Are you Prepared for China’s Pivot?

Featuring Simon Hunt

Simon Hunt of Simon Hunt Strategic Services is a China markets veteran and Real Vision regular. His deep inside knowledge of Chinese business and politics gives him an unparalleled perspective on policy. Simon thinks that the Chinese leadership will imminently announce a major policy pivot that will create a short-term financial trauma, followed by another period of extended and exceptional growth. Filmed on May 3, 2018 in London.

Published on
14 May, 2018
Topic
Macro, China, Financial System
Duration
26 minutes
Rating
68

Comments

  • JE

    James E.

    16 5 2018 21:51

    0       0

    Simon Hunt would have to be a RV keeper. Always a good idea to have an expert viewpoint from the UK.

  • DF

    Dominic F.

    16 5 2018 13:41

    0       0

    Helicopter money

    • MS

      Michael S.

      17 5 2018 04:00

      0       0

      Or a bid under gold?

  • LR

    Lucie R.

    16 5 2018 13:13

    9       0

    Simon Hunt indeed has many good connections in China, and is worth listening to. However, I found that he sometimes can make very far going conclusions based on just one or two conversations with “people in the know” in China. His opinions are interesting to hear, but in my experience they need to be weighted against all the other evidence coming out of China.

    Also, his interview has no explanation why exactly the profits in China are growing. A huge productivity improvement is required to see sustainable growth. To be able to afford all the air conditioning in the rural villages they need either to borrow more / save less or to become much more productive. What is the source of this growth? Are they better educated? Are there technological or infrastructural breakthroughs? These may be the foundations of growth. Specific examples would be much more convincing than general statements that “profits are growing”.

  • SL

    Steven L.

    16 5 2018 00:46

    2       0

    I too have been waiting patiently to hear from Simon Hunt again. I always like hearing his take on China and copper. I have to say though that in a previous interview with Grant, Simon predicted the imminent failure of some banks and that the Chinese government would let it take its course. It seems he's making the same prediction in this interview. I/m from Missouri on that one. His description of expanding growth with even more debt is totally believable. It seems the game plan in the global economy is to see who can spend the most before it blows up. The US congress will have to get to work!

  • MS

    Michel S.

    15 5 2018 22:32

    3       0

    One of the best overall video so far on Real Vision. This is genuine real good analyst and smart thinking, and really helpfull in futur guidance..

  • zy

    zhang y.

    15 5 2018 21:39

    0       4

    It's confusing, he says Dollar in secular decline 10 years, and then adds but short term, he says a bear vicious rally in the dollar, rembinbi will depreciate, he means no shortterm us dollar to go down, but to go up, and he says twice that of bear market, confusing - the intervier could take care of those details or in the edition add any note to corrrect it

    • MK

      Michael K.

      16 5 2018 01:33

      8       0

      I think he means the dollar is in a bear market, and the rally in the meantime is merely a step on the way to a long term decline. I think his expression is very clear and unfortunately sir you are at the point of misunderstanding.

    • DW

      Daniel W.

      16 5 2018 09:16

      1       0

      Hmm, I think he made his point very clear. USD is in a secular dowtrend but might have a spike in the coming month.

      Compare it to US bond yields. They habe been in a secular downtrend for more than 30 years but for sure they had spikes lasting couple of month on that way.

    • zy

      zhang y.

      16 5 2018 23:01

      0       0

      listen again, he says RMB will depreciate sharply in 3-4 months, and metals will take a big correction, those statements are implicative of US Dollar going up, metals dont depreciate big unless the dollar rallys up

    • MK

      Michael K.

      16 5 2018 23:30

      3       0

      Zhang, I think what you are pointing out is consistent with the short term dollar spike idea, and the long term dollar decline, isn’t it?

    • KJ

      Kulbir J.

      17 5 2018 05:03

      1       1

      I've heard about the renminbi depreciating in the near future/future for years!

  • CB

    Conor B.

