Filtered by Subscriptions: China Economics Use setting China Economics
Today’s reductions to both the one-year and five-year Loan Prime Rates (LPR) continue the PBOC’s efforts to support the faltering economy. We expect additional easing to follow in the coming months, but policymakers still appear reluctant to engineer a …
22nd August 2022
PBOC extends lifeline to struggling economy Today’s reductions to both the one-year and five-year Loan Prime Rates (LPR) continue the PBOC’s efforts to support the faltering economy. We expect additional easing to follow in the coming months, but …
Hit to hydro putting pressure on coal supplies Southwest China is currently experiencing power shortages due to a severe drought and heatwave. Officials in Sichuan province and Chongqing municipality have responded by ordering week-long halts to factory …
19th August 2022
China’s post-Omicron rebound has fizzled out and the prospects for near-term growth are poor. Virus outbreaks are happening with increasing frequency. The housing market remains in a downward spiral. And exports look set to drop back before long. To make …
18th August 2022
Recovery stalls on weakened property sector The July data suggest that the post-lockdown recovery lost steam as the one-off boost from reopening fizzled out and mortgage boycotts triggered a renewed deterioration in the property sector. We think the …
15th August 2022
The People’s Bank (PBOC) has cut its policy rates in response to a loss of economic momentum. A cut to the Loan Prime Rate (LPR) later this month is now a given and we expect additional easing measures further ahead, though it’s far from clear that this …
PBOC inflation concerns add to policy constraints The People’s Bank (PBOC) published its quarterly monetary policy report on Wednesday. It struck a less relaxed tone on inflation. While the PBOC still expects only a modest rise in CPI this year, in line …
12th August 2022
Credit growth held back by mortgage boycotts Credit growth dropped back last month, with property market jitters weighing on bank lending. It may continue to disappoint in the near-term given that sentiment among homebuyers is likely to stay weak and …
Underlying inflation is still low Consumer price inflation rose to a 24-month high in July and is now nearing the government’s target of 3%. But that is still very low by global standards, and we think headline inflation is close to a peak and will drop …
10th August 2022
Exports still strong but headwinds mounting Exports held up well last month, thanks to a backlog of orders still being cleared. But it won’t be long before shipments drop back on cooling foreign demand. Meanwhile, imports continued to trend down, pointing …
8th August 2022
Taiwan has dominated the headlines this week, with Nancy Pelosi’s visit triggering Chinese military drills and restrictions on cross-strait trade. These moves appear largely symbolic. China’s bans on exports of natural sand and imports of some Taiwanese …
5th August 2022
The trade sanctions introduced by China on Taiwan in retaliation for the visit of Nancy Pelosi are small in scope rather than serious efforts to force Taipei to shift course. China is constrained in the economic pressure it can exert unless it is willing …
3rd August 2022
China’s leadership has options other than invasion to coerce Taiwan to submit to its political control. The immediate economic and financial ramifications would differ in each case. But any scenario that upset the existing cross-Strait balance would come …
2nd August 2022
Economic recovery to remain tepid Hong Kong’s GDP ticked up last quarter as the easing of virus restrictions boosted consumption. But the recovery was muted, held back by a drop in exports. We think growth will remain weak given rising interest rates, …
1st August 2022
Rebound slows as manufacturing sputters The surveys suggest that China’s economic recovery slowed in July as the one-off boost from reopening faded. It is consistent with our view that activity will remain below trend in the coming quarters. The official …
GDP target RIP It turns out that GDP growth targets aren’t such a big deal after all. The Politburo yesterday said that only “provinces that are in a position to do so” need hit their targets this year. And it signalled that no major new stimulus measures …
29th July 2022
This Update was originally sent to clients as a Rapid Response immediately after the readout of the Politburo’s quarterly meeting on economic affairs was published by state media. The readout of the Politburo’s quarterly meeting on economic affairs has …
28th July 2022
Overview – Activity has bounced back from lockdowns but China’s economic recovery will become more challenging from here on as exports turn from tailwind to headwind and the property downturn deepens. Policy restraint means that stimulus will not fully …
The mortgage boycotts are a double threat to developers and to the housing market. They have drawn attention to the problem of cash-strapped developers being unable to complete properties that they have already sold, which is putting off new homebuyers. …
27th July 2022
Developers likely to remain under pressure Last week, we discussed the threat to the housing market from the growing number of home-buyers halting their mortgage payments on uncompleted properties. Those boycotts have expanded and now affect at least 319 …
22nd July 2022
Our China Activity Proxy (CAP) suggests that the economic hit from lockdowns had largely reversed in June. But infection numbers are ticking up again. And even if another large-scale virus wave is avoided, problems in the property sector and headwinds to …
21st July 2022
Even weaker than meets the eye The statistics bureau claim that output in Q2 was slightly higher than a year ago. That’s implausible even accounting for the strong rebound shown on the monthly data for June. The official GDP data acknowledge that the …
15th July 2022
Mortgage boycotts bode ill for housing market Homebuyers across China are banding together to pause mortgage payments in response to construction delays on presold apartments. These mortgage boycotts have spread rapidly in the past week, affecting over …
Imports slump, exports jump Import volumes fell to a three-year low last month, pointing to continued weakness in China’s construction sector. Exports rebounded strongly as shipping bottlenecks eased. But we think this may be the last hurrah for China’s …
13th July 2022
Credit growth is only creeping higher A further slight pick-up in credit growth last month was given a big helping hand from government bond issuance as local governments were instructed to issue their annual allocation of bonds by the end of June. That …
