Elsewhere In The News.

The acquisition of Goldman Sachs has been postponed.

1. Prices charged by Chinese companies at the factory gate recorded their first annual fall in almost two years, another downbeat signal for the global economy as bulging inventories and cautious consumers in the West hit overseas demand for Chinese-made goods. Chinese producer prices fell 1.3% in October compared with a year earlier, the National Bureau of Statistics said Wednesday, the country’s first year-over-year decline in producer-price inflation since December 2020. The decline reflects weaker prices for the producers of raw materials following a recent pullback in commodity prices, as well as a high base for comparison because of rapid price rises a year earlier. The data come on the heels of ugly export figures released Monday that showed a surprise drop in Chinese exports to the rest of the world last month. (Source: wsj.com)

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2. Ambrose Evans-Pritchard:

Harvard professor Ken Rogoff said property makes up 23 percent of Chinese production in different ways, and 26 percent of final demand. This is three times the intensity of the US subprime bubble and has already gone multiples beyond the underlying income stream needed to sustain it.

“If income growth stalls, China’s residential and commercial real-estate prices could collapse like a house of cards, taking down the banks and the local governments that have been furiously lending to the sector,” he said.

This does not imply a Minsky moment or the sort of banking crash that afflicts Western capitalism. The Communist Party retains control of the banking system and legal contracts. It can therefore almost always prevent a disorderly collapse. But it cannot prevent stagnation. (Sources: scholar.harvard.edu, telegraph.co.uk)

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3. Pessimism about China’s banking sector has reached an unprecedented level, even approaching the depths at which U.S. lenders traded during the 2008 financial crisis. Shares of the four biggest lenders, including Industrial & Commercial Bank of China Ltd. (ICBC), are priced at near record low valuations of about 0.4 of book value in Hong Kong after a sector index weakened to an 11-year low. That depressed level roughly matches where investors priced JPMorgan Chase & Co. and Bank of America Corp. among others during the depths of the 2008 crash. They are far from the same perils that hit American lenders at the bottom of the financial crisis. But the banks’ recent swoon reflects both a broad market sell-off and growing concerns about bad debt as lenders have been called on to backstop the flagging economy. Bank earnings have been steady so far, fueled by a jump in new loans, but they face growing risks from the nation’s pandemic lockdowns and a property crisis that shows no signs of easing. (Source: bloomberg.com)

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4. New Covid cases in Beijing jumped to the highest level in more than five months, with officials alarmed by infections being found outside of quarantine that show the virus is still spreading in the community. China’s capital reported 78 new infections Wednesday, the most since May 22. The city has reported double-digit daily cases for most of the past month, though numbers started to spike in recent days, doubling from 39 on Nov. 4. (Source: bloomberg.com)

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