    15 5 2018 17:43

    2       0

    So China just dismantles ten of trillions of dollars of shadow banking assets and goes along its merry way... what he's describing would make GFC look like a speed bump.

  • JG

    John G.

    15 5 2018 13:29

    0       0

    Interesting so a short time correction in precious metal prices..

    Yet the US dollar index will be halved over the next 7 years..

    • ww

      will w.

      20 5 2018 16:40

      1       0

      I assumed Simon was referring to industrial (base) metals, rather than precious metals. But I could be wrong...

  • PD

    Pat D.

    15 5 2018 10:44

    2       0

    Class Act. The quiet confidence says it all!

  • HM

    Hot M.

    15 5 2018 07:35

    5       0

    It would be good to hear from Simon what precisely these anticipated 'tremors' will look like/cause?

  • HM

    Hot M.

    15 5 2018 07:35

    3       0

    It would be good to hear from Simon what precisely these anticipated 'tremors' will look like/cause?

  • HM

    Hot M.

    15 5 2018 07:35

    0       0

    It would be good to hear from Simon what precisely these anticipated 'tremors' will look like/cause?

  • DS

    David S.

    15 5 2018 04:40

    5       1

    President Xi is consolidating China's power in Asia. The only leader who can backstop North Korea's President Kim is President Xi. China would like to see the Korean peninsula without nuclear weapons. China does not want millions of North Koreans crossing its border. China does not want Russia to gain a foothold in North Korea. China does wants to let the US take as many soldiers back home as possible. All these items will be better if President Kim comes to an agreement with the US to denuclearize North Korea as well as South Korea. That is why President Kim went in a private railroad car to have discussions with President Xi; followed by a second meeting a few weeks later to prepare for the US negotiations. North Korea's testing nuclear testing grounds are apparently in trouble. North Korea is already broke. it is with the intelligent negotiations of President Moon with all parties that has brought this about. President Kim certainly is happy to meet with President Trump, but could never trust him with his life after he backing out of the Iran Nuclear Agreement. It is President Xi who is in the driver's seat. DLS

    • SB

      Stephen B.

      15 5 2018 16:12

      4       4

      I have a different view. Xi's platform is all about eliminating corruption (and from that, establish long term sustainable growth) but that is also Trump's agenda (the famous "Drain the Swamp" or "The Storm") - not that the MSM give him any credit for it. Xi recognizes that in Trump and therefore they have a common interest. North Korea's nuclear program was supported by corrupt forces and, working together, they have eliminated that particular threat in a heartbeat. Iran will be a tougher nut to crack as China's interests are less well aligned but it will happen. Note that the Iran Foreign Ministry has stated that if the EU follow the US out of the agreement (which, to be clear, Iran never countersigned) they will name which western politicians received backhanders. That is why China has been relatively quiet on the Iran issue and all the noise is coming from Western leaders and MSM. Western Governments may fall over this. Moreover, Trumps long term instincts are to cut expensive overseas global troop deployments which surely China would welcome. That only leaves trade issues as a potential source of friction. So far, i have witnessed nothing more than the normal sort of theatre that precceds a renegotiation but time will tell.

    • DS

      David S.

      15 5 2018 17:26

      3       0

      Stephen B. I hope very much that you are correct, but it seems to me that the Washington swamp is not being drained. We may have just added the New York swamp to the Washington swamp. It may just be uncontrolled human nature. DLS

    • SB

      Stephen B.

      15 5 2018 17:50

      5       4

      David, i dont know if you will have picked this up but there are now over 20,000 sealed indictments across every jurisdiction of the US (but concentrated in New York, Southern Cal and the Washington DC area). Sealed indictments are a rarity, used typically only in the rarest of cases such as multi-state (or gang type) offences. The number, pre Trump and Sessions, was a fraction of this. Only question is when are they going to be unsealed and why the delay? Speculation is that Trump/Sessions are waiting for their judicial appointments to be approved by the House, not trusting the incumbants to be clean. Cleaning up the DOJ and FBI has also been a distraction. We shall see how events unfold but clearly there are seismic events occurring right now but unreported by the MSM.

