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What next after the fiscal flop? Investors were not impressed by the fiscal measures announced last Friday, at least judging by the performance of Chinese equities – the Hang Seng index has fallen 6.1% so far this week. This disappointment is …
15th November 2024
Economy regains momentum as consumers step up China’s economy improved further at the start of Q4, thanks to stronger-than-expected consumer spending. We think faster fiscal spending will support a continued cyclical pickup in activity overing the coming …
An oil market that has mostly looked through a year of Middle East conflict now faces fresh, Trump-shaped, uncertainty. The president-elect’s campaign pledges on everything from Iran and Israel to climate policy to household energy bills appear to raise …
14th November 2024
Stimulus too small to turn around credit growth Both bank lending and broad credit growth hit fresh lows in October in a sign that monetary easing hasn’t done enough to drive a substantial turnaround in private credit demand. And after last week’s …
12th November 2024
This page has been updated with additional analysis since first publication. Deflationary pressures ease slightly but still pose a risk Headline CPI and PPI inflation both fell further in October. But core inflation edged up and factory gate prices fell …
11th November 2024
Today’s fiscal announcement was far smaller and less detailed than many had hoped for. The explanation, we think, is that China’s leadership sees less need for stimulus than most commentators (we’re with the leadership on this). Its priority instead seems …
8th November 2024
Exporters could do even better in the near-term We published our initial thoughts on the impact of a second Trump presidency on China’s economy here . Counter-intuitively, perhaps, we concluded that there would be initial upside for exporters, as US firms …
Unless there’s more to come later this evening, today’s fiscal announcement is another disappointment for those expecting substantial stimulus. The key measure announced at a press conference earlier is a refinancing of local government debt. Local …
Exports to remain robust in the near term despite Trump victory Export values grew y/y at the fastest pace in more than two years, and export volumes picked up too. We expect shipments to stay strong in the coming months – any drag from potential Trump …
7th November 2024
Large US tariffs would hurt China’s export sector but less than many suppose. We estimate that the direct impact of even a 60% US tariff on goods from China would be well under 1% of China’s GDP . The bigger challenge for policymakers could be the …
It’s still unclear if consumption will be prioritised Over the weekend, the Vice Finance Minister confirmed that the NPC Standing Committee is set to approve a fiscal package at its upcoming meeting , set to last from Monday to Friday of next week. At a …
1st November 2024
The economy has already regained some momentum on the back of increased policy support. But the extent of the recovery hinges on the scale of fiscal stimulus, which remains uncertain. Our base case is for growth to pick up over the coming quarters before …
Weak external demand results in a sharp slowdown Hong Kong’s economy contracted sharply in Q3. GDP surprised significantly to the downside, with growth of 0.4% q/q in Q2 more than reversed by a 1.1% q/q fall in Q3 (Bloomberg median: +0.2%, CE: -0.2%). In …
31st October 2024
This report was first published on 31 st October covering the official PMIs. We added commentary on the Caixin manufacturing PMI on 1 st November and on the Caixin services and composite PMIs on 5 th November. Economy continues to regain momentum The PMIs …
EMs are playing a growing role as substitute markets for Chinese exporters that face rising trade barriers in DMs. A second trade war with a re-elected President Trump would only accelerate that shift. It is plausible that a sizeable portion of the loss …
30th October 2024
Our China Activity Proxy suggests that the economy’s growth picked up in September, bringing Q3 growth in-line with official estimates. While this acceleration was broad-based across sectors, the main driver was financial services activity which was …
29th October 2024
Fiscal package may be revealed in two weeks At its 12 th October press conference, the Ministry of Finance (MoF) offered some reassurances that fiscal spending would pick up in the final months of this year and stay supportive into 2025. But it didn’t …
25th October 2024
We held online Drop-In sessions this week to discuss how we factor the US election into our thinking on the macro and market outlook for the US and other parts of the world. See here for a recording of the session focused on the US and here for the rest …
24th October 2024
The depreciation pressure on the renminbi has abated over recent months and the USD/CNY rate is currently trading around our end-2024 target of 7.10. But with US interest rate expectations on the rise again, China’s stimulus announcements continuing to …
21st October 2024
The PBOC continues to support the economy Today’s reductions to both the one-year and five-year Loan Prime Rates (LPR) continue the PBOC’s efforts to support the economy. We expect additional easing to follow in the coming quarters, but this is unlikely …
No gamechangers, but some new approaches The housing ministry’s press briefing on Thursday left investors understandably underwhelmed: there were no substantial new measures and little new detail on plans to support the property sector. The Hang Seng …
18th October 2024
Recovery still shaky, underscoring need for fiscal boost After slowing in Q2, the economy regained some momentum last quarter. A boost from fiscal stimulus should help narrowly meet the annual growth target this year and support activity in the coming …
Credit growth still slowing, highlighting need for larger fiscal response Despite monetary easing and a pick-up in government bond issuance, both broad credit and bank loan growth hit fresh lows in September. While the PBOC will continue to loosen policy, …
14th October 2024
Exports still strong but headwinds emerging Export growth slowed last month but remained resilient, with volumes still rising at a double-digit pace. We think shipments will stay strong in the near term, supported by gains in export competitiveness. …
Fiscal boost needed as deflationary pressures build CPI inflation fell in September, as an increase in food inflation was outweighed by further decreases in energy and core inflation. Meanwhile, producer price deflation deepened further on the back of …
