China Outlook

McVEAN

Trading Trading & & Investments, Investments, LLC LLC

CHINA OUTLOOK PHILADELPHIA, PA DECEMBER 13, 2019

Michael Drury Chief Economist McVean Trading and Investments, LLC

Past Performance Is Not Necessarily Indicative Of Future Results.

1

2016 CHINA + HONG KONG EXPORT PIE $2.0 TRILLION

PACIFI C RIM

NORTH

AMERI CA

30%

PAC RIM EUROPE NORTH AMERICA SOUTH ASIA MENA LATIN AMERICA OTHER

EUROPE 24%

22% Past Performance Is Not Necessarily Indicative Of Future Results.

2

2016 US EXPORT PIE $1.5 TRILLION

OTHER 23%

NORTH AMERICA 34% NORTH AMERICA WESTERN EUROPE PACRIM OTHER

PAC RIM 25%

EUROPE 18%

Past Performance Is Not Necessarily Indicative Of Future Results.

3

THIS IS THE TARIFF ROUND CHINA FEARED MOST

YOU START WITH THE LOW HANGING FRUIT SOLAR & WASHING MACHINES

STEEL & ALUMINUM

25% ON $50 B

10% ON $200B

$36B, THEN $14B

25% ON JAN 1

15% MORE ON THE SAME $200B

INDUSTRIAL PARTS & CHEMICALS

CHINA TIT FOR TAT RESPONSE

25% ON $50 B MOSTLY AGRICULTURE

10% TO 25% ON $60 B

5% TO 25% ON ANOTHER $60B

Past Performance Is Not Necessarily Indicative Of Future Results.

4

FURTHER TARIFFS WILL LIFT US PRICES

Past Performance Is Not Necessarily Indicative Of Future Results.

5

THE NEXT $325 B LANDS OUTSIDE CHINA

Past Performance Is Not Necessarily Indicative Of Future Results.

6

CURRENT EXPORTERS OF INDUSTRY PER CAPITA INCOME US Northeast US West Australia US Midwest Northern Europe ex Germany US Resource Germany US South Canada France U.K. Japan Italy South Korea Spain Taiwan Saudi Arabia

70541 67881 56689 56477 56070 56042 48669 48621 46733 42930 42260 40105 34349 32046 31059 25535 23186

POPULATION (MILLIONS) 63948 52704 25088 58673 67459 63631 82439 88340 37279 65481 66959 126855 59217 51339 46441 23758 34141

Past Performance Is Not Necessarily Indicative Of Future Results.

GDP (BILLIONS) 4511.0 3577.6 1422.2 3313.7 3782.5 3566.0 4012.2 4295.2 1742.2 2811.1 2829.7 5087.5 2034.0 1645.2 1442.4 606.7 791.6 7

CURRENT IMPORTERS OF INDUSTRY

Past Performance Is Not Necessarily Indicative Of Future Results.

8

NEXT GENERATION FOR INDUSTRY

Past Performance Is Not Necessarily Indicative Of Future Results.

9

CHINA CREDIT LEADS THE WORLD ECONOMY

2000

CHINA SOCIAL FINANCING VS US & EUROPEAN PMI

60

1750 55 1500

1250

50

1000 45

750

500 40 250

0

35

06 06 06 07 07 08 08 08 09 09 10 10 11 11 11 12 12 13 13 13 14 14 15 15 16 16 16 17 17 18 18 18 19 19 n- un- ov- pr- ep- eb- ul- ec- ay- ct- ar- ug- an- un- ov- pr- ep- eb- ul- ec- ay- ct- ar- ug- an- un- ov- pr- ep- eb- ul- ec- ay- cta J D M O M A J D M O M A J J N A S F J D M O J J N A S F J J N A S F CHINA SOCIAL FINANCING (12 MO AVERAGE) AVERAGE OF EUROPE & US PMI (3MO AVG) Nov-19

Past Performance Is Not Necessarily Indicative Of Future Results.

10

CHINA LEADS THE GLOBAL MANUFACTURING 65

54

China, Eurozone and US PMI 60

52.5

55

51

50

49.5

45

48 Eurozone

US

CHINA

Nov19

Past Performance Is Not Necessarily Indicative Of Future Results.

11

CHINA CAR SALES ARE REBOUNDING (?)

32

30

MONTHLY CHINA CAR SALES SEASONALLY ADJUSTED BY MCVEAN TRADING

28

26

24

22

20

18

16 3 MO AVG

CURRENT MONTH

Past Performance Is Not Necessarily Indicative Of Future Results.