    • DS

      David S.

      16 5 2018 17:28

      1       0

      Stephen B. Thanks for the additional comments. Again, I hope you are correct. The answer will be known when we find out what the indictments are for. Many may be for immigration and drug violations - both serious problems and priorities of AG Sessions. I would prefer Congress would work on immigration and drug reform also. It is time that we changed the law about being an American citizen based on place of birth. I would prefer that to be an American by birth would require that one of your parents be an American Citizen. This is the way, I believe, that most European countries establish citizenship at birth. This would be just one example. With such a bipolar electorate and Congress, I do not see meaningful reform which is exactly what we need. I certainly am not smart enough to solve these problems. We need to work together and figure this out. DLS

    • SB

      Stephen B.

      16 5 2018 22:23

      2       0

      David, my pleasure. You are very likely right that most of the cases will be drug or immigration related but they are going to have to be rather complex or unusually sensitive cases to qualify for them being sealed. Time will tell. Separately, you make a good point on a change of law needed to allign Citizenship rights in the US to those practiced in Europe - a move long overdue. However, before that occurs, i anticipate a move to tighten voter registration processes. As you undoubtedly know, most jurisdictions do not even require that a drivers licence (let alone evidence of citizenship) be produced in order to vote. In theory (and allegedly in practice) that makes it possible for individuals to vote multiple times and/or for non citizens to vote, potentially distorting the outcome in marginal constituencies. This, of course doesnt just impact elected federal positions but powerful localy elected positions, including, in some jurisdictions, sheriffs and/or judges. Surely, if corruption is to be curtailed it will have to start with ensuring that democratic processes are not open to abuse ?

    • DS

      David S.

      17 5 2018 22:06

      1       0

      Stephen - Good dialog. I think that we can do several things at the same time. We all need to work together to get our house in order. All the best. DLS

    • CM

      C M.

      19 5 2018 00:08

      2       0

      Have to agree with David that very little swamp draining is happening in Washington DC. From what I havse read, lobbyists are setting records on spending and Trump has shown to be easily influenced by lobbyists. The only commonality I see between Trump and Xi is their interest to be the #1 world power. While the US government is in disarray and very ineffective in getting things done on a long term plan, Xi benefits from strong control of the Chinese goverment and can make decisions/investments for the long term while not worrying as much about the short term ramifications. I agree with Hunt's assessment of a long term declining dollar as the US loses out to the better managed Chinese goverment and emerging markets play a bigger role in the world economy. As China continues to urbanize, it will drive growth in their third tier cities and they will take the lead as the world's largest economy. In the meantime, the US will be mired in political quicksand as income inequality and debt weighs down the middle class while becoming more of a service oriented economy anchored down in corporate, personal, and government debt.

  • KJ

    Kulbir J.

    15 5 2018 03:32

    5       4

    12% Nominal Growth in China? Has he been smoking some crack?

    • DR

      David R.

      16 5 2018 17:50

      1       0

      Why? Already happened in 2017 per the UBS index which measures real economic activity based on things like electricity consumption, shipping volume, etc.

    • KJ

      Kulbir J.

      17 5 2018 03:35

      4       0

      @David. I live and have lived in China for 6 years. These numbers are fake and manipulated. I have visited numerous Tier 2,3,4 and 5 cities and have seen empty apartment blocks after empty apartment blocks in each of them. The Chinese companies also use very questionable accounting standards.

  • WH

    W H.

    15 5 2018 02:36

    3       1

    He is good on copper, but doesn’t get the financial system.

  • DY

    Donny Y.

    15 5 2018 01:07

    3       4

    Brilliant guy! Much more so than I. But painfully dry personality.

    • MN

      Michael N.

      18 5 2018 00:12

      1       0

      Listen to him at 1.5X and it's way more bearable.

  • HH

    HODL H.

