Pro Macro – Deep Dive: DEBT, DEMOGRAPHICS & CCP

Published on: January 30th, 2023

Despite the recent rally, China faces challenges which will require hard choices in the years ahead. Given the geopolitical test China faces, CCP policies will be a key input in determining the macro environment for the decade to come. Corporate debt investors will be on the front lines of any conflict.


  • VM
    Veliko M.
    31 January 2023 @ 19:45
    One piece of feedback that I've been mulling over the past two years that I've been reading Julian's reports. IS GREAT Julian's research is very insightful. He got me to de-risk in 2022 (although later than I should have). I consider JB's viewpoint important enough on its own to keep me subscribing to PRO Macro year over year. COULD IMPROVE Maybe it's the ornate British writing style, but sometimes it's hard to draw conclusions from the writings. Usually I get what Raoul is trying to say the first time I read his reports. With Julian I need to keep re-reading in order to make sure I did not get the opposite idea of what he's trying to convey. I largely believe this is the reason that Raoul's viewpoint spreads like wildfire, while Julian's message is for connoisseurs and has a niche audience. Maybe that's how he wants it. But I think had he been more straightforward in his writing style I might have de-risked even sooner in 2022. Having an ornate writing style is cool, but it would be even cooler to be extremely straightforward, especially at inflection points. The main way I subscribe to investment research services now is I go back, look at the clear inflection points, and then compare the communication which was sent at the time. If the service wasn't screaming BUY in April - May of 2020, or wasn't screaming SELL in NOV 21-JAN 22, it needs to improve its messaging. Maybe what I do is too simplistic, but over-complicating the research message makes it difficult to discern true signal for simpletons like me (and I would venture I'm not the only one).
    • JM
      John M.
      1 February 2023 @ 00:09
      I find that I like Julian's analysis vs other services because he tends to go into both sides of the arguments, rather than just giving a one sided recommendation. But agree it takes a bit more time to understand, size, risk manage etc. I wouldn't mind some extra guidance on confidence, sizing, timeframe etc.
    • HM
      Harry M. | Real Vision
      31 January 2023 @ 21:03
      I think the conclusion is there is a load of Chinese corporate debt that is far less likely to be paid. Something like $3.5tr of debt more than can easily be seen. Now, JB suggests that some amount is owed to Chinese entities (perhaps as a way of Chinese oligarchs getting capital out of the country. But a few trillion is owed to foreigners. China is now vulnerable to capital flight. That debt is one vehicle for capital flight via HK. So, the $HK peg is questionable. What China does will be driven by what the US does. If China is increasingly cut off from Western export markets, China will retaliate by force default on this debt. But if there is enough capital flight China can simply shut the door by forcing default on this debt. Why would this matter? Well there are rumors (for example) that tether is long of that Chinese debt. But $3.5tr is a lot of money, and if it goes "puff" then we will see major repercussions in markets. If enough money is lost it always causes collateral damage.
  • MD
    Mike D.
    15 February 2023 @ 22:29
    Once again, Julian & team produce a deeply thoughtful, thought provoking analysis with broad implications. I agree with other commenters that it takes some time to think through the implications of this piece, but imo that is time well spent. Bravo!