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China: Economy getting worst? - Rabobank

Analysts at Rabobank point out that yesterday, the PBOC had to pump in CNY560bn (USD84bn) in liquidity, the largest one day injection ever, equivalent of the Fed doing USD130bn, or twice what we were getting in QE in some months.

Key Quotes

“Yes, Chinese New Year is looming; yes, tax bills are due; and yes, the PBOC have been on the side-lines for a while: but that’s a lot of cash demand in an economy not doing so well - yesterday’s housing data showed new home prices cooling in most cities, albeit stepping up again in the larger ones where regulatory controls have been eased somewhat. (How else are the Chinese public to get their “guaranteed” annual 20% returns, one wonders?) Chinese borrowing is also stepping up at local government level: Xinjiang will issue CNY10bn of bonds soon, while Xinjiang Production & Construction Corps (XPCC), described by the media as “a unique economic and quasi-military organization” has started issuing CNY4bn for affordable housing and land acquisition (for concentration camps.) So yet more debt, yet more liquidity, and yet Chinese yields are still heading lower: 10-year Treasuries are now 3.08% with 3% in sight, and 2s are at 2.60%.”

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