    15 5 2018 00:50

    0       0

    Didn’t they already restructure shadow banking?

    • HH

      HODL H.

      15 5 2018 01:11

      1       0

      And the accounting of debt going down as more debt is officially brought onto the books, Not sure if I understand that logic. Also he thinks the lower tier housing boom is purely people from the countryside, is there reliable data on that or just guess?
      Alipay reducing the daily withdrawal limit could be a signal of coming change

    • cw

      cc w.

      15 5 2018 03:59

      2       0

      I think he is saying some banks will fail so those debts will get wipe out? But he is not clear on why bring more credit to the poor people will resolve current debt other than broad base bank failure and restructure. It is already pretty expensive to buy RE in the countryside. Disposal income in the tier-1 system is crap and w/ high inflation (cost of Starbucks coffee in Shanghai is probably equivalent to here in US) I don't know how they can borrow to buy those RE.

    • HH

      HODL H.

      15 5 2018 20:12

      0       0

      Ya agreed, was fairly confused on the mechanics behind that

  • DC

    Dale C.

    15 5 2018 00:32

    11       2

    So "Huge Financial Tremors" coming soon are Bullish for the Chinese economy? Are you kidding me? Are you so positive about the Chinese Leadership to control their economy that you think this will turn out just fine? This is what I think. If they do this it will crush their economy and send world markets into a tail spin. To think that Xi is some kind of Economic God is absolutely rediculous. Hold on to your hat because if you are right and they plan "Huge Financial Tremors" all hell is going to break loose. I am not nearly as connected or as smart as you but for sure I am not going to plan investing on this news.

  • WG

    Wade G.

    14 5 2018 21:57

    13       0

    Thank you. I thought this was a very interesting presentation, and I'm wide open to the views expressed, but I struggled with a few aspects. I don't really get his points minimizing Chinese debt. He remarked their Corp debt isn't so bad when adjusted for number of companies. Then, total debt not so bad over all households. Really? While acknowledging you need to standardize to compare (I agree), I think those choices are odd. Why not simply as a percentage/ratio to GDP? Which everyone does and it looks frightful. If there's a problem w/ using GDP to frame the debt picture, I would have liked him to address it. I'm open to more positive view on it, but I don't really understand the rationale for his view. My other concern is that for me, the coming policy shift simply wasn't described explicitly enough. I'm afraid I'm too dense to fill in the unspoken details. Are we to assume China profoundly curtails their shadow banking system, and in doing so, devalues? Thereby causing transitory "strength" in the dollar? But he mentioned failures in China. That implies debt destruction, not devaluation, and no particular strength in the dollar. I get the feeling if he talked longer or with just a bit more detail, I could have learned a lot more. If anyone has any clarifying thoughts, I'd love to read them.

  • F

    Floyd .

    14 5 2018 21:16

    1       0

    Interesting points,we also have a few near term predictions to test his predictions. However, he has a tremendous level of confidence that a centrally planned economy can work that effectively. Mandating extreme change like the kind that have been announced regarding the banking system might just be a little bit more disruptive that he thinks,particularly when people lose money.

  • CD

    Charles D.

    14 5 2018 20:32

    1       3

    Brilliant...

  • DL

    Dan L.

    14 5 2018 20:29

    2       1

    Equities are going to get pounded harder than commodities by a sharp rise in the DXY. Margin of safety is too high in the commodity sector where equities are massively overpriced. The sell off will be in equities. And if velocity chooses to rear it's head during that, commodities will boom regardless of what happens. There are more factors at play than "only" a secular strengthening dollar move over the next 2-4 months.

  • BC

    Bryan C.

    14 5 2018 19:39

    5       0

    It is always good to get a variety of viewpoints. In this case, I have no doubt that he correctly characterized the Chinese intent. But intent and ability are two dramatically different things. The magnitude of what the Chinese government presumes to accomplish will be highly volatile both domestically and internationally. The idea that a pseudo communist / pseudo capitalist governance structure will be able to control all of the forces that they are about to unleash is unrealistic in the least, absurd in the greatest extent. Historically, China has vacillated between short periods of centrally controlled stability (ie empire) and rampant chaos. I suspect that the cyclical pattern will hold and that the short period of stability is about to come crashing down in a very dramatic way.