China’s Finance Ministry has pledged to significantly increase government debt, as well as ensure that RMB2.3trn in unused funds (equivalent to 1.6% of GDP) are spent by year-end. The latter should ensure that GDP growth ticks up in Q4 and that the annual …
12th October 2024
Consumer support and a larger deficit Tomorrow’s press conference will provide a platform for the Ministry of Finance (MoF) to reveal its fiscal plans. The stakes are high - most observers agree that recent stimulus announcements won’t amount to much …
11th October 2024
China’s economy has some cyclical spare capacity that could be filled with fiscal stimulus. But its troubles are mostly structural. The finance ministry won’t solve them on Saturday. China’s finance minister is a long way down the pecking order of Party …
9th October 2024
CNY nears strong end of its trading band We regret to inform our readers that the chart and analysis in this section contained errors. We have added a corrected chart below. The original chart and analysis have also been retained for reference but should …
4th October 2024
China’s recent stimulus announcements are still at the top of many investors’ minds, at least judging by the high level of client interest in the online briefing we ran on the topic yesterday. We’ve wrapped up our answers to the most common questions we …
3rd October 2024
Despite driving a surge in developer stock prices, the property support measures announced so far aren’t that different from previous efforts and are unlikely, on their own, to deliver much better results. Achieving the Politburo’s recently upgraded goal …
2nd October 2024
Note: the last chart was previously uploaded incorrectly and was corrected on the 8th October The pivot toward stimulus reduces near-term risks and should provide some much-needed support to an economy struggling with a softening labour market and a deep …
1st October 2024
We recently held a series of Asia-focussed roundtable discussions with clients in London, covering an array of topics including the impact of Fed easing, the US election, global fracturing and China’s stimulus blizzard. This Update answers several of …
This page has been updated with additional analysis since first publication. Stimulus measures will shore up near-term activity While the official PMIs held up okay in September, the Caixin PMIs dropped quite sharply which suggests that the economy lost …
30th September 2024
Overview – A pivot towards fiscal and monetary stimulus should support China’s growth in the near-term. But the economy continues to be propped up by investment, still elevated levels of construction, and the willingness of trading partners to allow …
27th September 2024
Stimulus implementation gets underway A flurry of policy announcements propelled the largest weekly gains in Chinese equities since 2008 this week (CSI 300 up 15.7%; Hang Seng 13.0%). The catalyst was Tuesday’s stimulus announcement , which included …
China’s finance ministry appears to be lining up a fiscal support package to deliver on the Politburo’s pledge of additional support for the economy. If a report by Reuters is correct, the package could lift GDP by around 0.4% over the course of the next …
26th September 2024
Leadership hints at further stimulus measures The readout of the Politburo’s quarterly meeting on economic affairs has just been published by state media. It acknowledges that new problems have emerged in the Chinese economy recently and calls for …
Our China Activity Proxy suggests that growth slowed in August, with construction seeing the sharpest deceleration. Alongside today’s monetary easing, an uptick in fiscal spending will help keep the economy afloat over the rest of this year, but it won’t …
24th September 2024
But still falls short of what’s needed In a departure from their previous approach of drip-feeding piecemeal support measures, China’s financial regulators have just announced a coordinated package of stimulus measures. This is a step in the right …
Tailwind from Fed’s easing cycle will be small The US easing cycle that got underway with a 50bp cut this week will provide a boost to economic activity in Hong Kong, where a fixed exchange rate means interest rates track those in the US. We expect the …
20th September 2024
The PBOC fails to deliver cuts The lack of any reduction to policy rates today, despite the clear economic case for doing so, underscores the extent to which the PBOC remains constrained by concerns about bank profitability and declining long-term bond …
An acceleration in fiscal spending during the final months of the year should mean the 2024 growth target of “around 5.0%” is met, but only just – we now expect growth of 4.8% this year. China’s slowdown is likely to continue over the coming years as …
19th September 2024
A disappointing outturn Activity growth slowed last month, falling short of expectations across the board. The service sector is still faring reasonably well and the fiscal support that’s already in the pipeline should help to stabilise wider growth over …
16th September 2024
The US is moving to limit the de minimis tariff exemption that has supported a surge in low value shipments from China over recent years. Only a subset of the roughly 8% of China’s exports to the US that are currently tariff-exempt would be at risk under …
13th September 2024
Renewed slowdown in credit Both broad credit and bank loan growth slowed in August, coming in below expectations. (See Chart 1.) While stronger government spending should give the economy a boost over the coming months, that doesn’t seem likely to be …
A temporary boost to employment growth After years of delay, China’s legislature today passed a bill that raises the statutory retirement age for the first time since 1978. In January, it will increase from 60 to 63 for men, 55 to 58 for white-collar …
A second Trump term would bring greater uncertainty to US-China relations, challenges to a global economic order that has helped China prosper, higher tariffs (probably) on Chinese goods, and (possibly) a global retreat from free trade. All of this would …
12th September 2024
The Fed’s upcoming monetary easing cycle will probably provide less of a tailwind to EMs than is widely thought. While it’s likely to give some central banks (such as in the Gulf, Mexico and Indonesia) a green light to lower interest rates, EM rate …
Exports set to remain a near-term bright spot Export values grew y/y at the fastest pace in 17 months, with export volumes hitting record highs. We expect exports to remain robust in the near term, supported by the decline in China’s real effective …
10th September 2024
