More than 8 million people blacklisted by authorities after missed payments on mortgages and business loans. Defaults by Chinese borrowers have surged to a record high since the outbreak of the coronavirus pandemic, highlighting the depth of the country’s economic downturn and the obstacles to a full recovery. A total of 8.54 million people, most of them between the ages of 18 and 59, are officially blacklisted by authorities after missing payments on everything from home mortgages to business loans. That figure, equivalent to about 1% of working-age Chinese adults, is up from 5.7 million defaulters in early 2020, as pandemic lockdowns and other restrictions hobbled economic growth and gutted household incomes. The soaring number of defaulters will add to the difficulty of shoring up consumer confidence in China, the world’s second largest economy and a crucial source of global demand. It also throws a spotlight on the country’s lack of personal bankruptcy laws that might soften the financial and social impact of soaring debt. Under Chinese law, blacklisted defaulters are blocked from a range of economic activities, including purchasing aeroplane tickets and making payments through mobile apps such as Alipay and WeChat Pay, representing a further drag on an economy plagued by a property sector slowdown and lagging consumer confidence. The blacklisting process is triggered after a borrower is sued by creditors, such as banks, and then misses a subsequent payment deadline. “The runaway increase in defaulters is a product of not only cyclical but also structural problems,” said Dan Wang, chief economist at Hang Seng Bank China. “The situation may get worse before it gets better.” The personal debt crisis follows a borrowing spree by Chinese consumers. Household debt as a percentage of gross domestic product almost doubled over the past decade to 64% in September. But mounting financial obligations have become increasingly unmanageable as wage growth has stalled or turned negative in the midst of the economic malaise. As a growing number of cash-strapped Chinese consumers have struggled to make ends meet, many have stopped paying their bills. More Chinese residents are also struggling for work: youth unemployment hit a record 21.3% in June, prompting authorities to stop reporting the data.

November will be etched in the memories of investors as a remarkable month. Risky assets, such as stocks and high-yield bonds, delivered exceptional returns. Even assets that are traditionally negatively correlated to them, such as US Treasury securities and gold, experienced notable upward price movements. Money that had been on the sidelines found its way into a diverse array of investment opportunities. Companies rushed to issue new bonds to finance investments and bolster their reserves. And all this fostered increased confidence and optimistic projections for the market and economy in the coming year. This extraordinary November was propelled by four key factors: Goldilocks economic data, declining yields, falling oil prices, and a surge in the deployment of cash sitting on the sidelines. Together, they created an unusual convergence of the three primary risk factors shaping market returns and correlations. Extrapolating all this forward, however, is subject to important qualifications that might well be underestimated during a period of understandable euphoria. Let’s start with the numbers that are so pleasing to most investment portfolios. In November alone, the Nasdaq 100 experienced a 10.7% surge that, unlike the recent past, was not confined to a select few high-performing stocks. Indeed, the S&P 500, Dow Jones Industrial Average and Russell 2000 index of small companies all registered gains of nearly 9%. Similar robust advances were seen in other risk assets, including high-yield bonds. Notably, the VIX Index, known as Wall Street's fear gauge, sank to its lowest level in nearly four years and traded below 13 on several occasions during the month. Risk-off assets too performed well in this risk-on month, contrary to what the traditional finance textbooks would tell you. Gold gained 2.7%, and a stunning broad-based drop in Treasury yields drove up the price of the 10-year US government bond.

Federal Reserve Chair Jerome Powell attempted to push back against investors’ growing expectations of interest-rate cuts in the first half of 2024. Wall Street responded by doubling down on Friday, despite Powell’s warning that “it would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease.” Markets now place odds of a quarter-point cut by the Federal Open Market Committee’s March meeting well above 50%, and are fully pricing in a cut in May, as traders viewed Powell’s comments as sufficiently balanced to leave the door open to such a pivot. That followed a round of manufacturing data released earlier on Friday adding to other measures that signal growth is slowing. A slowing US economy and fall in the inflation rate have also raised expectations among investors that the central bank could begin to cut rates as soon as March. The two-year Treasury note’s yield declined as much as about 14 basis points to 4.54%, the lowest level since June, as traders priced in a larger total amount of rate cuts they consider likely over the next year. Swap contracts that anticipate the outcome of Fed policy meetings priced in an effective rate of about 4% in December 2024, compared with 5.33% currently. Conversely, Fed officials projected rates at 5%-5.25% at the end of next year, according to their median forecast released in September — just one-quarter point lower than the current level. Policymakers will submit updated projections for interest rates and the economy at their next meeting.

Turkey’s trade deficit narrowed yet again in November, propelled by a drop in imports and a rise in exports for the fifth consecutive month. The trend signals subdued economic activity influenced by restrained domestic demand as the Turkish central bank continues to raise interest rates aggressively. Preliminary data released by the Trade Ministry on Saturday shows a trade gap of 5.9 billion USD in November, down from 8.8 billion USD a year earlier. Despite weakening demand in major European markets, Turkey’s exports have showcased resilience — while imports have continued to fall. state and the Israeli state," he said, alongside the Spanish and Belgian prime ministers. The decline in imported goods aligns with the Turkish central bank’s stance on interest rates, forming part of its strategy to curb inflation following the general election in May. The institution raised the benchmark one-week repo rate by 500 basis points to 40% in November, marking the sixth consecutive rate hike since June and underlining the end of cheap credit in the country. Turkey’s top export destinations in November included Germany, the United Arab Emirates, and Iraq, whereas China, Russia and Germany stood out as primary import sources.