    • DR

      David R.

      14 5 2018 20:28

      3       2

      In fact, China was economically and scientifically dominant globally from the time of Rome through the 16th century when their navy was litterally 100X bigger and better than all of Europe's combined, until they decided to destroy it. Except until a mere few hundred years lately, either China or India had the largest economy in the world for 2000 years. In 2014, China regained the title as world's largest economy, and today it's even bigger than all of the EU which is #2, with the US now a distant #3.

    • SH

      Steve H.

      14 5 2018 22:05

      4       0

      "The idea that a pseudo communist / pseudo capitalist governance structure will be able to control all of the forces that they are about to unleash is unrealistic in the least, absurd in the greatest extent."

      You could make this same point about what has been emanating from the central planners in the Eccles Building over the last several decades.

    • HH

      HODL H.

      15 5 2018 02:30

      1       0

      David R dunking on everyone in the comments section!! Need links though, facts feel somewhat alternative... It’s good that they made use of that large navy and spread out all over while they had the chance...🤔

      In real life though, Pacific allies are few and far between, borders 14 countries and has 2 carriers...but is near a neighbor with bad recent history, that also has 3 convertible carriers and another on the the way...so force projection by China could potentially be challenged...Limited practical experience of the PLAAF Is also definite plus...👍

      I guess the biggest upside is that the Chinese government feels so confident with their position/ability to stay in power that They feel the need to aggressively pursue a massive AI surveillance state and social credit system to control the population. Definitely a bullish signal for LT stability and growth

  • CB

    Chris B.

    14 5 2018 17:45

    20       0

    It would be interesting to see him debat Kyle Bass.

    • BP

      Brandon P.

      15 5 2018 20:25

      7       1

      second that motion. RV would benefit immensely from a regular debate program

    • GS

      Gordon S.

      16 5 2018 16:59

      1       0

      Also second that! I've seen such requests in the comments often and for a long time! Unfortunately, so far no luck :/.

  • MB

    Matthias B.

    14 5 2018 17:43

    0       0

    very concise! could have been longer it was so interesting. question, did the referred Xi announcement already occur?

  • EL

    Elizabeth L.

    14 5 2018 17:32

    7       0

    Welcome back Simon. You were missed certainly by all of us who are long time subscribers of RV. Would be great to see a conversation between Simon and Grant like in the early days. Those were powerful.

    • PW

      Phil W.

      14 5 2018 23:13

      4       0

      Yes indeed EL. A little disappointed it was only 25min long! Always a treat to get Simons inside info

  • AB

    AJ B.

    14 5 2018 17:18

    10       0

    Amazing to see the growing number of people who believe the Xi hand is wiser than the Invisible hand

    • SW

      Scott W.

      14 5 2018 19:10

      2       1

      I know. Is it neocon to believe that central planning ultimately fails, and that no matter how many ghost cities they build, when all's said and done one cannot fake true wealth?

      AND, Mao on a pedestal? Is it neocon/zionist/whatever propaganda, or didn't he achieve a higher body count than both Stalin and Hitler? Do the Chinese have no choice but to view him in such a manner?

    • DR

      David R.

      14 5 2018 21:21

      0       3

      Who is putting Mao on a pedestal? Certainly not Xi, as during his formative years both he and his father were forced into a reeducation prison camp under Mao. Who indeed achieved that higher body count, but less high than the Japanese, which has lost its mind by letting them re-arm. A global leader in robotics, AI, nuclear technology and the most xenophobic nation on earth; what could possibly go wrong with that?

    • DS

      David S.

