Tag: Finance

First quarter China household net additional mortgage lowest in 10 years

For the first quarter of 2026, the net increase in mid-to-long-term household rmb debt is lower than 2015 by ~33%. This is an approx of net new mortgages.

2015 was the year of 棚改货币化 / 去库存

2016 was the year of 房住不炒 (near end of the year)

1q26 – 2026年一季度金融统计数据报告

3月末，本外币贷款余额284.51万亿元，同比增长5.7%。月末人民币贷款余额280.51万亿元，同比增长5.7%。一季度人民币贷款增加8.6万亿元。分部门看，住户贷款增加2967亿元，其中，短期贷款减少1640亿元，中长期贷款增加4607亿元；企（事）业单位贷款增加8.6万亿元，其中，短期贷款增加4.13万亿元，中长期贷款增加5.42万亿元，票据融资减少1.1万亿元；非银行业金融机构贷款减少3680亿元。

1q15 – 2015年一季度金融统计数据报告

3月末，本外币贷款余额91.52万亿元，同比增长13.3%。月末人民币贷款余额85.91万亿元，同比增长14.0%，增速比上月末低0.3个百分点，比去年末高0.3个百分点。一季度人民币贷款增加3.68万亿元，同比多增6018亿元。分部门看，住户贷款增加8892亿元，其中，短期贷款增加2064亿元，中长期贷款增加6828亿元；非金融企业及其他部门贷款增加2.71万亿元，其中，短期贷款增加9543亿元，中长期贷款增加1.48万亿元，票据融资增加1643亿元；非银行业金融机构贷款增加632亿元。3月份人民币贷款增加1.18万亿元,同比少增661亿元。月末外币贷款余额9146亿美元，同比增长4.0%，一季度外币贷款增加341亿美元。

In fact, you need to go back to 2012 to find a lower number.

1q12 – 2012年一季度金融统计数据报告

3月末，本外币贷款余额60.77万亿元，同比增长15.5%。人民币贷款余额57.25万亿元，同比增长15.7%，比上月末高0.5个百分点，比上年末低0.1个百分点。一季度人民币贷款增加2.46万亿元，同比多增2170亿元。分部门看，住户贷款增加4995亿元，其中，短期贷款增加2581亿元，中长期贷款增加2414亿元；非金融企业及其他部门贷款增加1.95万亿元，其中，短期贷款增加1.05万亿元，中长期贷款增加5906亿元，票据融资增加2575亿元。月末外币贷款余额5595亿美元，同比增长17.2%，一季度外币贷款增加211亿美元。

M1 vs M2 gap in China

Back in 2016 and 2017, M1 growth was meaningfully faster than M2 growth in China, which typically indicates a high willingness to spend or invest in the economy.

That is a bullish sign.

On the contrary, if M1 growth is below M2 growth by a wide margin, it usually indicates people would rather save more than spend or invest.

That negative gap was deepening throughout 2024 till the famous 924 stimulus.

Using revised M1 growth rate, the negative gap was about -5% at the beginning of 2024 and about -10% in Sep 2024.

That negative gap shrunk to about -1% in Sep 2025 and about -3% in Feb 2026.

Actually, looking at M2 growth alone might give you a glimpse of China’s economy pulse and sentiment.

 

Powell’s lesson on oil supply shock

Fed is hard to react to oil supply shock.

1/ Fed is designed to manage demand. It cannot produce more oil or open shipping lanes. Historically, the Fed “looks through” supply shocks unless they start to bleed into the broader economy (secondary effects / expectation for inflation rises).

2/ Energy shocks often spike and subside relatively quickly. However, Fed policies take months or even years to fully permeate the economy. Fed would be slowing down the economy exactly when it might be trying to recover from the high energy costs.

“By the time the effects of a tightening in monetary policy take effect, the oil price shock is probably long gone, and you’re weighing on the economy at a time when it’s not appropriate.”

China’s currency policy

It’s a very keen observation and description by Kenneth Rogoff in his book Our Dollar, Your Problem that China prioritizes a USD exchange-rate objective over domestic inflation targeting.

What are the implications?

1/ Tighter capital movement control

The “impossible trinity” says a country cannot simultaneously have a fixed (or tightly managed) exchange rate, free capital movement, and independent monetary policy.

Since China uses the peg and China wants more independent monetary policy (when Fed raised interest rate last cycle in 2022, China didn’t follow), it has to have tighter capital movement control.

Or PBOC policy shall move more in-line with US Fed policy.

2/ Real exchange rate moves

With a mostly fixed nominal RMB/USD, the real exchange rate moves via the inflation gap:

If China inflation below the US, China gets a real depreciation (more competitive) even without nominal RMB weakening. This is what happened in the last few years, and foreigners will find traveling in China very cheap (e.g. Chinese hotel price).

If China inflation above the US, China gets a real appreciation (less competitive) even if the nominal stays “stable.”

3/ Intervention can force money/credit swings 

Defending the exchange-rate path often requires buying/selling FX:

When inflows are strong, the central bank buys USD and creates RMB liquidity (which can be inflationary/credit-boosting).

When outflows dominate, defending the rate can drain RMB liquidity (which can be contractionary).

4/ It tends to bias the economy toward tradables and away from household consumption

If the RMB is held weaker than it otherwise would be (or just “less strong” than productivity would imply), it functions like:

a subsidy to exporters/tradable producers, and

a tax on importers/consumers (imports cost more in RMB terms than under a stronger currency).

5/ Bigger reserves and bigger balance-sheet exposure to USD assets

Exchange-rate management usually accumulates FX reserves (especially in surplus periods). That brings valuation risk when USD moves, opportunity cost (low-yield reserve assets vs domestic needs), geopolitical/financial exposure to the dollar system.

