Overall retail sales dropped 3.3% yoy in the first quarter of 2025 in Beijing, with March dropping 10% yoy.
Auto contributed nearly 2% of the drop (-20% x 10%).
Meanwhile, average spending looks okay – it’s rising 2.3% yoy. It’s a very good number for Beijing actually.
It might be due to the parallel export (?) – people bought cars and export (e.g. Russia).
Bond market is volatile these days – US 10-years treasury yield just swung from under 4% to near 4.5% in a few days.
The inflation protected 10-year TIPS yield also rose from under 1.8% to over 2.2% in a few days. (this is like a 20% move? even higher than the 10% move in 10-year treasury).
I shall discuss 10-year TIPS more below.
It was ~5% in early 2000s. Then, it went down a bit before GFC. Between GFC and 2021, it was sub-2%. Now it’s back to pre-GFC level.
| Period | 10Y TIPS Real Yield | Key Characteristics |
|---|---|---|
| Pre-2008 | 2%–3%+ | Higher real rates, less Fed intervention |
| 2009–2021 | <2%, often negative | QE, ZIRP, low inflation, high demand for safe assets |
| Post-2022 | >2% again | Inflation shock, Fed tightening, rate normalization |
Source: ChatGPT
And in terms of why 10-year TIPS was low from 2009 to 2021, it seems that Fed QE is a big factor.
| Period | TIPS Purchase Status | Notes |
|---|---|---|
| 2010 (QE2) | ✅ Began buying TIPS | First inclusion of TIPS in QE |
| 2010–2021 | ✅ Continued buying in QE3, COVID QE | Purchases scaled with overall Treasury buying |
| Nov 2021 | 🔻 Began tapering all Treasury purchases | Including TIPS |
| Mar 2022 | ❌ Fully stopped purchasing TIPS (and other Treasuries) | QE ended completely |
| Jun 2022 onward | 🔄 Began Quantitative Tightening (QT) | Letting TIPS holdings roll off gradually |
Source: ChatGPT
As to whether yield will go up from here? The equilibrium real interest rates (r*) depend on several things:
1/ real productivity growth. AI is helping? So can push r* higher.
2/ global saving. Can be lower in China, thus less supply of capital. So can push r* higher.
3/ risk appetite. Going down sharply. So should push r* lower.
4/ DOGE. Lower gov spending should push r* lower.
5/ Reshoring. Need to borrow more. So can push r* higher.
Unfortunately, these factors are all moving..
Some people will be priced out if tariff significantly increases drug price.
That to some extent is like “killing” those people.
Of course, prices on drugs shall increase over time for different reasons.
Would you argue that if a drugmaker raises price, it’s “killing” people?
It will be interesting then.. as pharmaceutical companies are saving and killing people at the same time. They are still saving people net net.
For investors in pharma, if they expect higher profits, are they also killing people as companies need to raise price? But if you invest in drugs, you should be saving people right?
What a humanitarian cap on the industry!
For many in the US, tariff discussion should be very educational.
For one thing, people now know more about where things are produced and where different parts are coming from.
It asks people to debate what’s really needed to happen in the US and what’s not. And the feasibility of any changes.
Also, without all those analysis and breakdowns, many people probably just complain, but rarely value the importance of global collaborations – that it’s hard to have everything happen in the US.
The entire debate and the prospect of an iPhone city (the whole Boston population is needed) let people understand why those decisions were made in the first place.
The debate is magnified by the financial market. All participants globally need to think about this.
For wealthy people, a more expensive iPhone means nothing. They might see the impact of deglobalization as limited if it’s just things are just getting expensive. But the upheaval and collapse of the financial market will let the wealthy know it’s more than the living cost.
Cooling off the excessive confidence
If the economy is running too hot, you need to cool it off.
One way to cool it off is to add uncertainties.
Individuals and businesses will pause new investments and rethink how fast they shall run when uncertainty (not short-term, or can be overlooked) skyrockets.
Perfect excuse to change gears
Sometimes, business leaders also need a good external excuse to press the “pause” button. Why?
