China: Still Recovering, But Losing Steam By Raphie Hayat of Rabobank Still recovering, but losing steam Summary China’s economic growth surged to 18.3% y/y, broadly in line with expectations A big part of this is due to the lower base in Q1 2020 Although the overall first quarter growth was driven by production, more recent data suggests that services are taking over, while production growth is slowing We think the recovery will lose steam as the initial pent up demand dies out and because policy support is being scaled back Moreover, trade will not help economic growth as much as it did in the past few months as China’s trading partners are slowing coming out of the pandemic and are requiring less working-from-home and other coronavirus-related exports from China. That is why we stick to our GDP forecast of 7.7% this year Despite the relative positive short term outlook, we remain gloomier for the long term as China’s ageing population, high debt load, weakening productivity growth and increasing international tensions will keep growth below the levels of the past 15 years Services are taking over China’s National Bureau of statistics (NBS) released Q1 GDP figures, which showed that GDP growth accelerated to 18.3% y/y, up from 6.5% y/y in Q4 2020 (figure 1). This was broadly in line with the Bloomberg consensus of 18.5% y/y although higher than our own estimate of 16.3% y/y. The main driver of the first quarter growth was industry and construction, which grew by 24.4% y/y, while services grew by 15.6% y/y (figure 2). However, the monthly data suggests that services growth has taken over, while production growth is coming down. Industrial production growth has moderated to 14.1% y/y in March (down from 35.1% y/y in January/February) while real retail sales growth has kept pace

Have Chinese State Banks Quietly Bought $180 Billion In Gold? By Ye Xie, Bloomberg Live commentator and author Three things we learned last week: 1. U.S. Treasury scrutinizes Chinese state banks for possible hidden currency intervention While Janet Yellen’s Treasury Department refrained from labeling China as a currency manipulator in its semi-annual currency report, it again zeroed in on the role of Chinese state banks in the foreign-exchange market. It noted that China’s net foreign exchange settlement, which it considers a more comprehensive proxy for intervention because it includes the activities of China’s state-owned banks, surged to about $180 billion last year. But the PBOC’s foreign exchange assets, which historically track the settlement data, stayed flat. The Treasury cautioned that it’s not clear what’s driving the unusual divergence between the two data sets, which used to provide roughly similar estimates of the direction and size of China’s currency intervention. While acknowledging that the difference could be due to commercial reasons, it’s also possible that these banks intervened on behalf of the PBOC to cover the central bank’s tracks, the Treasury said (ZH: or, it is the case that China has been stealthily accumulating some $180 billion in gold, as discussed last Friday in “Beijing Greenlights Purchases Of Billions In Bullion“). “Overall, this development highlights the need for China to improve transparency regarding its foreign exchange intervention activities,” the Treasury Department wrote in a report released Friday. “Compared to other major economies, especially in Asia, China is increasingly an outlier with respect to its non-disclosure of foreign exchange market intervention.” The Treasury raised similar concerns in its previous report. This won’t be the last time we hear about the issue. 2. Besieged Huarong got some reprieve Dollar bonds of China Huarong Asset Management Co. rallied after financial regulators sought to ease investors’ concerns that the nation’s largest bad-debt manager may

Obama’s Chief Energy Scientist Disputes The Climate-Change Propaganda-Peddlers Authored by Mike Shedlock via MishTalk, After a stint at the Obama Energy Department, Steven Koonin reclaims the science of a warming planet from the propaganda peddlers. Beyond the Hype Please consider the Wall Street Journal report How a Physicist Became a Climate Truth Teller Barack Obama is one of many who have declared an “epistemological crisis,” in which our society is losing its handle on something called truth.  Thus an interesting experiment will be his and other Democrats’ response to a book by Steven Koonin, who was chief scientist of the Obama Energy Department. Mr. Koonin argues not against current climate science but that what the media and politicians and activists say about climate science has drifted so far out of touch with the actual science as to be absurdly, demonstrably false. Mr. Koonin is a Brooklyn-born math whiz and theoretical physicist, a product of New York’s selective Stuyvesant High School. He would teach at Caltech for nearly three decades, serving as provost in charge of setting the scientific agenda for one of the country’s premier scientific institutions. Along the way he opened himself to the world beyond the lab. From deeply examining the world’s energy system, he also became convinced that the real climate crisis was a crisis of political and scientific candor. He went to his boss and said, “John, the world isn’t going to be able to reduce emissions enough to make much difference.” His thoughts seem to be governed by an all-embracing realism. Hence the book coming out next month, “Unsettled: What Climate Science Tells Us, What It Doesn’t, and Why It Matters.”  “I’ve been building models and watching others build models for 45 years,” he says. Climate models “are not to the standard you would trust your life