11th July 2022
Late last month, Xi Jinping reaffirmed the goal of achieving “around 5.5%” GDP growth for the year. The economy grew 4.8% y/y on the official figures in Q1 so faster growth is needed, on average, over the rest of the year. But it is almost certain that …
8th July 2022
Policymakers are reportedly bringing forward some planned government bond issuance from next year to support infrastructure investment in the second half of 2022. This will help avert the slump in investment that was imminent without new funding and …
Spending on high-tech “new infrastructure” should result in higher returns than adding more highways and railway lines. But it is not as effective a channel for cyclical policy stimulus. And a state-led push into these new, complex sectors won’t deliver …
7th July 2022
PBOC survey reveals looser lending controls Although changes to interest rates and reserve requirements attract more attention, the main determinants of the pace of bank lending in China are quantitative controls such as loan quotas and window guidance. …
1st July 2022
Output jumps but demand growth still subdued The Caixin manufacturing PMI hit a 13-month high in June and points to a jump in output as virus restrictions were lifted and supply chain conditions improved. But it still points to subdued demand growth and …
Robust services rebound amid easing restrictions The official PMIs point to a surprisingly rapid recovery in services activity this month after virus restrictions were mostly lifted. But this likely reflects a one-off boost from reopening and we doubt …
30th June 2022
The Omicron virus wave in China appears to have eased global shipping bottlenecks rather than worsened them as many had feared. Firms were able to re-route shipments through other ports to avoid disruption in Shanghai. And weaker goods demand domestically …
28th June 2022
Getting back to normal China’s economy began to rebound in May as lockdowns were gradually lifted. But many consumers stayed home and activity remained depressed, especially in the service sector. There has been a more substantial improvement in mobility …
24th June 2022
Our China Activity Proxy (CAP) suggests that around half of the drop in output during the recent virus wave reversed in May. This recovery looks to have continued in June. But a lot of damage has already been done and we now doubt that China’s economy …
22nd June 2022
Unattainable even on paper China’s statistics office is adept at massaging GDP data. But it can’t perform surgery. In April and May combined, retail sales fell 8.9% y/y and industrial output and real exports both fell 1.1%. Even if growth returned in June …
17th June 2022
Industrial recovery well advanced, consumers still weak The May data suggest that a post-lockdown recovery got underway across most parts of the economy last month. It is likely to have progressed further in June. But the recent resurgence in infections …
15th June 2022
Less tech, more regulation The Ant IPO is back on, according to Bloomberg and Reuters. If confirmed, what would this signal about the regulatory crackdown? An IPO would be positive as a sign that tech firms and the regulators have found a way to get …
10th June 2022
Credit growth stronger as government borrowing picks up Credit growth was stronger than expected last month. It is likely to accelerate following the clear signal in late May that policymakers want banks to step up lending. More policy easing is likely. …
No sign of upstream price pressures Consumer price inflation was unchanged last month and remains well below the government’s target of 3%, while producer price inflation dropped to its lowest in a year. As such, inflation is unlikely to be a constraint …
Cancelling all of the Trump tariffs on China would give a smaller direct boost to China’s export sector than many might think. More important would be the signal a unilateral rollback would give that the US wanted a reset in relations. This would lift …
9th June 2022
Rebound in exports an exception rather than the rule Export and import y/y growth picked up last month. In volume terms, exports rebounded while imports were largely unchanged. We think outbound shipments will soften again before long amid growing …
The view that policy support is best directed towards investment rather than consumption is deeply rooted in China. A few token consumer voucher schemes aside, this doesn’t seem to be changing. In the package of 33 support measures announced by the State …
8th June 2022
Accelerating towards a fiscal cliff Last week’s announcement of 33 support measures in six areas by the State Council has been followed by a flurry of statements by ministries signalling that they understand the urgency of the situation. A State Council …
2nd June 2022
While it has rebounded over the past couple of weeks, we expect the renminbi to resume its fall against the US dollar as China’s economy underwhelms , interest rate differentials continue to shift against the renminbi, and the last two years’ strength of …
1st June 2022
Industrial activity improves but recovery will be slow The Caixin manufacturing index published today rebounded last month thanks to the easing of virus containment measures. Taken together with the official survey, they suggest that a recovery in …
Past the worst but weakness persists The official PMIs add to broader evidence that activity has started to rebound as containment measures were rolled back. That said, the recovery is likely to remain tepid amid weak external demand and labour market …
31st May 2022
China’s beleaguered property developers may soon see some respite both from their inability to borrow at reasonable rates and from sliding property sales. Last week, PBOC Governor said that the government would “correct the contraction in credit to …
30th May 2022
Inventories at record high relative to sales Most observers assumed that China’s Omicron wave would worsen goods shortages both at home and abroad but the data increasingly point to the opposite outcome, at least at the macro level. The latest evidence …
27th May 2022
Our China Activity Proxy (CAP) suggests that all of China’s pandemic-era growth has been reversed by recent lockdowns, with output in April no higher than during 2019. Activity should start to rebound this month on the back of easing restrictions. But the …
26th May 2022
The State Council has announced support measures totalling 1.7% of GDP. Most of this comprises incentives for banks to lend to struggling firms, rather than fiscal stimulus. The People’s Bank has also made a call for “all-out” efforts to boost lending, so …
24th May 2022