12

REAL ESTATE HELPING BUILD WEALTH

15.0

AVERAGE PRICE FOR NEW RESIDENTIAL BUILDINGS IN CHINA % CH CURRENT MO FROM YR AGO - 70 CITIES

12.5

10.0

7.5

%

5.0

2.5

0.0

-2.5

-5.0

-7.5

Past Performance Is Not Necessarily Indicative Of Future Results.

13

EQUITIES NOT SO MUCH 5000

4500

4000

3500

3000

2500

2000

1500 SHANGHAI COMPOSITE

Nov -19

Past Performance Is Not Necessarily Indicative Of Future Results.

14

CHINESE RAILROAD FREIGHT VS ELECTRICITY PRODUCTION 3 MONTH AVERAGE % CHANGE FROM YEAR AGO 3 MONTH AVERAGE

30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% 6 7 0 0 1 2 3 4 4 5 5 7 8 8 9 9 0 1 1 2 2 3 4 4 5 5 6 6 7 8 8 9 1 2 00 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 2 / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / 31 31 31 31 31 31 31 29 30 30 30 30 31 31 31 31 31 31 31 2/1 9/1 4/1 1/1 6/1 1/1 8/1 3/1 0/1 5/1 2/1 7/1 2/1 9/1 4/1 1 1/ 8/ 3/ 10/ 5/ 12/ 7/ 2/ 9/ 4/ 11/ 6/ 1/ 8/ 3/ 10/ 5/ 12/ 7/ 1 1 Oct-19 RAIL ELECTRICITY PRODUCTION Past Performance Is Not Necessarily Indicative Of Future Results.

15

CHINA EXPORTS VS IMPORTS

6 MONTH AVERAGE %CH FROM 6 MONTH AVERAGE YEAR AGO 66.0%

49.5%

33.0%

16.5%

0.0%

-16.5%

-33.0% 0 0 1 1 2 2 3 4 4 5 5 6 7 7 8 8 9 9 0 1 1 2 2 3 4 4 5 5 6 6 7 8 8 9 9 -0 g-0 r-0 t-0 y-0 c-0 l-0 b-0 p-0 r-0 v-0 n-0 n-0 g-0 r-0 t-0 y-0 c-0 l-1 b-1 p-1 r-1 v-1 n-1 n-1 g-1 r-1 t-1 y-1 c-1 l-1 b-1 p-1 r-1 v-1 n u u a c p a c a e Ju e e A p o u a u p o a c Ja Au M O Ma De J Fe Se A No Ju Ja Au M O M D F IMPORTS S N J J A M O Ma De J Fe Se A Nov-19 N EXPORTS

Past Performance Is Not Necessarily Indicative Of Future Results.

16

CHINESE PPI IS BOTTOMING

15

CHINA PPI CHANGE FROM SAME MONTH A YEAR AGO

10

5

0

-5

-10

Nov-19 Past Performance Is Not Necessarily Indicative Of Future Results.

17

MANAGING THE FREE FLOATING YUAN CORRUPTION CAMPAIGN CURRENCY BREAK

N

EU CRISIS

UR

CO RE

OOPS

A TR

RE T

RECESSION PRE LEHMAN

RY VE

DE

SCHUMER

Past Performance Is Not Necessarily Indicative Of Future Results.

18

CHINA NOMINAL GDP GROWTH IN US$ CURRENT QUARTER % CHANGE FROM YEAR AGO

36%

32%

28%

24%

20%

16%

12%

8%

4%

0%

Q3 19 Past Performance Is Not Necessarily Indicative Of Future Results.

19

CRUDE OIL 160

140

120

100

80

60

40

20 00 00 01 01 02 02 03 04 04 05 05 06 07 07 08 08 09 09 10 11 11 12 12 13 14 14 15 15 16 16 17 18 18 19 19 20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 / 31 31 30 31 31 31 31 27 30 29 30 30 31 31 31 31 29 31 30 28 30 30 30 28 31 29 31 30 31 30 31 28 28 30 29 1/ 8/ 3/ 10/ 5/ 12/ 7/ 2/ 9/ 4/ 11/ 6/ 1/ 8/ 3/ 10/ 5/ 12/ 7/ 2/ 9/ 4/ 11/ 6/ 1/ 8/ 3/ 10/ 5/ 12/ 7/ 2/ 9/ 4/ 11/

Nov 19 Past Performance Is Not Necessarily Indicative Of Future Results.

20

COPPER VS SOYBEANS 450

1800

400

1600

350 1400 300 1200 250 1000 200 800 150

600

100

50

400

Copper

Soybeans

Past Performance Is Not Necessarily Indicative Of Future Results.

Nov-19 21