      14 5 2018 22:26

      5       0

      Unfortunately, in the case of the US the invisible hand is nailed to the wall by Congress and the Presidency who cannot see beyond personal short-term gain and the next election. If China can make some of the improvements that are discussed by Mr. Hunt, then the invisible hand may find a home in personal consumption in China. In China the top 1% own about a third of China's wealth vis-à-vis the USA where it is much higher percentage depending on your definitions. DLS

  • ZY

    Zheng Y.

    14 5 2018 15:22

    4       0

    Let me tell him, he is talking his book, due to some benefit he get in china, asking FT chief editor too. So funny, :).

  • DW

    Daniel W.

    14 5 2018 15:03

    6       1

    Please, make this a regular appearance, one a month or so

  • YB

    Yuriy B.

    14 5 2018 14:20

    11       0

    This is interesting. Would have liked to hear him address (1) the coming demographic crisis in China and (2) the coming demographic crisis in the rest of the developed world.

    • CM

      C M.

      19 5 2018 00:17

      0       0

      Agree that the demographic crisis is rarely addressed by Chinese analysts. It would be interesting to see someone discuss this topic and how it plays out for the world economies.

    • AE

      Alex E.

      16 6 2018 01:54

      0       0

      Yuriy B., You're the first person to actually make note of demographics. I concur with you that China will not achieve it's vaunted second golden age because 40% of the Chinese population will be over 65 years of age when the so-called "re-acceleration" occurs...

  • TJ

    Terry J.

    14 5 2018 13:46

    6       0

    Great to hear Simon's thoughts again. He is a real authority on China, but I am amazed to hear him quite so bullish. Fingers crossed he is right about the clean up of shadow banking, which of course is a global and not just a Chinese problem. Fascinating also to hear Simon's thoughts on the dollar! Hopefully we can get more regular updates from Simon as the story unfolds.

  • BD

    Bruce D.

    14 5 2018 12:45

    32       6

    I've been waiting patiently for a Simon Hunt update.....thanks Milton! No one puts in perspective better the sheer magnitude of the changes occurring in China. The West just cannot fathom these changes, as we believe nothing has changed.....however, everything is changing more rapidly than we expected. Reason?......they have a PLAN! While the US can't get out of its own way, concerning itself with the stupidity of the left wing Liberal Democrats, the main st media, Stormy Daniels and the Russians.....China is focusing on implementing a 30 year PLAN. The US has a hard time focusing on what's for dinner, because they are too busy searching for their next "like" on Facebook. Time to WAKE UP America, as the landscape for competition is turning more Global by the minute, and we are losing.....time to get back to work!

    • DS

      David S.

      14 5 2018 22:32

      3       0

      I agree that Mr. Hunt did an excellent job. I would like to add that Conservative Republicans are causing just as much trouble. The origins left/right TV "news" which just panders to its own tribe. The TV stations are controlled by the wealthy left/right oligarchs who try to get their politicians elected so they can increase the their wealth. At the very least a very inefficient system. No invisible hand here. DLS

    • CM

      C M.

      19 5 2018 00:23

      2       0

      While I am a republican, hard to blame the democrats for all the problems when the republican party is in control of the White House and Congress. The realiy is politicians rather go to campaign rallies and play to the media than get anything done in DC. When you throw cooperation out the window, you are going to get the stalemate that we are experiencing. This is advantageous to the both the Russians and the Chinese. It has become clear why Putin wanted to see Trump elected.

  • CC

    Christopher C.

    14 5 2018 11:36

    16       1

    When realvision launched, it was interviews with this man, and the many others like him, that helped cemented the idea that they were doing something VERY special. Thanks Raol, Grant, Milton, and team!!

    • DR

      David R.

      14 5 2018 20:23

      4       3

      Yep. Quality not quantity. No wonder the price dropped more than half.

  • VC

    Vince C.

    14 5 2018 10:33

    5       2

    Great insight. Implications enormous. China (and her people) has thus far shown incredible consistency in following through on its long term vision. When such a player is pit against one acting in their short term interests (US) the one who holds the edge is clear