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Whilst buying gold may reduce central banks’ overall exposure to the dollar, we don’t think that the surge in central bank gold demand reflects a severe loss of confidence in the greenback. Instead, the perception of gold itself as a safe haven is …
31st March 2025
The US would have to exert a lot of pressure to coerce most major countries into putting large tariffs on goods from China . Curtailing trade with China would have an economic cost and even countries that have closer economic ties with the US would still …
In this Update, we answer several key questions about how the announced 25% tariffs on US imports of autos and parts might affect the global economy and the US itself. Mexico, Slovakia and Korea are most exposed with up to 1.6% of GDP at risk. But the …
27th March 2025
Deflation has reared its head again in China, underscoring the problem of persistent supply and demand imbalances. The limited extra support for consumption outlined at the National People’s Congress and in the new “Special Action Plan” for consumption …
18th March 2025
China’s government has launched a new “Special Action Plan” to support consumption. Talk of prioritising consumption is encouraging on paper. But the leadership has been talking about this since a Politburo meeting in July. The latest plan doesn’t include …
17th March 2025
The events of the past two weeks have called into question whether the US is severing ties not just with adversaries such as China but also allies, including Canada, Mexico and the European Union. This would radically alter the shape of the fractured …
4th March 2025
With US tariffs now escalating, the key question is whether the People’s Bank (PBOC) will allow the exchange rate to adjust in response. We think it ultimately will, just as it did during the first trade war. But if we’re wrong and the PBOC attempts to …
28th February 2025
President Trump’s attempts to reset relations with Russia have led some to suggest that he may be attempting to break apart the Sino-Russian alliance as Nixon did in the early 1970s (although in Nixon’s case, by reaching out to China). But while this may …
27th February 2025
Policy support is helping developers secure financing and should boost their sales this year. This will allow them to intensify work on existing projects. But it won’t prevent homebuilding activity from declining further over the coming years as the …
President Trump has signalled that he is open to the possibility of a new trade deal with China, though probably not before tensions rachet up further. This would likely involve China committing to more purchases of US goods, particularly energy, …
25th February 2025
China is among a minority of countries that apply lower tariff rates on the US than vice versa, so it is not as obviously exposed to reciprocal tariffs as many others. But President Trump’s latest announcement underscores just how serious he is about …
14th February 2025
China added five critical minerals to its export control list last week but stopped short of banning their sale. The move was intended as a warning to the Trump administration and to increase China’s leverage during future negotiations. If the US …
12th February 2025
The end of the de minimis tariff exemption for US imports of low-value goods from China will be a major blow to Chinese e-commerce giants like Temu and Shein. They’re likely to lose market share to foreign competitors like Amazon. But unless tariffs …
11th February 2025
Rise in inflation likely temporary Headline CPI inflation rose to a five-month high last month, driven by the lagged effect of stronger demand last quarter on the back of government efforts to boost consumption. But with the boost from stimulus likely to …
10th February 2025
The additional 10% tariff that Donald Trump has applied on Chinese goods will have a relatively modest impact on China’s economy, especially if the PBOC allows the renminbi to adjust. But this is likely just the first round in a protracted trade war with …
3rd February 2025
DeepSeek’s success in developing AI models that rival those of US tech-giants has rattled US markets. While this does suggest that catching up to the technological frontier in AI may be easier than many expected, it is not a sign that China is overtaking …
30th January 2025
The raft of export restrictions introduced earlier this month are the latest escalation in China’s shift to a more assertive export control regime. The use of such non-tariff measures is likely to intensify over the coming years, if as we anticipate, …
27th January 2025
An unexpected loss of momentum The PMIs suggest that China’s economy lost some momentum in January, despite tailwinds from recent policy easing. The breakdown suggests that exporters were downbeat even ahead of Trump's latest tariff announcement. But …
We think China’s 10-year government bond yield will fall to fresh record lows over the coming year, partly because the other investment options available to Chinese investors look increasingly unappealing. Chinese government bond yields are around record …
16th January 2025
The debt swap that kicked off in November and extends to 2028 reduces the risk of near-term defaults by local government financing vehicles, which would be destabilising for financial markets. But it is not a lasting solution for China given it only …
15th January 2025
The Cold War was defined by geopolitical blocs – the Soviet or Eastern bloc against the Western bloc. Geopolitics retreated with the collapse of the Soviet Union. The period from the early-1990s to the early-2010s was instead an era of globalisation: most …
7th January 2025
Given the deterioration in the outlook for Chinese equities and the prospect of a markedly weaker renminbi, China’s demand for gold in 2025 will be stronger than we had previously expected. In turn, this will help offset the downward pressure on gold …
17th December 2024
Note: When this Update was first published, China's state media had relayed the content of the CEWC readout but the readout itself had not been published. The Update has now been updated to reflect the contents of the readout that was published late on …
12th December 2024
This report was first published on the 2 nd December covering the official PMIs and the Caixin manufacturing PMI. We added commentary on the Caixin services and composite PMIs on the 4 th December. Growth continues to pick up, led by manufacturing The …
2nd December 2024
We held an online session on US import tariffs on 26th November. (See a recording here ). In this Update we answer the questions we were most asked. What are Trump’s motives for threatening tariffs and will he follow through? Trump has spoken about using …
29th November 2024
President-elect Donald Trump’s first threatened tariffs since the election are designed to extract concessions on drug trafficking and illegal border crossings, which means it may be possible for the countries targeted – Canada, Mexico and China – to head …
26th 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
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 …
7th November 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 …
31st October 2024
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
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
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
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
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
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 …
1st October 2024
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
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
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 …
The new US controls on exports of semiconductor manufacturing equipment will slow China’s ability to expand its advanced chip-making capacity. While the immediate economic impact will be small, it will leave China’s hi-tech industry reliant on foreign …
9th September 2024
This report was first published on 2nd September covering the official PMIs and the Caixin manufacturing PMI. We added commentary on the Caixin services and composite PMIs on 4th September. Growth has stabilised thanks to policy support The PMIs for …
2nd September 2024
The PBOC appears poised to step up its efforts to prevent bond yields from falling, even though lower borrowing costs would help the economy right now. The inconsistencies in its policy approach are linked to the shifting whims of the Party leadership, …
29th August 2024
Signs of a thaw in frosty relations between India and China don’t point to a fundamental realignment in India’s position in a fracturing global economy. But they highlight a growing theme of some EMs tactically courting investment from China to put …
13th August 2024
Fears of a US recession have rattled EM equity markets at a time when EM economies themselves are showing more pronounced signs of weakness. Most EM currencies have held up well, suggesting a dovish tilt may come from EM central banks – particularly those …
5th August 2024
In its new urbanisation plan, China’s government is setting its targets low . The goal of reaching a 70% urbanisation rate in five years’ time could be met with far smaller increases in the urban population than have been seen in the past few years. And …
2nd August 2024
This report was first published on 31 st July covering the official PMIs. We added commentary on the Caixin manufacturing PMI on 1 st August and the Caixin services and composite PMIs on 5 th August. A poor start to Q3, but more policy support on its way …
31st July 2024