Normally, they want to be seen as the encouraging voice internally. That what business leaders do – to grow the companies. And they always want suppliers to increase their capacity. Thus, showing extra confidence in business can ensure suppliers are confident enough.
To be seen as credible in the long-term, business leaders can’t change the tone overnight. And it’s hard to change the tone if there is no external shock. Otherwise, it feels like you were trying to “trick” your suppliers or employees.
Suddenly, tariff becomes this perfect excuse – external, lingering, impactful.
It’s just the perfect time to take a step back and rethink business leaders. And it’s the perfect opportunity to change gears.
Ubisoft created a new entity and put valuable assets into it.
Tencent put money into this new entity and got 25% ownership.
While Ubisoft’s shareholder got nothing, Tencent can do more with the important IPs like Assassin Creed.
Maybe there is a limit on how much Tencent can buy into Ubisoft. Maybe the possibility of Ubisoft being acquired is low due to France regulation, not due to Tencent’s previous investments.
Probably it’s the complications and regulations around the world are making those deal structure necessary. Capital is not allowed to buy anything it interested in.
So.. on the positive side, will this model serve as a template for TikTok US?
ByteDance inject some assets (TikTok US) into a new entity, and new investors inject money or assets into the new entity, so that the new ownership structure can satisfy both US and China’s demands?
Found another closing discrepancy in reported numbers.
These were the reported numbers for fixed asset investments (excl. rural) between 2020 and 2024.
The 2023 number has the biggest difference. If you directly compare 503,036 and 572,138, that’s dropping -12% yoy. Yet, the reported yoy was +3%.
This resulted in a 15% gap in yoy percentage number for 2023.
That gap has been shrinking to less than 1% in 2024, with +3.2% reported for 2024 fixed investments, compared with +2.3% in calculated comparison.
In 2024, the investment in the water conservancy management industry increased by 41.7%, investment in the air transportation industry increased by 20.7%, and investment in the railway transportation industry increased by 13.5%.
Those are some big % numbers. If you compare some headline numbers, e.g. water conservancy, the growth should be 13%, rather than 42%.
Maybe 2023 was indeed a lower base than reported.
Anyways, the picture in 2024 indeed looks better.
Tariff is not an unknown factor.
Trump talked a lot about tariff during campaign and after election.
However, stock market was buoyant until recently.
The most common excuse? Investors thought tariff is just an negotiation tool that won’t be implemented.
That sounds reasonable, but actually it doesn’t make any sense.
Let me explain.
If stock market reflects the common wisdom and it doesn’t go down, then it means everyone assumes tariff threat is not that real.
Then why should the negotiation be effective?
Governments are not fools. Like in poker, if they think Trump is just bluffing, they would call.
The stock market almost sells Trump out if it doesn’t fall.
So, if US wants to be considered serious on the negotiation table, stock market must fall.
Why?
Because you need to let everyone know tariff is real. Every company needs to talk about it. Investors need to be panicking about it. When investors are really worried, they sell, even with losses.
Stock market drop is a manifesto that everybody realizes the tariff can be as real as the losses in their retirement accounts.
That’s when the “negotiation tool” is effective.
Nvidia GPUs can be used as collateral to borrow. Financial Times reported that $11 billion of loan was created for these chips.
That’s something too creative for me.
I think it’s generally safe to borrow against assets with a growing value.
Chips, however, are like cars to me, depreciating… with new versions better than the previous one.
Well, it seems you can borrow against your car, but that’s still based on your ability to pay back the loan.
So how does it work?
Maybe it’s actually a loan borrowed against the “service contract” or rental agreement carried by the chips, which makes it more like an asset with “yield”.
But still, this market sounds a bit too arbitrary…
Hard to imagine that the rental income will be stable or rising, as Nvidia chips supply is up to Nvidia and TSMC. That capacity can increase over time.
Is this only for Ukraine?
Probably the conversation was made publicly intentionally as the words were for other parties as well.
Those who would count on the US to defense themselves shall be shocked to realize how much compromises they need to give to Trump.