Rule of Law - Are we going to see authoritarianism ratchet further? Looks like it. Moreover, how much is the further preparation for economic difficulties?

As for rising defaults, this situation has been steadily building. The absolute level of debt is becoming increasingly unsustainable. Total aggregate financing YTD is up CNY 31 trillion ($4.6 trillion) and is running at over 40% of nominal GDP YTD.

And liquidity is short with rates/yields back at 2019 levels.

However, with inflation plunging and non-food CPi at zero, the weakest since 2009, real interest rates are at the highest level in a decade. Makes it even harder for debtors with no pricing power or income growth to cover.

Add in the renewed macroprudential approach - something we have seen before - and conditions are likely to soften further.

There is another element as well. China has had a huge export boost thanks to the pandemic. That will fade, even more so should Biden fully utilize the Defence Production Act on taking office.

Net trade has boosted GDP this year. It will be a drag in 2021.

Defaults are going to continue to rise.

Furthermore, if large, supposedly 'good' borrowers are defaulting what does that say about the real condition of Chinese banks' loan books, especially medium and small sized ones...TOXIC