China’s missing inflation in early 2000s

In Our Dollar, Your Problem, author raised this question – why China didn’t see a faster inflation it should see. The higher inflation rationale is that when tradable goods sector productivity rises fast, this part of the economy will attract more workers, presumably from non-tradable goods sector. Thus, wage should rise and likely at a faster pace than the productivity gain in non-tradable goods sector, which should result in higher inflation in non-tradable goods sector to counter labor inflation.

In the books, the author mentioned one plausible explanation, which was Chinese gov could move massive population from rural areas to cities and factories. The amount of inflow was so large that wage increases were not seen. Thus, there is lower than expected service inflation.

This sounds reasonable.

I have additional arguments on #why China didn’t see strong inflation in non-tradable goods sector.

1/ The high-end of services are not priced fairly in China.

Unlike more capitalism-driven societies, the high-end supply and demand are exchanged in non-monetary channels. E.g. think about the high-end healthcare senior gov officials may receive in China – that’s not charged at the “market price”. Thus, you can’t measure the inflation, if that doesn’t carry a “price”.

In additional, the high-end services may not be available to the public or openly marketed. Thus demand is lower than it should be.

2/ High-end demand is shifted abroad.

Chinese wealthy like to shop, travel and live abroad.

This lowers the inflation across the board.

So they say central banks are buying gold

I did some research and tried to put pieces together.

1/ Central banks are buying, but top country is Poland (National Bank of Poland).

None of G7 is top buyers in 2025 till Nov.

German is a small buyer.

Source: IMF, respective central banks, World Gold Council

 

2/ The total buying from central banks surged in 2022

2022 vs 2021, more than doubled

2022 vs 2018, more than 50% surge

Year
Annual central bank net gold purchases, tonnes
2014 601.2
2015 579.6
2016 394.9
2017 378.6
2018 656.2
2019 605.4
2020 254.9
2021 450.1
2022 1080.0
2023 1050.8
2024 1089.4

Source: www.visualcapitalist.com

3/ Many gold buyers are Russia trading partners, except for Poland

Six of top seven central bank gold buyers in 2025 through Nov is a top Russia trading partner.

Poland (no)

Kazakhstan (yes)

Brazil (yes)

Azerbaijan (yes)

Turkey (yes)

China (yes)

Czech (yes)

Top Russia trading partners in 2024.

Source: oec.world

It looks possible that as Russia doesn’t want to accept or own USD, or it can’t use USD, its trading partners are buying gold as a form of payment.

 

Chatted with ChatGPT and created model for gold price

With a 5-year time frame, I tried to create a gold price model for 2028, based on 2023 gold price.

Gold_2028 (USD/oz)
– Low $4,087
– Base $6,070
– High $9,556

gold_2028_model_with_deficit_cb

Disclaimer: I am not expert on gold nor did I have spent considerable time in studying it. But I was trying to understand different drivers behind gold price. I asked ChatGPT to pick the coefficients, so there is little credibility behind these coefficients.

 

Notes of Paul Tudor Jones (PTJ) on AI bubbles

Paul Tudor Jones on the AI Bubble Debate by Bloomberg

The only way to reduce debt to GDP is to have obviously nominal growth exceed your interest rate.

– Paul Tudor Jones

Here are notes for Paul’s interview and my opinions

  • Today feels like Oct 1999, but if this is a bubble, it’s a small one. Past bubbles ran 400–600%. Nasdaq is “only” ~200% off the bottom. Blow-off possible, not inevitable. [I agree; see my previous post Is it like internet bubble? in October]
  • Key bull case: rates. If Fed funds fall toward ~2.25–2.75%, that’s powerful fuel for equities. Markets look 6–9 months ahead, not at today’s data. [Sure]
  • Difference vs 1999: companies are profitable. [I don’t agree; I believe AI model companies like OpenAI etc. are losing a lot of money; let’s see when they publish numbers for IPOs]
  • Risk isn’t traditional leverage like in margin accounts — it’s derivative leverage: options, leveraged ETFs (up 250% from 2022 bottom), and trader-driven equity flows. [Very real]
  • Jones stays a trend follower. Recently, gold & silver > Bitcoin despite massive crypto inflows. He now expects precious metals to outperform crypto into year-end. [I wouldn’t agree back then; but I would be very wrong, so far]
  • Bond vigilantes were held in back; money debasement happened in gold and bitcoin instead. [True]
  • Biggest risk: concentration everywhere — stocks, investors, and policy power. [Agree]
  • Bottom line: short-term cautious, but Paul believes markets can be substantially higher by year-end. Likely long: Nasdaq. Short: Bonds.

Notes on JPY strength

Coordinated intervention

Reports that the New York Fed did “rate checks” (often interpreted as a potential prelude to intervention) plus Japan officials stressing coordination with the U.S. put the market on alert.

Previous examples

In March 2011, the G7 announced concerted intervention after extreme yen volatility following Japan’s earthquake.

What was happening in 2011?

Markets anticipated Japanese insurers and investors would bring money back to Japan to pay claims and fund rebuilding.

What’s happening now and why US wants a stronger yen now?

Excess volatility and disorderly FX moves can harm economic/financial stability

Japan’s finance minister has said the U.S. Treasury secretary shared concerns about “one-sided depreciation” of the yen, which signals the U.S. doesn’t want to be seen as tolerating a move that could be framed as giving Japan an unfair export boost.

A weak yen can worsen import-cost inflation and political stress in Japan.

Some exit from Japan might cause the temporary yen weakness (e.g. China selling).