Bank of America Corp. economist Helen Qiao said on Bloomberg Television Tuesday. “The stimulus was not strong enough to get them out of the current liquidity trap, and therefore how exactly they can really survive raises many questions.”



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