Factories worldwide in big comeback

<p>Kia ora,</p><p>Welcome to Monday's ANZAC holiday edition Economy Watch where we follow the economic events and trends that affect New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news there is extra stress in "<a href="https://www.foreignaffairs.com/reviews/capsule-review/2020-10-13/china-bubble-never-pops"><strong>the bubble that never pops</strong></a>".</p><p><a href="https://www.bloomberg.com/news/articles/2021-04-17/why-china-bad-bank-huarong-s-fall-is-big-bad-news-quicktake" target="_blank"><strong>All is not well in China's NZ$1 tln bond market</strong></a>, and a key source of uncertainty is in their State-owned financial firms, especially those set up as 'bad banks' by Beijing to manage the banking system bad debts from a 1999 financial crisis. There were four such SOEs and one is in dire strife, so much so that Beijing executed its chairman for corruption in January. The other three are in bad financial shape too. This one, China Huarong Asset Management, is majority owned by China’s Ministry of Finance and is deeply intertwined with the nation’s NZ$75 tln financial industry. The pointy issue is that it looks like Beijing is sick of the endless bailouts that SOE firms get (not just these four) and may let this one fail. That could have a ripple effect that spreads widely. And it will end investors' presumed safety net that has been priced into Chinese bond values. The resulting repricing lower could trigger a tsunami of other company failures.</p><p>And short bets in the main Chinese share markets have hit a new record high. That is because demand for hedging against the risks of policy tightening, and further fallout from the antitrust crackdown on their big tech firms, are rising sharply.</p><p>Away from the stock markets, foreign investors boosted their <a href="http://www.safe.gov.cn/safe/2018/0419/8806.html" target="_blank"><strong>holdings of Chinese bonds</strong></a> in the first quarter by +US$63 bln, or up +11% from Q4-